Windy City Trader Trade Tip 3/18/2013 Sugar Call

  on March 18 2013 11:04 AM

Sugar has finally showed signs of consolidation near 1800 since peaking above 2300 last summer. Our government subsidizes the sugar industry and it is said they will support near 1800 and plan large purchases if that level is approached again. The breakout point for July sugar was near 1830 and we have corrected back to that area after testing 1900 Friday. Most of our trades involve writing options but these calls are fairly priced to buy. The July 2000 call options can be had for less than $300, about 27 points X $11.20 per tick and we have plenty of time for a rise with 91 days until expiration. Aggressive traders Could sell/write July 1700 puts for about 25 points to lessen the trade cost.

The Trade:    Buy July 2000 Sugar call for 26-27 pointsProtection:    Risk the premium of $280-$290Objective:      Futures rise to 2150-2200, then sell option

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