Today in Commodities: Suspend Your Disbelief

Includes: ERO, GAZ, GLD, NIB, SGG, SLV
by: Matthew Bradbard

“Suspend your Disbelief” -- that is what a manager of mine said to me 4/5 years ago when at the time I was buying out of the money Crude oil calls. I find myself thinking the same thing today when buying gold call options for clients at a record high. He was not capable of calling a top there in Crude and I am not capable of calling a top here in gold.

We missed an epic rally in metals last week as we were out of the office. The train has left the station and albeit en route, we have chosen to jump on, suggesting clients to buy $100 call spreads today in April 10′ gold. We suggest waiting on silver for now.

Natural gas was lower by 6% today. We are looking for a touch more before getting clients long. We advised clients to exit or at least lighten up on their December oil. On the next setback we will be looking to trade January or February from the long side.

Cocoa closed near the lows today but we still have some work to do on our puts. On a trade down to 2850 exit the trade. Sugar caught a bid today with March gaining 5%, we advised clients to get long after the 17% correction in the last 2 weeks.

As we voiced in our Commodity Update this morning we like buying dips in corn, wheat and soybeans in 10′ contracts.

The stock market seems to be running into resistance or perhaps could be taking a breath for the next leg up? The next few sessions will be the tell. We have no strong opinion on Treasuries, the short term trend is down but the 40 day moving average seems to be acting as solid support. Stay tuned. Continue to buy dips in December and February live cattle. As for the currencies, will the dollar ever rally? We think so. We advised clients to buy back their lower leg in their Euro put spreads. Contact us for clarification.

Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.