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Elgrey
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Expat finance professional living and working in Hong Kong.
  • My October-14 And November-14 Strategy

    I am sorry for a slight delay with my next post but all I meant to say with my silence was that my portfolio remained intact. OK, below are my thoughts as to what is left of October and November.

    KC - as I mentioned many times before I was short coffee and this position took a serious hit after rains got delayed by 2-3 weeks in Brazil main coffee areas. However delayed does not mean cancelled. Today when coffee prices hover between 2.10 - 2.20 per pound I see it as a good opportunity to place short bets as rains will begin in a few days. Anyway, my short December calls have strike prices of 2.10 and 2.25 so even a slight delay will make me a winner. But in general I was indeed wrong expecting price declines into 1.60 area. I guess this price levels are not achievable in short to medium terms unless weather improves drastically. I plan to keep this short position open until options expiration in mid of November and will reevaluate the market then.

    CC - another rollercoaster market. Supply and demand factors are being pressed by fear and panic of Ebola. I will remain bearish until expiration of my December calls in 3 weeks and reevaluate the situation then. So far I see more downward bias unless Ebola spreads into Ivory Coast and Ghana which has not happened yet and I hope this won't happen.

    SB - sugar market is a question mark at the moment. I have had bearish bets on it since middle of August and I closed almost all of them. Now I am cautiously bearish - harvesting in Brazil is approaching the end and next step will be to see the development of next year's crop. We are approaching crossroads.

    NG - I had a options strangle on natgas since mid-August and now I am bearish it again. Injections are quite healthy. Weather is supportive. We may see 3.60 in December futures within coming weeks.

    C - insight of record crop corn is definitely in sell-mode. Market tried to reboot last days but I think it is a bull trap and we are yet to reach new lows as harvesting will continue in November. Export sales are healthy but far from striking levels and this makes me think that buyers expect better bargains.

    HE - lean hogs tried to restart bull rally but that did not happen. I've been bearish hogs and I think I will add to this position.

    S, SM, BO - I am still bearish on soy but I do not want to engage into selling of S directly. I'd rather be shorting SM and BO as they have not taken so much damage as S did.

    CL, HO, RB - I was away from this trade for quite a while after I closed HO bullish bet. At that time I expected seasonal appreciation which did not happen because of political reasons. Now I believe that political pressure on oil will persist as States and Saudis want to punish Islamic State and Russia for their clumsy attempts to change World picture. I thought of 1980s scenario to happen again when oil dropped from 40 to 7 dollars and I think we are heading that direction. WTI lost 20+ dollars and I do not think this is a bottom - States and Saudis came very well prepared and IS and Russia are not. This could be an easy win for them if they drop the prices to low 70s or even under 70s. Among all the oil products to short I favor RB the most as demand for gasoline is not strong during winter.

    This year I've given mostly sell recommendations and I am pleased to see that I've been right. Humphrey B. Neill said in his Letters of Contrary Opinion "Don't confuse brains with a bull market". I am glad to see I passed this first exam. Dow Jones Commodity Index lost 9% year to date, Goldman Sachs Commodity Index lost 13%. I do not want to disclose my results before the year end but I gained year to date.

    Oct 16 11:01 PM | Link | Comment!
  • My September-14 Strategy Review

    The first month of autumn is over. Here is review of September performance.

    Natural Gas sat firmly at USd4.00 per bbu. As expected.

    Cocoa was a rollercoaster of September. Somewhere along the way markets "finally" noticed Ebola virus and cocoa jumped 10% for no reason. No reason does not mean I do not believe in Ebola, no the virus is real and deadly. But there were no occasions in Ivory Coast and Ghana and markets purely overreacted. That was a market manipulation attempt without any doubt. Ebola has been there for months and CC price accounted for it already. Prices pacified already and as I type this post prices returned to the levels there were just before the spike and I expect them to go lower as harvesting is on its way in Ivory Coast.

