OREANDA-NEWS. March 12, 2015. Raw sugar futures on ICE tumbled to a six-year low on Tuesday, spurring what traders believed to be a wave of profit-taking in options and potentially signaling that the steep price drop may be in for a pause.

Volume in May 14-cent calls surged above 5,500 lots on Tuesday, a day after open interest fell to just 6,508 lots and implied volatility rose slightly, though it remained below last month's contract high.

"(At) the 13 (cent) price level, a lot of people are taking profits," said David Martin, founder and managing member of Martin Fund Management in New York.

"I think it's people taking some money off the table. It may be a pause in the market going lower."

The corresponding May sugar futures contract fell as much as 2.2 percent to a session low of 12.38 cents per lb on Tuesday, the lowest on a continuation chart since April 2009.

Traders believe the surge in May 14-cent call volume was the result of short covering rather than long liquidation, which would have been viewed as bearish.

"It's mildly constructive because they think the market will find support at current levels," said Michael McDougall, head of the Brazil trading desk at Societe Generale in New York.

"It's a price target that people are taking advantage of."

Jack Scoville, a vice-president for brokerage Price Futures Group in Chicago, said the move appeared to have been done by speculators as the heavy volume was traded at just four times throughout the day.

The May 14-cent call delta fell to 0.21 percent, from 0.27 percent on Monday, showing that the market perceives the call to have a shrinking chance of being in-the-money.

Volume was also heavy in July 12-cent puts at 5,332 lots after open interest rose to 5,138 lots and implied volatility climbed to a contract high at 25.35 on Monday, as market participants were seen taking protection in case the market falls further.

A volatility smile chart shows a slight skew toward puts.