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Market finally able to exhale
Mar '08
NY futures gave back some ground this week, as May lost 189 points to close at 80.81 cents, while December dropped 57 points to close at 88.53 cents.

After a very frantic and nerve-wracking nine sessions of trading, the market was finally able to exhale, as futures volume dropped significantly today to just 22'693 contracts and May's trading range measured a relatively narrow 263 points. Options remained quite active as 20'000 calls and 35'000 puts were traded, which may have to do with the unwinding of some synthetic positions that were put on last week.

Open interest in futures has stayed relatively stable during this up and down move, as it was still amounting to 292'018 contracts as of this morning, which is not far below the record 302'683 contracts of March 3rd.

When we look at open interest in options, it has literally exploded since February 28, with open call options up 101'194 contracts to 316'288 contracts and open put options increasing an astonishing 148'799 contracts to 366'571 contracts.

As of yesterday's close these call options amounted to a delta position of 17.6 mio bales, while puts represented 10.6 mio bales. We realize that some of these options are offsetting futures positions, but the sheer volume of what we are dealing with nowadays is simply mind-boggling.

As we have pointed out repeatedly, this ever increasing open interest has outgrown the trade's traditional hedging requirements by a wide margin and this disparity may become even more grotesque next season if open interest continues to expand while the US crop gets smaller.

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