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Elgrey
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Expat finance professional living and working in Hong Kong.
  • My May-14 (And A Bit Further) Strategy

    There was no article on April for one reason - I reviewed my approach towards investing business and left shorter-term trading in favor of longer-term strategies. My trades were seldom longer than a month before. Now I take positions for 2-3 months. Therefore writing an article every month is not relevant anymore. Instead I will be doing that on uneven periods basis.

    Soybeans - at the moment I hold short position consisting of OTM August calls. I still expect soybeans to fall bearing in mind (a) extreme crop in South America, (b) imported beans coming to the US, (c) extremely long position of speculators, (d) looming El Nino which brings wetter conditions to the US in summer. On the resistance side there is shortage of beans in the US warehouses but this is no longer news and was factored into the price already.

    Cotton - I held strangle position but I do not rule out to close it as CT market keeps on crawling up. But this market is unpredictable and is highly dependent on several large players who can turn it upside down within hours.

    Coffee - fears of loss of crop weakened after Brazil received needed precipitation. I am under impression that the price gone up too much and increased my short position waiting for the pullback to 170-180.

    Cocoa - I re-instated strangle position soon after major grind reports were issued. Quarter-on-quarter grind data has weakened a bit in EU and Asia but added in the US. Same period last year grinds are stronger all over the World. Midcrop is promising but El Nino is a potential threat for Ivory Coast. Technically, bulls are very weak. Bottomline - market is under pressure of different factors and I want to hold a non-directional position until early July when new grind reports come live.

    Heating Oil - there is not much to heat in summer and I short HO.

    Gasoline - I was long RBOB back in March. I transformed my position into a non-directional strangle in April. In May I am shorting RBOB. These are seasonal trends and technical factors that influence my decision.

    Natural Gas - I was shorting it but I was caught unprepared in mid-April when prices spiked after pitiful weekly injections. Now situation calmed and I hope that injections will normalize and we see NG slowly giving up its positions. I am shorting NG.

    I suggest to stay away from Wheat and Corn as these two are at gambling state at the moment - July will tells us if corn pollination went well and at that time we will have more info about wheat crop. Plus, important factor is situation in Ukraine. If fascist from Kremlin continues to escalate the conflict then there could be less supply of wheat and corn, especially wheat. I am interested in buying copper but I do not want to buy futures and unfortunately options market is very thin for this commodity so I am still thinking.

    May 05 11:48 PM | Link | Comment!
  • 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!
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