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Elgrey's  Instablog

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Expat finance professional living and working in Hong Kong.
  • My October, November-15 Strategy

    This October-November I have following plans:

    Grains - all of them are plentiful and quite cheap at the moment. So I do not suggest a short position to be opened at the moment. I have short positions in wheat and corn and I keep them for now but once they drop a bit more further I will close them and wait for a bump. I am also thinking of a short strangle position.

    Oil (and products) - I have a short position here, I may add a bit to it but not much, if any at all. The reason for that is falling rigs count - it takes about 3 months for proces to react and rigs number has been decling for almost two months.

    Natural Gas - short, short, short. Mild summer, mild autumn - no reason to worry and I think the case will last for October and November. Small hikes are a part of the game but generally the trend is down.

    Cotton - after a long break I come back to short it. Cotton market is bit of a muddy waters but USDA sheds some light with WASDE report. At the moment cotton price is a bit skewed towards upper end of the price range so I short it for a while. Position is not large cause fundamentals are not 100% in favor of bears.

    Lean Hogs - I keep on doing the same thing as I've been doing over last couple of months - buying low and selling high. My opinion is that hogs stuck in a range - production and demand seem pretty balanced. There are lots of factors like seasonal perks - demand changes, PEDv, so keep your eyes open.

    To question marks:

    Coffee - for no obvious reason prices hiked. There are talks about poorer crops but no proof yet, rains has not come yet but it is too early for next crop to suffer, El Nino is a wild card up to date. Waiting and watching.

    Cocoa - waiting for grind reports to arrive during second half of October. They will show us the trend.

    Oct 13 5:37 AM | Link | Comment!
  • My August, September-15 Strategy Review

    OK, it is time to review the performance:

    Soy Oil - bears got loads of fun watching BO fall from 31 to 26.5. Now I am thinking of leaving this trade as seasonal tendency is diminishing and market has shown some recovery to 28.

    Gasoline also lost alot but then recovered half of the damage. I keep my shorts open but at this stage I begin to feel a bit pessimistic about further price falls. I mean sharp price falls.

    Natural Gas - I was thinking earlier to rebuild NG position from bearish into neutral and I did it. But after a couple of weeks I removed long leg and added to shorts. This has been a right decision so far.

    Hogs - I was bullish that market initially but then I noted unusual volatility and played its game - I was selling tops and buying bottoms. Although I could not catch falling knives exactly at the right moments of time I never scored defeat on hogs during these two months. That was a good trade.

    Coffee - enjoy it while it lasts cause it never does. I quit my shorts when the price was 1.25+. A bit too early, I agree, but I never wanted to find a bottom. I stopped liking the trade cause options premiums got thinner and this is not what one wants when trading such a volatile commodity. I am out of this market for a while. It was a good trade too.

    Sugar - I burned my fingers on it during last week of September and quit the trade. Should I have it done earlier? Maybe, but I can't blaim myself for being slow either - it all came at once - rains, poorer harvests, large purchases by Wilmar and defiit widening by Czarnikow. Let's see how long it will last.

    Grains - weather was favorable for good crops development and I opened shorts in between of WASDEs. Not too much profitable but I try not to overextend the risk - I still bear scars of June-July rally.

    Except for sugar the trade was good. Let's move on.

    Oct 04 9:14 PM | Link | Comment!
  • My August, September-15 Strategy

    August is here with us and below are my thoughts for Autumn-September.

    Soy Oil - seasonally BO is falling until early October. I will stick to this plan. BO balance sheet and COT do not show any signals to worry about.

    Gasoline - production of RBOB hits records while crack spreads protect refiners' profits. This is not a sign of price strengthening. Seasonally, the demand should begin to soften - summer driving season is moving towards its end. Not to mention that commercial users buy commodities months ahead so there should not many buyers these days. This is what common sense tells me. I hope I will be right.

    Natural Gas - right now I have bearish position but I think to rebuild it into a neutral strangle. I believe the prices have accounted for larger inventories and now waiting for a spike down to open longs. I am going to keep this position till October-November.

    Lean Hogs - I keep my longs open and believe that current supply and demand situation overextended its bearish stance - recent news revealed that piglets are quite light in weight and inventories are more like 2013 when prices hovered around 80-90 cents per pound.

    Coffee - absence of bad weather events this year secure good crops which add to healthy carryover stocks. This is a long-term bearish factor. Winter in Brazil has just passed its equator so the chances for frost diminish with every day. I think this bearish stance will be here with us till December unless something bad happens.

    Sugar - production in Brazil is somewhat lower than last year but last two years were record-makers so inventories are very plentiful. Plus, India and Thailand have good crops this year. I do not see any reasons why bears should be worried.

    Question marks - grains, cocoa.

    Grains - August is very critical in a sense of crops being harvested as well as insane volatilities after WASDE report. Therefore I am out of the market until WASDE comes live. This time the key variable will be yield per acre and should this value deviate from what market expects we may easily see day limits breached. Overall I am bearish but I do not want to be in the trash situation similar to where I was in the end of June. Hate myself for that. Well... What does not kill you only makes you stronger.

    Cocoa - 2Q 2015 grind reports were very bearish. But I held myself from opening any positions - the crop figures are yet to be known and they can easily turn the tables. Weather news do not offer comfort either - in my understanding pods development requires much more sun light than weather has been offering. This may translate into reduced supply. At the same time port arrivals are on par with last year which is a bearish number. I'd rather wait till October when market knows more about this year crops.

    That is it for now. Stay sharp.

    Aug 03 4:56 AM | Link | Comment!
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