17 September 2018 MONDAY
Blank Summary Sheet Available: I’ve had quite a few people ask for BLANK Trade Summary sheet, so they can enter their own trades and track them. This is the same formatted XLS sheet for the Trade Summary Sheets I include in each newsletter. So for your convenience, you may download it here: TradeSummarySheet_BLANK.xlsx
New Tab – Resource: Links Library This new tab on the MENU contains some downloads and links to help you find topics in your research quickly. It is a work-in-progress and over the next few weeks, I’ll be adding new links and topics there. You will find links under the CME list for research graphs for the grains (corn, soybeans, wheat links); this list is quite extensive. The Resource: Links Library is now on the MENU at this website.
Crude Oil: I am short the DEC18 90-strike CALL. I sold it for 0.09 and it is trading at the close last week on Friday of 0.05. If Crude Oil goes down a little anytime this week, I may close this out and keep the profits safe. This might give me an opportunity to sell another CALL option in the DEC18 class. This is TBD (To Be Determined.)
We are at the season (in the United States of America) when demand for crude oil begins to wane as demand for gasoline declines. For the short-term there will be some RBOB drawdowns from all the traffic in the Eastern United States as a large segment of the population traveled to evade the bad weather and danger from hurricane-storm Florence. This might bring some additional buying soon that could increase oil prices as supplies are replenished. As for the world view on oil: Producers are discussing keeping output levels high in order to avoid Crude Oil prices from rising too much (this might dampen demand, something producers do not want -especially this time of the year.)
Soybeans: The short soybean NOV18 1000-strike CALL(s) I sold for 1.75 cents ($87.50 each) are now trading near .875 (7/8th =$43.75) I will probably go ahead and close them out at .75 or .875 very soon. I would like to do this sooner than later, as I do not want to give that profit back to the market if soybeans suddenly go up in price. After this is done, I will consider selling other options on soybeans. Here is a little factoid: Soybeans are often grouped with the grains since they have similar contract specifications and trading units as the grains. Technically, the soybean is an oil seed and not a grain.
Gold: I might look for an opportunity to sell some JAN19 Gold strangles. I am already short strangles in DEC19 and FEB19. The short strangle has to be a favorite strategy because with only one-side requiring a margin deposit – I get more bang for buck – as the saying goes.
I will be examining other commodity markets this week, looking for any prices that are getting “overdone” that could offer additional opportunities. Between Wednesday and Friday last week, their was talk in mid-week about progress with China and the United States tariff talks, then by Friday the President (of the United States) tweeted that, “…. we (the USA) would be collecting billions of dollars in tariffs…..” – whether warranted or not, this had the effect of cooling off the markets. One of the reasons, I am very anxious to close out my short NOV18 soybean 1000 CALLs, is that even a perceived break-through could be enough to spike (up) soybean prices a bit. I am grateful I do not do the kind of trading that would require me to depend on being able to read the political motivations and news reports to make money. I keep reminding myself that as a far OTM option-seller, I just have to sell strikes as far OTM as possible – and won’t need to try and guess the day-to-day price and amplitude timing to make money.
Back Ratio Spreads: Another back ratio spread could be coming up. Earlier this year, I did a back-ratio spread in corn. See the 16AUG2018 newsletter, and the Trade Summary sheet date of 08/16/2018 also. At present we are studying both Corn and Soybeans and I have trades in both. At this particular moment, either of these could go UP, each one for its own reason. Corn could go up because next season (2018-2019) will be facing smaller supplies and plantings than any recent previous year. Soybeans could go UP, on either rumors or facts of trade tariff resolutions. When faced with a market that has current bearish fundamentals on the near term, but it still has real possibility of having a counter-seasonal move, the back ratio spread can be an ideal strategy. It is an advanced strategy with some definite applications in special cases like I just described with corn and soybeans. I will be posting an article on this strategy on my SellingCommodityOptions.com blog in the coming weeks. One of the great advantages of the back ratio credit spread is that if you are using CALLs – and the underlying commodity goes UP, a trader will be long a CALL that will prevent much higher margin calls and can offer an opportunity to make even more money than the original credit from the spread. If you feel like a little homework, look this one up (review that Corn trade I mentioned on 8/16/2018) and give it some thought. This way, you will be ready if we decide to use the strategy soon.
Final Comment: I know it’s tempting as we all listen to the news, the weather, and all the political trade talk positioning, to try to form an opinion about what may and what may-not happen. I will suggest to you that you consider a mind-set, from a trading perspective, of thinking of it as your job to react to what happens (find trading opportunity), and not to try and predict day-to-day price moves. This posture produces much less stress.
If you have a friend that gets a blank stare when you try to tell her or him what selling commodity options is all about, please consider sending them this link to a new article I posted on the blog this weekend: Trading Options to Turn Time Into Money
Thank you for your support. Have a great week. – Don
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