On December 5, I pointed out on this blog some overpriced volatility on Cocoa Futures, and suggested that selling some premium over this contract could be a good idea. I also thought that the volatility skew and seasonal tendencies suggest risk on the upside. By implication, and if that risk is accepted as real, delta should be kept long. In other words, sell puts, bull credits or whatever.
That risk turns out to be materializing as Cocoa goes on a bit of a bull romp.
It broke out of resistance drawn on the chart immediately and put in a big bull candle on Friday.
It would have been nice to be long the futures as this contract can rise awefully fast, and it was interesting in that the IV predicted the move.
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