Tuesday, December 12, 2006

Cotton - Low Volatility Heads Up

Cotton futures have been doing very little in the last 10 weeks apart from trade in a range from about 51 to 54.4 c/lb.

Well, yesterdays bar might have the bulls sitting up and paying attention, but ostensibly sideways.
What is of interest to option traders is the multi year lows in implied volatility. In the last few days, IV mean has finally decided to collapse below 20% to basically be on a par with statistical volatility, making them look like fair value for the first time in quite some time.
I wouldn't go calling them cheap or underpriced, but buying could finally be considered in my opinion

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