    Coffee - here I am a bit worried. Prices soared in a similar manner as CC prices did but what differ them from cocoa is the drought in Brazil is probable while Ebola was only a fear. Anyway, I do not believe that present pricec spike is real as it is too early to judge on next year crop fate but my bearish stance on coffee begins to soften unless weather improves substantially.

    Lean Hogs market is resistant but it slowly surrenders as supply picture looks better these days. Market recovers from PEDv.

    Sugar is in a long-term bear trend as expected. Crops have been good so far. However market stars to talk about issues in 2015 so I do not want to extend my short position at the moment.

    Corn is a downtrend as expected.

    Oct 06 2:48 AM | Link | Comment!
  • My August-14 Strategy Review

    August ended and September is on its way. Let's have a brief review of gains and losses.

    Heating Oil - position closed a week+ ago. My expectations of oil price recovery did not come true and I closed position with minimal gains. Gains, that's right - I opened bullish position when HO was around 2.90 and I closed it when HO was around 2.80 and still I made money because I was selling puts instead of buying futures. Good strategy, a spare parachute, if you like. Currently I do not recommend to touch any oil product cause its further direction has a huge political component these days. OK , it has been there forever but now it weighs more than before with all the sanctions against х Moscow. History tells us that in 1980s Soviets were crushed with oil prices falling from USD40 to USD7 - their oil-selling economy did not survive that hit and collapsed. What happened once can always happen again, that fall in prices took a long time. We never know if that fall was intentional or not so I seek for fortunes somewhere else. Another factor to bear in mind is positioning of speculators - in June they amassed a gigantic net long position of nearly 500,000 contracts. This was something for the Guinness Book of Records. Today net long position is around 300,000 and prices are almost 15 bucks lighter. Imagine what will happen if net position will fall to miserable 20,000 net long contracts. That also happened a few years ago when the price fell to USD70. So, again I have no comfort understanding the situation and I am to stay aside.

    Natural Gas - keeping options strangle here betting on prices to stay within 3.50 - 4.50 for another couple of months. We have two opposing forces in play - low inventories on one hand with injections not sufficient enough to bring back inventory levels to 5-years average before winter, and calm summer and prospects of mild winter plus injections are still above average values, so 5-years average inventory levels may be reached in a few months.

    Cocoa - last days were black days for bulls. Prices touched 3300 per ton and fell under 3100. I keep my shorts open. Crops have been good so far, weather in Western Africa is supportive, port arrivals are high. No reason to worry about supply and all the stories about demand you can spare for later. Like I was saying earlier EU demand became weaker and stories about strong Chinese demand are for dummies. I live in Hong Kong and when I see what "chocolate" is on shelves I just wonder - who buys this stuff with cocoa percentage of 30% to 70%? This is not Belgian chocolate, this is some cheap fake which does not need much cocoa butter and powder to make. Besides I do not see much fashion about it.

    Coffee - historically coffee has a local peak during 1st week of September and then eases. We are seeing this picture these very days. I opened shorts earlier than needed and missed some profits but I still hope to make more.

    Soybeans - I advised not to short any longer and I was somewhere wrong. But WASDE is due tomorrow and who knows... Instead I have a strangle in soymeal which is OK so far.

    Lean Hogs - after a strong bearish rally prices made a steep U-turn and rushed upwards. This is normal for this part of the year and I still expect prices to fall because facts about hogs are the same - cheap feed, PEDv is over, COT is bullish on closest October contract only and bearish on further contracts. Let's see what Hogs and Pigs reports will tell us in 2 weeks. I have a small short position.

    Sugar - I did not announce it earlier but I shortly after I wrote my previous comment I opened bearish position in sugar. Brazil sugar production was great last year and this year it is on par and even slightly better. A couple of days ago I added to my short position.

    This is it for August and early September review.

    Sep 09 11:01 PM | Link | Comment!
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