• Market:  September 2006 Lumber (LBU6)
• Tick value: 1 point = $110
• Option Expiration: 08/31/06   
• Trade Description: Long Call
• Max Risk: $330
• Max Profit:  unlimited

Buy one September 2006 300 call for 3.00 points ($330) or less to open a position.

Technical / Fundamental Explanation
Lumber can be a very volatile market. Last hurricane season we saw lumber prices all over the map. So far this hurricane season has been quite quiet, but it is still early in the season and I have an eerie feeling that we may be seeing the calm before the storm. With the prospect of the summer continuing to be being abnormally hot the probability of some devastating hurricanes remains high. This trade is a great way to position yourself long the lumber market for the month of August which is traditionally one of the worst months for hurricanes. On a technical note we have just seen Stochastics, CCI, and RSI all issue buy signals on this market in the last 48 hours. At the same time lumber has started to support out just above a multi-year support level on the weekly charts. This trade is attractive because it is low cost and risk with unlimited profit potential.

Profit Goal
Max profit is unlimited.

Risk Analysis
Max risk assuming a 3.00 point fill is $330. This occurs at expiration with Lumber trading below 300.

Derek Frey is Head Trader at Odom & Frey Futures & Options.

Disclaimer
Past performance is not indicative of future results. Trading futures and options is not suitable for everyone. There is a substantial risk of loss in trading futures and options.