OJ Trade Still On - Here's Why

This from Dow Jones Newswire:

"The gains this week (in orange juice futures) have been attributed to technically linked buying, concerns over a tropical weather system in the Atlantic Ocean and media reports about citrus-greening disease in Florida, analysts have said. Short covering after FCOJ futures had fallen to 23-month lows last week was also cited for the gains.

"Traders are keeping an eye on a broad area of low pressure associated with a tropical wave about 1,250 miles east of the Windward Islands. Conditions appear favorable for development and the system could become a tropical depression within a day or two, the National Hurricane Center in Miami said. While the storm doesn't appear to pose an imminent threat to Florida's orange groves at present, traders will continue to monitor the forecasts for possible strengthening, a broker said."

I also saw a NOAA chart showing a new possible tropical depression in the Gulf of Mexico off Texas.

The Dow Jones story went on the say that "continued liquidation in FCOJ futures has finally taken speculators to a net-short position, the speculation and hedging report on Sept. 7 showed. Specs are net short by 813 contracts, or 2.9% of open interest, from being net long 1,238 contracts the previous week. With Monday's rally, open interest actually fell 27 to total 28,201 contracts, proving that the move was done largely on short covering." (My emphasis).

We are still looking at the Nov. 140 OJ calls (trading at 1.20, or about $180.00), and the Nov. 160 OJ calls (trading at .75, or about $113.00). However, these options expire on Oct. 19th, so time is running out. Unless the OJ market makes a big up move very soon, we're going to move out to the Jan. '08 options. The Jan. 140 calls are 3.50, or $525.00 while the Jan. 160 calls are 1.60, or $240.00. These expire Dec. 21.

If you have any questions or comments please send me a note at davidbrown@midwestfutures.com. Futures and options trading is speculative and involves a high degree of risk. The risk of loss can be substantial. Neither the information presented or any of the opinions expressed constitute a solicitation for the purchase or sale of any commodities.