Xiao Fengbo: Cotton Price Is Not Surprising, The Rise Is Expected To Increase.

In recent years, domestic cotton has been fluctuating in a narrow range, but the rise of ICE cotton has also given support to domestic cotton, and the gradual increase in the operating rate of cotton spinning enterprises has led to a strong spot price and limited space for futures prices to fall.

With the production of cotton spinning enterprises in the whole country improving in March, the demand for cotton is gradually recovering.

In the short term, the bottom of the market and the bottom of the policy have been formed, and will form a solid base at 15000-15300 yuan / ton. The structure of the position of cotton option also indicates that the bullish atmosphere will become stronger in the future.

Before fear of wolves and fears of tigers, cotton has become a tiger on the ground.

An old lady has two daughters, the elder daughter sells straw hat, two daughters sell umbrellas, and the old lady looks gloom all day.

Because on rainy days, the old lady was worried that her daughter's straw hat could not be sold, but when the weather was fine, the old lady was worried that her two daughter's umbrella would not sell.

It is best to use this story to describe cotton's worries.

At present, the good news for ICE cotton is China's imports of American cotton. When ICE futures prices rise, domestic considerations are not about the rise of international cotton prices, but a large number of imports will lower domestic prices in China. When ICE cotton futures fall due to the uncertain future of Sino US trade negotiations, the domestic overall price reduction of cotton and the prospect of export of cotton textile products will be considered in China.

In short, when the external market is rising, the domestic cotton will not have a strong desire to rise. If the price increases, the cotton reserves will increase and cotton imports will increase. The decline in the external market will increase the double negative factors of the domestic and foreign cotton price differentials and the weakening of demand expectations, so it has been in a 15000-15600 yuan / ton box type shock.

(difference between domestic grade 328 cotton and American cotton)

Market bottom and policy bottom appear successively, superposition effect supports cotton to fall hard.

Although domestic cotton supply is adequate in 2018/19, commercial inventories and social stocks are still relatively high, the futures adjustment is limited.

From the spot market, cotton spot prices have picked up since the beginning of this year, especially after the spring price is strong. Cotton textile enterprises have started to make the cotton spot enterprises get more confidence.

After entering the March, cotton textile enterprises started to operate at a rate of more than 85%, although most of the cotton textile enterprises thought that the trade war caused the textile industry's orders to be reduced compared with the same period last year, but it did increase at the end of 2018. At least for now, the trade war between China and the United States did not deteriorate.

Judging from the performance of futures prices, the price has fallen below 15000 yuan / ton this year, and only a few trading days have been maintained after that. In January 14th, the author predicted that "the bottom of the cotton market has already formed and the bottom of the policy needs to wait". In March 1st, the US postponed the increase in tariffs on China and the domestic value-added tax, and the bottom of the policy had already been formed.

If the market is formed by the increase in digestion and supply, then the policy is expected to restore demand.

At the end of the market and at the bottom of the policy, the superposition effect can hardly sustain cotton down to 15000 yuan / ton.

In exchange for time, the structure of option positions shows strong market expectations.

The interaction between supply and demand restricts the growth of cotton prices. Under the background of Sino US trade negotiations, the overseas orders are difficult to increase and the domestic textile capacity growth is slowing down. Therefore, before the emergence of a factor of no supply reduction (for example, the cotton growth in the new year is experiencing dry weather), the market is hard to strengthen.

Most of the trend will be similar to that of the same period last year, maintaining a narrow range of fluctuations.

Cotton futures have been trading sideways for more than 3 months, and market bullish sentiment has been rising.

From the perspective of option structure, as of March 21st, the CF1909 call option was held at 24344 hands, and the put option was 16042 hands.

And in the CF1909 call option, the execution price is 16800 yuan / ton. The maximum holding price is 5404 hands. The calculation is based on the option fee of 220 yuan, which means that the investor holding the call option can not lose money when the CF1909 contract has an opportunity to rise to 16800+220=17020 yuan / ton before the closing price in August 5th, otherwise the 220 yuan / ton option fee will be wasted.

Now we see that the probability of price rise to 17000 yuan / ton is small, but the position of options is still increasing.

The rise and fall of foreign cotton will weaken domestic influence. Unless ICE cotton can rise to 80 cents / pound, domestic cotton can only go up, or when ICE cotton falls to below 72 cents / pounds, domestic cotton will only be able to explore 15000 yuan / ton support, otherwise domestic cotton will also be sideways.

Although the structure of option positions indicates that market sentiment is on the rise, there is no data to show when cotton prices will go to cattle.

Maybe now time is the best friend for cotton futures and spot investors.