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Weekly OJ: Watch For A Price Bump

ByMatthew Bradbard
Published 11/15/2012, 01:00 PM
Updated 07/09/2023, 06:31 AM

Perhaps off the beaten path but not just a beverage we drink with our breakfast. Orange juice is actually a tradable commodity. The contract size on frozen concentrate orange juice is 15,000 lbs. That means every one penny move equates to $150 gain or loss. I am operating under the influence that the trend line identified by the red horizontal line will hold as support. In the coming months I expect to see prices pick up as we may be under way with futures appreciating 7% this week. As one can see, prices are bouncing off oversold levels and while past performance is not indicative of future results, let’s look at OJ during the last four years.

I’ve put red arrows on the chart under the middle of November to correspond to the current price and prcies the last three years at this time. Now it may take a few months to develop so I would trade the March contract and be patient. In 2009 within three months prices appreciated 20%, in 2010 better than 20%, in 2011 after a 15% decline prices rebounded to trade at multi decade highs 18% over the original entry price. Now in 2012 prices are starting from a depressed price and I think it is feasible into early 2013 to see prices gain 20% plus putting futures near $1.40; identified by the blue line and the 200-day MA.
Orange Juice Futures
At the money options or just out of the money options have a delta of 40-55% and can be purchased for $1000-1600 depending on which strike you select. I also like the idea of back ratio spreads or getting long futures and selling out of the money calls 1:1.

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