DTN Cotton Close: Plunges on Options Exercise

©Debra L Ferguson Stock Images

Spot May led the downward charge Monday as its options expiration added additional longs into the trade. Last Friday, as the market was recovering on Chinese quota, the resulting rally caused the market to settle at 78.11 cents. Thus, all calls being held at the 78-strike level were triggered long into the futures.

With such added bullish weight, the market spiked lower in its technical attempt to lighten its load. It was also noted prior to option expiry, the market was already saturated with small and large net long traders. Volume Monday was huge at 60,000 contracts plus.

The market did suffer chart damage, and it may take some sort of momentous news event, such as a U.S./China trade deal, to bring the market back around. Monday’s low has taken the market back to its March 28 lows.

It was already thought that the market can become somewhat overbought, as from the February lows prices had risen nearly 5.00 cents across the month of March. To that end, a 50% retracement of the May contracts move stands at the 76.00-cent mark.

Monday afternoon USDA will release its latest data on the planting of the 2019 crop. Although there remains plenty of time to seed the crop, for the moment, many locales are enduring cold and wet field conditions. With an abbreviated trade week ahead, bull traders are hoping the market recovers before the Easter holiday.

Monday May cotton closed at 76.49 cents, off 1.62 cents, July finished at 77.04 cents, down 0.82 cent and December settled 75.88 cents, down 1.31 cents. Monday’s final volume was closed to 63,018 contracts.

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