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

    OK, let's review January performance:

    Wheat was a loser in January as predicted.

    Calling shorts for rice and oats was a wrong move but remember I said I did not want to play with them. So I did not and this false call did not affect me. In fact I dislike rice and oats markets - they are too small and too unpredictable.

    Cattle rallied in January so my hesitations were not correct. At the same time hogs were very stable during January and historical pattern did not happen as I anticipated. I currently have short strangle position in hogs and hoping for further price stability.

    Copper lost alot in January. I warned not to buy it.

    Palladium - seasonal pattern held true this year - buy palladium during last days of December and sell at the end of January or early February. This year rally started around Christmas and finished around 20th of January. This was a nice bet.

    Cocoa - I called shorts long time ago and market was bullish no matter what. I closed my short position during first days of January when prices slumped. It was luck cause that drop did not last long.

    Generally, the first month of the year is known for its optimism. Also, it is the month when funds rebalance their portfolios so plenty of strong moves were around. I finished this month on positive note but there is not too much to brag. OK, moving into February!

    Feb 02 10:47 PM | Link | Comment!
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