Monday, 5 November 2012

On why the KC Z12H13 spread is sinking so deep

I am long another two ICE KC Coffee Dec12Mar13 calendar spreads at -5.10. I will see this two at -4.95 and -4.90. I will buy more at -5.30.
A lot of people are wondering how comes that this spread is going out so wide , and here there's someone trying and explaining that: 
Date: 11/4/2012, 6:36 pm
I believe that the Z/H is sinking because of Rule 8.03 which was implemented by ICE late last year. My opinion is that it entices the Trade to dump their crap coffee in December because in March crap coffee will be disqualified. The Trade has purchased quite a few puts on the Z/H spread and the open interest has been dropping in Z with the market. This tells me that the Trade longs are selling to Spec shorts. I don't know the facts for sure but I think that this is what's happening. We'll see what happens after options' expiration on Friday.

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