Buy one September OJ 160 call and one November OJ 180 call for a combined price of 5.50 ($825) or better. By diversifying the distance to the market and the time frame you are taking a layered approach to timing a rally. The market is in a technical freefall but is likely to see a near term correction and potential long term retest of the contract highs should the anticipated increase in Atlantic hurricane activity damage the Florida crop. The U.S. produces about a third of the world’s OJ and Florida produces about 75% of this country’s crop and approximately 90% of the U.S. contribution to the frozen concentrate that makes up the futures contract.

Expiration
September options expire 8/17/07 and November options expire 10/19/07

Margin
Cost of Trade ($825)

Risk Scenarios
Max risk is the cost of the trade ($825) and occurs at expiration with the market below the respective strike prices (160 for September and 180 for November). Risk management is best achieved in quick initial partial scale outs as described in the profit scenarios section.

Profit Scenarios
Max profit is theoretically nearly unlimited and is $150 per full point above the respective strike prices of the options. It is recommended that you scale out of the September options on an early price spike in 33% scale out intervals at 5.00, 8.00 & 12.00 respectively. For the longer term November options I recommend wider scale outs of 50% of the position at 7.00 and the other 50% as per your personal aggressiveness.



James Mound is the head analyst for www.MoundReport.com, and author of the commodity book 7 Secrets. For a free email subscription to James Mound's Weekend Commodities Review and Trade of the Month, click here.