Market: September Orange Juice (JON7)
Tick value: 1 point = $150
Trade description: Long Call
Option expiration date: 08/17/07
Max risk: approximately $450
Max profit potential: $Unlimited (target is 100% of the risk.)

Buy a September OJ 175 call for approximately 3 points ($450) to open a position.

Our OJ trade from last month worked out very well. We covered yesterday with about a 300% return on our investment*. We are now looking to reverse our position and go long. The reason for reversing is both technical and fundamental. On the technical side OJ has formed a double bottom and looks to have found strong support just under the 150 level, which if you recall was our target on last months OJ trade. Fundamentally we are simply looking at this seasons hurricane forecast. NOAA's 2007 Atlantic season hurricane outlook calls for 13-17 named storms, and 3-5 of those being major. These predictions are at least partly based on the evidence that suggests we will have a La Nina in the Pacific again this year. The OJ crop has already been devastated by the 2004 and 2005 hurricane seasons and another blow this year could easily send prices back above 200. So we feel that this is a good trade to have in your account for the summer as we should see a good portion of the hurricane season take shape before the expiration of these options. OJ is a thinly traded volatile market that is prone to lock limit moves so options are the best way to manage risk in this often wild market.



Profit Goal
Or profit goal is to catch a move back up to 180 or above. Break even point is 178 assuming the three point fill. 100% gross profit would be realized at expiration if the market is at 181.

Risk Analysis
Max risk, before commissions and fees, and assuming the above mentioned fill would be about $450. The full premium paid for the option is lost at expiration if the market expires below 175.

Derek Frey is Head Trader at Odom & Frey Futures & Options.

Risk Disclaimer
Past performance is not indicative of future results. Trading futures and options is not suitable for everyone. There is a substantial risk of loss in trading futures and options.