Today in Commodities: The Commodity Train Is Leaving the Station 25 comments
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Natural gas is higher for the fifth day in a row, having gained 16% in that time frame. We continue to buy clients October and November $1 call spreads. We are paying approximately $2000/per and have an objective of $4000-5000/per. The question is, can you afford to be in a trade with that type or risk:reward dynamic? On a move above $4 in September $4.70 should be obtained.
We have been preaching about a US dollar rally and have been getting a lot of heat. Nothing has changed, we still expect a rally from around these levels. In my experience some of my best trades in my career have been the ones with the most controversy. With most investors thinking the dollar will go down precipitously, I feel good about the trade because most investors are wrong. Sorry, not meant to be a jab, just the sad reality.
Silver and gold were higher on the day, sit in your current position as it may be a bumpy ride but a road that should lead to higher ground.
December corn is a buy, we bought $4 calls recently and clients were buyers of $3.80 calls today for just over $500. October live cattle were lower by 125 ticks today, good for your 86 puts. Cocoa was lower by over 4%, we have clients long 2500 puts.
After a limit down day yesterday, cotton was lower by another 97 ticks today. Put in your profit limit on the October 55 put at 200 points or $1000.
Clients long coffee gave back some premium today but we still remain confident this trade will work out.
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This article has 25 comments:
On Jul 22 03:54 PM dcb wrote:
> i read your comments yesterda and today and they apprear to be different.
> not a good sign.
Just trying to understand your call on a strong dollar and gold at the same time.
I would be curious to know about your strong dollar call. Do you like the dollar against "all" other currencies? Or do you like it just against certain currencies.
I have various Canadian holdings that trade directly on the Toronto exchange and are affected by the USD/CAD relationship.
I personally see the CAD (after rallying this year) at the very least staying flat against the USD or maybe a touch bit stronger from now until years end.
Thoughts on that?
1) it's fallen hard and fast since the July 4th feel-good top; and
2) everybody has piled onto the "OMG, it's about to collapse" camp. SInclair is screaming "This is it! This is NOW!" for the 10 millionth time in the last 5 years. All the guns-and-dried-food wack jobs are recommending $'s for when the Charmin runs out.
Yup, all the ingredients for a quickie rally. Just long enough for people to start thinking Helicopter Ben really might be able to get out of the boat and walk to shore.
Ker-PLUNK!
On Jul 22 04:40 PM Matthew Bradbard wrote:
> How so...maybe because the markets change everyday and as a trader
> you must adjust??
You're below the linear regression line of over 200 days, so overall that's good. not a bad trade, but I think you'd test the recent support line in a couple days (maybe) yesterday it hit the 50 day moving avg, so that would be a clue for today to watch for. as your support and entry for today. A bit more detailed, but when you change your tune bear to bull without talking set up for the trade doesn't sound well thought out.
I only have gold on my chart.
I thin entry on the 50day would be good
On Jul 22 04:40 PM Matthew Bradbard wrote:
> How so...maybe because the markets change everyday and as a trader
> you must adjust??
I have no clue of what the author is talking about. I just came back from Europe after spending 18 days in Germany, Swiss, Austria, and France. US$ is not a very popular currency it was just a few years ago.
I'm still long natural gas and gold.
A dollar call short will be hard to call unless a market mover decides to pull out entirely, the best action would come from China which would bring the USD to its knees but China is already building a hedge against this with commodity reserves especially copper and gold.
As for natural gas I have been sitting on that said train and remain a first class passenger for the long run and not to make a short profit. Investors need to understand cycles and trends to make the most of profits here and natural gas fits perfectly within this sceanario.
If you can look at UNG chart but take the 20 year view (min) on trend association here and take note of the 15 year moving average and its low price points, that my friend is where we are currently and the trend is perfectly following the last 15 year low, within 12-24 months I strongly suspect that natural gas will have trippled in price towards the 10-12$ area but thats my opinion.
Forget the dollar movement for commodity movements especially gold it simply doesn't work all the time, infact it usually moves higher on the recovery from a reccesion as deep the one we are in so expect further moves up and also down unless CFD trading investigations reveal what is expected then the PM market could go either way depending on the situation at the time through short positions etc by the custodians backing the CFD market which is ultimately 'strange' in itself, if you hold CFD/ETC stocks look at the small print closely, very closely and you will discover the main shorters are the custodians of that said market which should be illegal.
Like I said just my opinion!
Also not sure how you can be bullish the USD when the printing presses have been running 24/7 for the last 9 months (much more so than Europes or Japans printing presses). If it's based on strictly a counter crowd trade then okay, but I don't see facts to support your stance.
As the US stock market soars the dollar will head up. What the bone heads in Europe think is of no importence.
UNG is a fund specialising in futures contracts which can be risky to say the least.
If investors are looking for a better deal IMO try the following ETF's: NGAS + NGSP both the same apart from NGAS denominated in USD and NGSP denominated in Sterling.
NGAS & NGSP are designed to track the DJ-AIG Natural Gas Sub-Index sm and pays a capitalised interest return which cumulates daily. The Sub-Index is an "excess return" index and the interest component combines to give a total return investment.
Or try put options, short/forward or leveraged if you are brave enough!
Cocoa now closes at 2879 - it's going the oppossite direction.
Also, what makes you think that USD will go high?
I believe it will just keep at 78~79 because there's no reason it should go very high.
Matt and others: End users of natural gas have been burned before. First, homeowners who switched to NG during the oil embargo, found themselves paying more for energy when heating oil prices fell. Electric companies are aware of the old swicheroo effect as well. Now the industry is trying to sucker in users with stories of massive new NG finds. Plentiful energy for 100 years. Be patriotic, buy natural gas! Yada, yada. We need a change of tack. Index your product to oil and coal, i.e., by BTU. Sign 10 year contracts, both assuring supply and competitive pricing. This is why people hate commodities. Buyers always have the feeling of being ripped off by the suppliers.
www.etfsecurities.com/...
Your looking at general stocks instead of funds!
Great fun to watch the little guy get creamed since they are so eager to act like fools anyway, might as well oblige them.