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Elgrey
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Expat finance professional living and working in Hong Kong.
  • My March-14 Strategy Review

    Time to review March predictions.

    Cocoa - as predicted it stuck in a range. My options strangle expires tomorrow and I am glad to collect premium in full. Furthermore I will wait for grind reports in the middle of April and re-evaluate situation.

    Cotton - cotton showed a bit of advance but generally speaking it is in the same shoes as cocoa. So I was correct here too.

    Soybeans - soybeans did not fall, unfortunately. However I still believe that price softening is only a matter of time and patience.

    Gasoline was at around 2.90 levels during the months. Actually I expected it to be a bit higher but RBOB is tightly linked with WTI and there was not much growth potential for WTI in March.

    Coffee - my bet to short coffee was correct. Prices pulled back by nearly 15% from maximums.

    Natural Gas - well… I was right but I am not pleased here. I have my shorts but I continue to hesitate. Last couple of weeks rig count fell drastically, there are new export licenses issued plus you have unrest in Ukraine. It is too far to affect prices in the US but my senses keep telling me that NG market status quo is about to change.

    It was rather calm month for me in terms of trading. As I gain new investment experience with every trade, my approach to investing also changes. I notice that I move away from trading futures to writing options. This is way safer and less time-consuming business that lets you sleep at night and make money. Lately, I read a beautiful book on options selling called The Complete Guide To Options Selling by James Cordier & Michael Gross and I highly recommend it to everyone involved in commodity investment and speculation. This book together with Hot Commodities by Jim Rogers and Secrets of the COT Report by Larry Williams must be a part of Investment Hall of Fame if one will exist one day.

    Alright, March is over, moving into April.

    Apr 02 10:57 PM | Link | Comment!
  • My March-14 Strategy

    This is a bit late but still...

    Cocoa, cotton - my opinion these two stuck in a range. Cocoa market keeps on telling us the same old mantra - shortages, shortages, shortages... But crop is strong so market has no moto to drive further up. At the same time there is no catalyst to move down either. My bet is that until next round of grinding report are issued during mid of April the market stays stagnant. For cotton I look at historical trends and cannot see any strong direction. Production is smaller this year but exports are not great either. My bet is that cotton will be within 80 and 100 cents for coming months.

    Soybeans - I am shorting soybeans. Brazil crop is huge no matter recent downgrades. Seasonally, prices rise till late February and pacify in March when Brazil crop comes to market. I believe that up to end of April market has no potential for growth.

    Gasoline - usually prices for gasoline grow in spring. Withdrawal of gasoline are strong. USA now net exporter of finished petroleum products. I do not foresee prices dropping below 2.60-2.70. That's level I sold puts. I do not have any feeling for upper price level.

    Coffee - coffee price is above $2.00. Price doubled within several weeks on Brazil drought. At the same time there are no confirmations about crop damage. Market is filled with talks and fears. Rains came to coffee growing regions of Brazil so they may be game changing. Historically, Feb-March are periods of high prices and starting from there prices slowly go down. I am shorting coffee.

    Natural Gas - it looks like bull party is over. There are few heating days left and soon market will see growth in inventories. Interesting fact - last week Baken rigs count added 23 rigs. Half of them oil, other - natgas. But I prefer to look at total number as according to some estimate about half of all the natgas comes as by-product from oil rigs. I am thinking to open shorts here.

    Mar 12 10:30 PM | Link | Comment!
  • February-14

    My apologies for skipping February. I did not have much time to post about such an interesting month. We saw multiple rallies in coffee, wheat, cocoa, oil, soybean complex, corn... The whole month was a crazy bulls party. I was absolutely unprepared for that and not only missed rally but also tried to counter it and was beaten. My options portfolio returned second monthly loss during last 12 months.

    Lessons learnt:

    - when selling options do not sell during last month. Yes, theta expires fastest but premiums are low so you can't sell options far out-of-the-money and collect decent premiums. I was usually taking risky bets like 4-5% out-of-the-money and once it became in-the-money I opened futures position to offset the loss and closed it once option ran back out-of-the-money. This strategy worked quite well when markets were flat or when markets moved strongly in one direction. But in volatile months like February options changed status every couple of days. Guessing final price vector became impossible so I had to buyback options and book losses in several occasions.

    - study fundamentals before watching technicals. I relied too much on technical analysis and it backfired on me. Do not really want to elaborate on that simple fact. I earned too fast too much with technicals and loosened the grip on fundamentals. This is something you cannot do.

    Good thing was that I was not overtrading and kept my margin safe so even when heaven fell I did not die and keep my spirits high.

    Mar 12 9:49 PM | Link | Comment!
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