Today in Commodities: The Rubber-Band Effect

by: Matthew Bradbard

We would not suggest being long oil as prices came off even with equities moving to new highs. For now it appears there has been some disconnect. Natural gas was lower today for the second session in a row. We will continue to accumulate $1 call spreads for clients in November.

We advised clients to move their short British pounds out at a profit and into short Australian dollars. We were buyers of the September 80 puts for just over $400 today. If in fact we get a setback in commodities the Aussie should in theory get hit the hardest.

We expect a weak close in stocks today…stay tuned. Clients own ES puts expecting a trade down to 965 in the next 2 weeks. The Euro-dollar was lower by 14-20 ticks today, have you bought your long dated puts yet?

Hindsight being what it is, we should have held off before rushing back long corn and wheat for our clients. That being said we have a light long position into next week's USDA report. I could think of worse places to be. Like gold, we suggest booking profits on longs or moving to silver. If the US dollar moves through the 20 day moving average it would not be unreasonable to see gold back at $900/ounce.

Lean hogs have yet to bottom but we will be there with clients if and when. We suggest buying December calls. We have clients positioned long October live cattle expecting a trade back to 91 in the coming weeks. All the softs were higher with sugar up an additional 5% today. I will need to do some soul searching over the weekend to see how to proceed from here in the Azucar.

Risk Disclaimer: The risk of loss in trading commodity futures and options can be substantial. Before trading MB Wealth recommends that you should carefully consider your financial position to determine if commodity trading is appropriate for you. All funds committed should be purely risk capital. Past performance is no guarantee of future trading results.