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December 20, 2025
Cotton is a roaring Buy
Relative to the way this market moves,
July Call Options are dirt, dirt cheap
If you told me, “You can take one position, then leave
town and not see it for the next six months,”…NO
QUESTION…this “2 &1” would be it. From a straight up 100% statistical standpoint,
going back for decades, it does not EVER get any better than this
recommendation in two critical respects. One, if I’m wrong, I should be
able to recoup 100% of what I have on the table…And two, if I am right, the
average potential gain should be of a sizeable percentage. Of
course, both of those outcomes are based on 30 years (actually 50) of data and it is obviously possible for this year to be
the first exception…thus resulting in losing up to every dollar you have
invested. BUT I WILL TAKE THESE ODDS…Irrespective of my market opinion, from an analytical
standpoint, I’ll repeat: I JUST DON’T THINK IT
GETS ANY BETTER THAN THIS.
I HAVE BEEN BULLISH COTTON DOWN HERE FOR A WHILE NOW…BUT
CONSIDERING ANY NUMBER OF STANDPOINTS…I AM NOW ROARINGLY SO…ESPECIALLY IF
YOU TAKE MY ADVICE AND POSITION OUT INTO JULY…USING “UNITS” OF 2 CALLS AND
1 PUT TO DO SO…WHY? BECAUSE THE HISTORICALLY BASED MATH SUPPORTING THE
APPROACH IS UNDENIABLE.
JULY COTTON MOVES…AND
MOVES BIG…YEAR AFTER YEAR AFTER YEAR…PRETTY MUCH FOR AS LONG AS I HAVE BEEN
IN THIS BUSINESS.
I know that charts, and tables, and historical data can
put some of you to sleep but I urge you to take the time to “get” my point
with the table that follows here…which basically documents the high
probability that this market, which has been laying here dead in the water
for 18 months, is about to do SOMETHING, and most likely it will be BIG.
TOTAL MOVEMENT, UP OR DOWN, AWAY FROM THE
MID-DECEMBER CLOSE OF JULY COTTON
BETWEEN DEC 15 AND THE CONTRACT EXPIRATION IN JULY
|
Dec 15 close
|
Percent below
Dec 15
|
Percent above Dec 15
|
Greatest per
cent change
|
|
2025
|
71.41
|
-13.1
|
+.7
|
-13.1
|
|
2024
|
81.17
|
-16.4
|
+26.4
|
+26.4
|
|
2023
|
81.25
|
-6.0
|
+10.7
|
+10.7
|
|
2022
|
102.14
|
-1.3
|
+52.7
|
+52.7
|
|
2021
|
77.00
|
-1.7
|
+25.0
|
+25.0
|
|
2020
|
68.87
|
-30.0
|
+7.4
|
-30.0
|
|
2019
|
81.34
|
-25.9
|
+.1
|
-25.9
|
|
2018
|
76.74
|
-1.29
|
+25.7
|
+25.7
|
|
2017
|
71.90
|
-2.59
|
+21.2
|
+21.2
|
|
2016
|
64.71
|
-16.0
|
+2.7
|
-16.0
|
|
2015
|
61.86
|
-4.8
|
+10.1
|
+10.1
|
|
2014
|
82.27
|
-9.4
|
+17.1
|
+17.1
|
|
2013
|
76.88
|
-1.6
|
+22.5
|
+22.5
|
|
2012
|
85.67
|
-22.8
|
+16.3
|
-22.8
|
|
2011
|
123.47
|
-.4
|
+70.0
|
+70.0
|
|
2010
|
76.19
|
-9.3
|
+14.39
|
+14.39
|
|
2009
|
45.56
|
-7.3
|
+35.3
|
+35.3
|
|
2008
|
68.90
|
-8.49
|
+37.2
|
+37.2
|
|
2007
|
56.89
|
-17.6
|
+8.19
|
-17.6
|
|
2006
|
54.70
|
-17.7
|
+8.6
|
-17.7
|
|
2005
|
43.75
|
-.1
|
+31.6
|
+31.6
|
|
2004
|
72.35
|
-35.8
|
+7.8
|
-35.8
|
|
2003
|
54.80
|
-12.1
|
+11.1
|
-12.1
|
|
2002
|
40.12
|
-18.1
|
+16.6
|
-18.1
|
|
2001
|
68.53
|
-45.3
|
+1.0
|
-45.3
|
|
2000
|
52.33
|
-4.8
|
+24.4
|
+24.4
|
|
1999
|
63.26
|
-24.5
|
+1.79
|
-24.5
|
|
1998
|
69.16
|
-9.9
|
+20.4
|
+20.4
|
|
1997
|
77.87
|
-9.6
|
+1.4
|
-9.6
|
|
1996
|
83.59
|
-17.4
|
+7.8
|
