If Oil Stabilizes, Will Sugar?

On the radar:

Sugar prices have softened due to ethanol demand destruction, but if oil stabilizes so will sugar.

sugar-calls

BUY JULY SUGAR 11.25 CALLS.

The seasonal low for July sugar isn’t due for another two to three weeks but given the fact that prices are approaching long-term support, a reversal could occur sooner. Like crude oil and corn, the COVID-19 lockdown has impacted sugar due to demand destruction for fuel (ethanol). However, with the stock and oil markets pricing in stability, sugar could soon follow.

We like the idea of buying cheap call options to keep risk low and limited. Specifically, the July 11.25 calls for about 27 ticks ($302.40) plus transaction costs seem to be a good play. This option was trading well into the $3,000 price just six weeks ago. If sugar flatlines or moves lower, the risk on the position is limited to the cost of entry (about $300). Also, if we see a breakdown into the 9.00 cent range, we would likely be willing to get more aggressive with bullish plays.

Margin: $0

Delta: .27

Zaner360 symbols: OSB-MN20 C0.1125

*There is unlimited risk in naked option selling and futures!

DeCarley Trading (a Division of Zaner)
Twitter:@carleygarner
info@decarleytrading.com
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www.DeCarleyTrading.com
www.HigherProbabilityCommodityTradingBook.com

Seasonality is already factored into current prices, any references to such does not indicate future market action.

There is a substantial risk of loss in trading futures and options.

** These recommendations are a solicitation for entering into derivatives transactions. All known news and events have already been factored into the price of the underlying derivatives discussed. From time to time persons affiliated with Zaner, or its associated companies, may have positions in recommended and other derivatives. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years. There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in similar directional manner during a certain calendar year. While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No representation is being made that price patterns will recur in the future.