Oil, sugar, cocoa, and cotton options spread can make your Roth and traditional IRA returns exceed 100% a year
Peter Oberois
Jul. 2, 2007

Crude oil, sugar, cocoa, and cotton futures are in raging bull markets. The deep in the money call spreads or an arbitrage position of long the future and way out of money put and short a deep in the money call option can provide handsome profit.

Cotton built a base for a many years. It has just moved above the upper end of the resistance level. It is expected that Cotton trading at 62 should reach 80 within the next year.

Cocoa is in a bull market rending close to 20. It is expected to reach above 40 over the next several years.

Crude oil is trading at 70. It is in a bull market and can reach 78 to 80 within the next six weeks.

Sugar is trading at 10. It can easily reach 20 within one year.

Option spreads (deep within money call) can provide handsome profits if you know the long-term trend. For example, you can long March 2008 cotton 56 call bad short 59 call. The difference is $1500. You can buy the spread for $1200 on a margin of $200. If cotton trades above 59 in Feb 2008, you will pocket the $300 profit – a 133% profit in eight months.

On the other hand you can buy March cotton future. Sell a March Cotton 60 call and buy a $56 put. You should have slightly higher return on a slightly elevated risk.

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