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Research and recommendations by Bill Rhyne
For more info or consultation…
Landline 770-425-7241
Cell 770-366-3070
October 29, 2025
Fantastic Math
BUY COTTON NOW
Cotton can be stored for
years without any degradation in quality.
And when you combine that with the fact that Cotton
almost ROUTINELY trades up at least 30-40 cents every 2-3 years, it makes
sense for large trading houses to accumulate it when prices are low and
hold it until prices rise again. In other words, using a simple
calculation, if you
can buy it at 70 cents and “know” it can be sold for $1.00 within the next
few years, you are talking about a 40+% return on your investment
in a commodity that you know WILL be consumed at some point in the future.
According to my digging around with ChatGPT, about 7
million bales of last year’s 14 million bale USA crop can be estimated to
still be in storage, with the farmers who grew it MAYBE still controlling a
mere 1-3% of that Cotton…Which, plain and simple, suggests to me that the remaining
97-99% (all of it in other words) of that Cotton is potentially now sitting
in very “strong hands” that have ZERO desire to sell until prices reach
substantially higher (normal) levels. Obviously
this is an opinion on my part…I certainly do not know what those owners
might be thinking, but I seriously doubt that they have been accumulating
the crop for the past year with the intention of selling it for a few extra
cents on the dollar.
Here is what I mean…
Makes sense to me…
Especially when you take the past 40 years of statistics
shown below into consideration…with the
bottom line being that between now and the March contract expiration,
COTTON MOVES…AND IT MOVES A LOT…YEAR AFTER YEAR AFTER YEAR…
What
follows is a history of how much the March Cotton contract moves
between August 31st and its expiration 7 months later…The
data starts with the August 31 close and then notes the biggest move away
from that close…in whichever direction that move might be before the
contract goes off the board.
The
point made here is that Cotton DOES move significantly during those 7
months…AVERAGING a 24% change in price in one direction or the other…which
lends itself to some VERY interesting option possibilities.
First
up…the stats going back 40 YEARS…with the 4th column being of
the greatest importance…
|
|
Aug 31
Close
|
Greatest
Change
In cents
|
Greatest
Change
In %
|
|
2025
|
71.65
|
- 10.03
|
- 13.9%
|
|
2024
|
87.77
|
+ 19.48
|
+ 22%
|
|
2023
|
110.14
|
- 40.04
|
- 36%
|
|
2022
|
91.77
|
+ 37.60
|
+ 40%
|
|
2021
|
66.05
|
+ 26.90
|
+ 40%
|
|
2020
|
59.49
|
+ 12.52
|
+ 21.1%
|
|
2019
|
59.50
|
- 19.97
|
- 33.5%
|
|
2018
|
70.11
|
+ 17.64
|
+ 25.1%
|
|
2017
|
66.01
|
+ 12.49
|
+ 18.9%
|
|
2016
|
62.58
|
- 5.61
|
- 9.6%
|
|
2015
|
67.01
|
- 9.96
|
- 14.8%
|
|
2014
|
82.74
|
+ 8.28
|
+ 10%
|
|
2013
|
77.98
|
- 8.69
|
- 11.1%
|
|
2012
|
103.26
|
- 18.91
|
- 18.3%
|
|
2011
|
84.74
|
+ 142.26
|
+ 168%
|
|
2010
|
62.05
|
+ 22.27
|
+ 35.8%
|
|
2009
|
74.38
|
- 35.15
|
- 47.2%
|
|
2008
|
64.31
|
+ 22.07
|
+ 42%
|
|
2007
|
58.73
|
- 7.92
|
- 13.4%
|
|
2006
|
51.57
|
+ 7.68
|
+ 14.9%
|
|
2005
|
55.50
|
- 13.78
|
- 24.8%
|
|
2004
|
61.36
|
+ 24.64
|
+ 40%
|
|
2003
|
48.49
|
+ 5.09
|
+ 10.5%
|
|
2002
|
40.88
|
- 11.02
|
- 27%
|
|
2001
|
66.73
|
- 15.23
|
- 22.8%
|
|
2000
|
51.92
|
+ 9.78
|
+ 18.8%
|
|
1999
|
71.72
|
- 15.72
|
- 21.9%
|
|
1998
|
74.27
|
- 11.22
|
- 15.1%
|
|
1997
|
77.55
|
- 6.70
|
- 8.6%
|
|
1996
|
84.52
|
+ 10.68
|
+ 12.6%
|
|
1995
|
69.090
|
+ 44.77
|
+ 64%
|
|
1994
|
58.08
|
+ 21.57
|
+ 37.1%
|
|
1993
|
55.56
|
+ 8.84
|
+ 15.9%
|
|
1992
|
67.15
|
- 15.55
|
- 23.1%
|
|
1991
|
73.30
|
+ 15.1
|
+ 20.6%
|
|
1990
|
75.52
|
- 11.37
|
- 15%
|
|
1989
|
57.60
|
+ 8.95
|
+ 17.3%
|
|
1988
|
77.88
|
- 19.38
|
- 24.8%
|
|
1987
|
37.52
|
+ 24.21
|
+ 64.5%
|
|
1986
|
59.71
|
- 5.34
|
- 7.8%
|
|
|
Avg Change
|
+/- 16.4
CENTS
|
+/- 24%
|
So it DOES move…? And in fact, using the August 31st close of
approximately 69 cents a pound, if Cotton were to match the 24% average, it
would mean about a 16 cent move…either up or down…before we get to March 31st…And
with two months having passed since August…with still having had very
little movement…I’d say the odds of something big beginning…NOW…have
certainly increased. When you then throw in that this contract has
basically been trading dead, dead, dead sideways for the entirety of 2025
and I think the case for a big move just
goes through the roof…And per this next chart, I WANT TO BE LONG…RIGHT
HERE…RIGHT NOW.
Commitments of Traders
And here’s what the lay
out is if it does match its average…or as noted, just moves 15% in either
direction.
I MIGHT BE DEAD WRONG BUT
I THINK COTTON IS POISED TO ERUPT ON THE UPSIDE AND REGARD IT AS A
SCREAMING BUY.
And here is where options come in and my reason for
referencing FANTASTIC MATH…
First up…For what Cotton could/should do between now and
March, I view both call and put options as being dirt, dirt
cheap…which, for my money, presents two possible approaches:
One would be, that with the knowledge it could
still go down, using the 2 & 1 approach here is NOT
expensive and does make sense as it does mean that breaking even lower does
offer the possibility of getting your money back…and then re-positioning at
even better prices.
And two, if want to make the
assumption that it MUST be a buy here…or that there is very little
downside potential…you can just buy the calls, which have a
ton of leverage…and be ready to maybe do more if Cotton does drop any
lower.
Truth is, either approach is viable…but I am personally
using both of them…that is, some 2&1’s and some naked calls.
Here are recommendations for both…
Units of 2 Calls and 1
Put
Just buying Calls
Call if you want to know more…
Thanks,
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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