Seasonal Trend Alert: May Cotton

Posted: Nov. 25, 2022, 8:43 a.m.

Seasonal Trend Alert: May Cotton

Below is a chart of the 5, 15, and 30 year average price fluctuation for May cotton futures. We've listed 3 Ways to Play at the end of this writeup.  

11.25.22 Cotton Seasonal

Performance Snapshot

Below is a performance snapshot of the seasonal trend for each of the last 15 years.  You can find average gain/loss, best/worst equity (based on one futures contract), and more.

11.25.22 Cotton Historical

The Technical Landscape

May cotton futures are on the verge of marking another inverse head and shoulders pattern.  We see strong support near 79.00.  A failure to defend that level could trigger a move lower, with the next support pocket coming in from 74.85-75.41.  This pocket represents the gap from November 2nd.  On the resistance side of things, the Bulls want to chew through 86.00-88.00 to encourage a bigger move to the upside.  If the Bulls can achieve this, it could extend the rally to the breakdown point from September 16th, which comes in near 96.00.


3 Ways to Play

We've been working to position clients long May cotton ahead of the bullish seasonal trend.

Here are three ways to consider playing this bullish seasonal trend:

1. Buy a call spread.

For clients who are looking for way to play this seasonal trend with limited risk, we see value in the May 92 call and selling the May 102 call.  Contact our trade desk if you'd like to place this trade or get more information: 312-278-0500.

2. Buy a future(s) with a stop loss.

Deciding where to buy and where to place the stop will vary from trader to trader, as each have a different risk profile and risk tolerance.  

3. Use more complex options strategies.

If you're curious about other ways to get exposure via different options strategies, contact our trade desk: 312-278-0500 or email [email protected]

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