Cotton and Euro Put Spreads

_{OPTION TRADE OF THE DAY!}

5-15

Cotton normally peaks out right about this time of year due to seasonal factors which we are seeing as well technically on the charts. The downward slide usually subsides sometime in early August. We are buying the December 59 put and selling the December 55 put, to collect premium we are selling the December 69 calls. The trade is looking like it could be filled at even money or no cost outside of the three commissions to establish the trade. The risk below 69 would be limited to this, however above 69 there is unlimited risk. The profit potential is limited to $2,000 minus costs. We also like buying out of the money puts like the 50 put or any low cost puts with less time.

Euro Currency could be possibly topping out as well showing a double top at this level. The markets failure to penetrate and close above the 137-138 high makes it susceptible to long liquidation as well as new shorts entering into the market. We see the possibility of the market dropping to the 131-130 level within the next couple weeks. This trade is a short timing trade with only three weeks until expiration. Buy the 134/131 bear put spread and sell the 140 call as your naked leg, the trade is running about 4-500 dollars which is your risk not including transaction costs (3X’s) above 140 there is unlimited risk. The profit potential is limited to 3,750 before cost consideration (profit minus premium minus commissions). Be aware that if the market breaks through the double top you will need to bail out of the trade.

_{* There is a substantial risk of loss in trading futures and options.}

_{PLACING CONTINGENT ORDERS SUCH AS “STOP LOSS” OR “STOP LIMIT” ORDERS WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS. SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS.}

_{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 and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. 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.}

_{FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE}

_{PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE}

_{INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON}

_{THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT}

_{AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY,}

_{OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER}

_{WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS}

_{RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION’S STRIKE}

_{PRICE COMPARES TO THE UNDERLYING FUTURE’S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES}

_{MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING}

_{FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR}

_{EVEN MOVE IN THE OPPOSITE DIRECTION OF THE UNDERLYING FUTURES CONTRACT.}

_{Paul Brittain}

_{Alaron Trading}

_800-935-6492

_702-255-4107

_{702-256-0186 fax}

_{pbrittain@alaron.com}