-17.4
|
|
1995
|
84.45
|
-2.1
|
+36.4
|
+36.4
|
Quite obviously, the big point here is what you see in
the highlighted column…that going back to 1995, between now and expiration
of the July contract, Cotton has averaged a 25%
move, either up or down, away from its Dec 15th close. During 17
of those years, the average move up was 28 cents…and in 14 of those years,
the average move was down 22%...and only ONE year, of -9.6%, which was not
in double digit percentages.
WITH JULY AT 66 CENTS ON
DECEMBER 15TH, A 25% MOVE WOULD BE ABOUT 16.5 CENTS…ONE WAY OR
THE OTHER…WHICH WOULD BE FAR MORE THAN ENOUGH TO HAVE THIS RECOMMENDATION
RECOUP THE ORIGINAL INVESTMENT…OR REALISTICALLY BE ABLE TO SCORE SOMETHING
LIKE A 400% GAIN.
And the MASSIVE spec short in Cotton still keeps this
market, in my old hack opinion, totally, totally primed for an upside
explosion…
HOW TO BUY IT…
Quite honestly, during the past year, I got away from
using the Both Sides Strategy, which I have forever believed/KNOWN is the
best way to position in the futures markets. In fact, two of my personal
wall reminders regarding trading (of 8 total) are:
IF YOU ARE NOT WILLING TO BUY BOTH SIDES, DO NOT DO THE
TRADE.
LOOK FOR RANGE TRADE 2&1 SETUPS THAT PUT YOU IN A
POSITION TO WIN BIG. THERE IS NO BETTER TRADE.
And that is what I have here in Cotton…and if you can
see what I trying to show you as to why I am making this recommendation…I
absolutely see the “2&1” as the way to do this, as, if Cotton does go
lower, you can recoup 100% of the funds invested, and then
you can reposition at even lower prices…And on the flip side,
the potential dollar gains shown below are very real when
Cotton does go up, which it WILL. But you do
have to be there when it does…
You have no idea how bearish the industry wide sentiment
is…which IS what you basically have had at every commodity market bottom in
history…where low prices, and laying there forever
just convinces the whole trading world that “there’s no way it’s going up
from here.”
My view is that very strong hands have been quietly
accumulating Cotton for the past year…And with this market having a 50 year history of almost routinely going from being “on
its ass” to leaping 30-50 cents higher, I THINK THAT IS WHAT WE ARE GOING
TO SEE IN 2026…quite possibly beginning right out of the gate. In
other words, 2025 was “nowhere,” and 2026 will be exactly the opposite.
Another rule…Be enthusiastic when no one else is.
Contact me if you want to know more…
Thanks. Enjoy you holidays.
Bill
770-425-7241
866-578-1001
All
option prices in this newsletter include all fees and commissions. All
charts, unless otherwise noted, are by Aspen Graphics and CRB.
FUTURES
TRADING IS NOT FOR EVERYONE. THE RISK OF LOSS IN TRADING CAN BE
SUBSTANTIAL. THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE
FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE RESULTS. THERE IS NO GUARANTEE YOUR TRADING EXPERIENCE
WILL BE SIMILAR TO PAST PERFORMANCE.
The author of this piece currently trades for his own
account and has a financial interest in the following derivative products
mentioned within: Cotton
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