Today in Commodities: Utilizing Leverage

After 2 weak closes, oil managed to close positive to end the week. Looking at the charts, we’re at the bottom of the Bollinger bands so we may get a push higher. We would not suggest new entries to buy or sell, we currently hold December call spreads for clients at a loss. We are still waiting for a pullback in natural gas before getting clients long again.

We are looking for a grind higher in the dollar and in turn a trade lower in most international currencies. Clients are positioned short the Euro-currency currently. Additionally today we advised clients to buy the breakout in the yen. We did a 3 legged trade; selling December calls, buying October puts and getting long December futures. We will keep you abreast with the outcome. December 30-yr bonds were higher by 1'0 basis point and Euro-dollars were lower by 10 ticks; a good scenario for both of our trades ( long bonds and short Euro-dollars).

On today’s small rally in sugar we advised clients to lighten up on their sugar, taking a small loss of roughly $150 per contract. Outside of a 4.5% drop in cotton, softs were quiet. This is a move we forecast early this week but missed. On a rally next week we may look to institute bearish plays for clients.

It is too early to say as of this post but if we get a third consecutive loss in equities today, this would be the first time since late August. We expect lower prices to come in the Dow and S&P.

Corn was quiet today but wheat was a loser, down almost 5%. Stops on futures may have been triggered on your longs depending on placement. On a more positive note the KCBOT/CBOT spread was a winner, gaining 8′6 cents and closing just short of our objective.

Gold and silver were lower, but we are looking for more…see previous posts. When it is time to buy silver, which we expect will be in the coming weeks, we will be a buyer with both hands for clients. Ideally at $15/ounce or thereabouts.

Live cattle were sideways for much of today's session. Next week we will be pricing out more calendar spreads, looking to get long the front and short the back months.

Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.

Comments

[woodennickels:]

“Leverage,” he said, “is the only way a smart guy can go broke …

Warren Buffett

Sep 25 04:26 PM

[Rick S.:]

Is there any reason why we have to "utilize" leverage? Can't we just "use" it?

Sep 26 03:29 PM

[ManAboutDallas:]

Same reason snails are tastier when you call 'em "escargot".


On Sep 26 03:29 PM Rick S. wrote:

> Is there any reason why we have to "utilize" leverage? Can't we just
> "use" it?

Sep 28 06:59 PM