Cocoa (CCK19): 15 March 2019

[TradingAdmin]

If you would like to trade a market that is going nowhere, look at this one:



I can honestly say I do not know where Cocoa is going, up or down, but it is no hurry to get there.  Luckily, using options these type of markets present us with ideal trading opportunities.  We simply use a combination of the two strategies we had for Coffee and Cotton above:



We short two Call options above the market and hedge with a long Call in the Jun options month, then short two Put options below the market and hedge that with a long Put.  Cocoa can take as much time as it likes to decide where it wants to go, but if it stays between 2080 and 2340 for the next 22 days we will make upwards of $600 from its indecisiveness - starting on this weekend where two of those days will expire and the market goes nowhere

[TradingAdmin]

Update:  Tuesday 19 March 2019



The weekend saw us making $120 profit on this trade, let's hold out another day or two and see how it develops..

[TradingAdmin]

Update for Cocoa:



The move Cocoa did yesterday constitutes a breakout of an important point on the Cocoa chart (on both a Weekly as well as the Daily chart) - marked with the red arrow.  For me, this is a sell signal.

Our position is still in profit by $90, due to the nature of the strategy that we employed.  I would take that $90 and get out of the trade.  Just close all positions.  (I would do it outside regular trading hours)

The position graph on the left is interesting though.  If you think this is a false breakout, just stop running, you would like to give it more time, any move back into the range will quickly realise you some nice profits.  And then you have the weekend before you, two more days of time decay, you can easily make $300+ by Monday - IF prices moves back up.  A more conservative strategy might be to wait for the open and follow the market closely.  Any sign that prices will continue to drop, get out of the trade.  You will need to leg out: drop the loss making ones - May Short Puts, then the Jun Long Call; and then drop the profit making ones - May Short Calls and Jun Long Put - the downwards momentum will ensure you make some additional profits while unwinding the trade.  If prices trade back up instead, hold onto the trade, it will quickly give you >$200 and the weekend time decay will see it jump to $300.

HOWEVER - AND THIS IS IMPORTANT:  The strategy described above requires you to be online and in front of your computer when the Cocoa market opens, and to be watching the action unfold during the live trading session - and then to make some quick decisions.  My personal trading style see me only monitoring the markets on a daily basis, I do not follow the live trading sessions.  On my daily watch, this is a sell signal, the risk is too high, so I just get out..

[TradingAdmin]

Update:  Tuesday 26 March 2019



I am already out of this trade (at $90).  If you did decide to hold on and went through a nervous couple of days you will be a happy trader.  The position is sitting on $320 profit and are perfectly positioned to give you upwards of $900 over the next 10 days!! 

Not bad at all.  At this point just hold on and watch the money rolling in..

[TradingAdmin]

This trade was closed.  I took $90 profit on it a long time ago already.  The previous post has shown that if you were willing to hold on a little longer, you could have banked $320.  Currently it looks like this:



There is hardly any profit left in this position.  BUT what I want you to notice is how the options trading strategy gave you a huge amount of space in which to capture profit.  From the day that we opened this trade until today, the position was never in a loss.  There was a lot of time for you to decide to take your money and get out.  Only if you were greedy and never got out will you no be facing a breakeven position.  It is no longer worth the risk to stay in the trade...!