Cotton has biggest Daily Range Ever!
Synthetics close: May 9010, Dec 9600
I’ve been around the cotton option market since 1987 and never ever saw a day like today! The option pit, the only place where cotton was readily available to transact, (as synthetics have no limits and the screen was limit bid again) moved rapidly up to 109 in May and 108 in December. Then prices came down enough so that the screen came off limit. The end result had May settling at 9010, July at 9300 and Dec at 9600 synthetically, in other words lower on the day. You can see the lows since they were made on the screen.
The market will again have a 400 point range tomorrow and it appears as if cotton will trade actively on the screen for the first time since the outcry pit was murdered. Volatility aside, the spread between bids and offers was routinely 100 points in options as well as synthetics over the course of the day and that had took its toll upon traders and customers alike. Delays in clearing, because traders just couldn’t input transactions in timely fashion caused some scares, but I am proud of the membership as they once again proved their mettle.
Rumors of margin troubles and a possible forced liquidation swirled in the ring and on the phone. Such action might explain the unprecedented “pop” above $1.00 and drop back below, (twice). Such action caused some panic selling sufficient to drop Dec almost below unchanged on the screen.
I look for calmer days ahead with fewer bodies milling about the in and around the option pit. (Hey, I’m 6 foot four and 300 lbs, but the crowd was so vast that it was difficult just to maneuver to and from the trading ring). You’d have thunk the ICE would have taken steps to utilize the empty futures ring (which is much larger than options) more appropriately, but I guess sight lines and moving screens around in short order wasn’t feasible.
Over 126,000 options changed hands in cotton.
As to where cotton prices are next headed; I look for some deserved consolidation and some inside days, but who really knows. A lot is up to the funds and the drama of who might be hurt and how bad their hurt.
I believe that cotton prices are intended to go the way of wheat and we’ll see crazy volatility, with frequent limit moves. After what I saw today, I think that the remainder of this week will be a struggle.
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El equipo de Brokers de Futuros USA
Fuente: MF Global
©2007 Jurgens Bauer & Associates all rights reserved.
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