Plexus Cotton annonce that on the trade side, we have currently 7.9 mio longs and 10.2 mio shorts. Of these trade longs, an estimated 4.5-mio bales are index-fund related, whereas the remaining 3.4 mio belong to the cotton trade.
Therefore, when we look at the cotton related position only, we have the trade quite heavily short at the moment at around 6.8 mio bales.
As you may remember, in 2003 one of the main reasons for the market to rally so sharply was the large position in call options, which traders so desperately tried to scramble out of.
Three years ago, the market started to take off at around the current date, with December having closed at 57.08 on August 25, only to rally by more than 27 cents over the following two months.
Back then, open interest in call options amounted to 76'000 contracts, which was large at the time considering that open interest in futures was only 64'000 contracts.
This morning the open interest in call options stood at 118'000 contracts, of which 97'000 were in the December contract alone.
The current 'delta' position of these December calls equates to just 28'000 futures, which leaves plenty of room to hurt traders in case of a sharp market advance.
For now, the market will most likely remain in a range between 54 and 57 cents, but we look at this huge open interest in both futures and options as a tinderboxthat could ignite at any moment.
-Ltd..jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Thermore (Far East) Ltd.")
.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Telangana State Industrial Infrastructure Corporation Limited (TSllC Ltd)")
.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Taiwan Textile Federation (TTF)")
