ASTRANGLEinJULYORANGE JUICE options – Friday 27 March 2009


OJ has rallied to 7 week highs recently on continued worriesthe Florida drought will take a toll on the 2009-10 crop which is now in bloom across the citrus belt. Nearly all of Florida is in moderate to severe drought and in fact Florida’s 2008-09 dry season is on target to be the driest on record since the measurement commenced in 1932. On the flipside, if the crop experiences sufficient rain (which is unlikely however possible) then we expect OJ prices to resume their downtrend. You never know with the weather hence our long strangle strategy. We need a big move up or down over the next 85 days. July OJ is currently at 77.30 a pound so the options we are buying are not too far from where we are now ie. 13 cents above and just 7 cents below.


BuyJulyOJ90 centcalls and BuyJuly OJ 70 centputs at a limit of 3.7 centsO/BGTC 85 days to expiry



If we see a rally then wewilleither sellhalfour bought callsor sellout ofthe money callsto reduce our initial cost. If we see a sell off then we willeither sellhalfour bought putsor sellout ofthe money putsto reduce our initial cost.

Take a look at aMonthlyOJchartshowing4 months of a 14 cent consolidation. You’ll notethat OJ has been in downtrend for 2 years and the fall from 209.50 in March 2007 may have seen the medium term low put in place around 65 cents. If not then we feel OJ will take another look at this low or even explore down to the May 2004 lows around 55 cents.

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All the very best in trading!


Aussie Matt