Currently at inflated premium levels, we feel that call options sold above the $4.00 strike basis the March or May contract are high probably (and high yielding) option sales this month. (Note these are more than 50% out of the money – with frost season now over.)
While trader anxiety will likely prevent any washouts in coffee prices this month, we expect price consolidation in the near term as the market digests the newly harvested beans. Assuming a successful flowering season, look for increasing price weakness as the year draws to a close.
This is a perfect example of using media created volatility to your advantage in crafting an option selling strategy. We anticipate adding call positions to our managed option selling accounts on additional strength this month.
Note: The opinions presented here are that of Liberty Trading and not necessarily shared by Optionetics and/or its instructors.