In my opinion Cotton can potentially move lower toward 67.00 as bearish indicators persist. March Cotton last as of this writing is 71.48. China has not bought US Cotton since the tariffs have started and there are concerns that even with a solid yield in US crops, some areas Cotton quality isn’t as good pushing any other potential buyers away from what is still decent quality US Cotton. This has lowered the USDA average price of Cotton to 66.40 on the large US Cotton supply. The ICAC lowered their average price for world Cotton to 86.45 from 89.00 and warehouse stocks for Cotton are 136,347 vs 136,257 last year this time.
Consider puts on March Cotton, the March 70.00 put cost 1.25 = $625.00 of quantifiable risk plus fees and associated costs per transaction to enter the trade, or the March 69.00 put cost .89 = $445.00 of quantifiable risk plus fees and associated costs per transaction to enter the trade.
For a contrarian view or to cover any potential upside indicator or comment, consider the March 73.00 call costing 1.35 = $675.00 of quantifiable risk plus fees and associated costs per transaction to enter the trade.
MARCH COTTON OPTIONS EXPIRE IN 35 DAYS 2/8/2019
MARCH 2019 FUTURES ARE THE UNDERLYING CONTRACT.
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