Greetings: July 1, 2019 TRADE COMMENTARY:
My GTC (good til canceled) order to make a closing purchase on the DEC19 Crude Oil $30-strike PUT was filled Friday at 0.05 ($50). Profit: +$80.00 per option.
I had sold this PUT for 0.13 ($130)
Summary of my Positions for: July 1, 2019 Monday:
Short Crude Oil DEC19 $40-strike PUT for 0.31 ($310).
Expiration Date: November 15, 2019 Prob. OTM = %92%
Short DEC19 Crude Oil 90 CALL for 0.10 ($100)
Gold DEC19 1150 PUT, sold for 0.50
Current Positions in Crude Oil (below):
Current Position Gold DEC 2019 (below):
President Trump met with China’s President Xi at G20 Saturday – and further hikes in tarifs that were scheduled — have now been canceled and the two agreed to continue negotiations. It’s hard to read much into it, and even harder to guess how the markets may or may not react this week. The USDA predicts that since China now buys soybeans from USA’s competitors that it might take years (out to year 2026) to recover annual USA soybean sales to previous levels. It is possible that China might resume Corn buying some time in the next few weeks. Since USDA reports on Friday showed much higher than expected acres planted (report available here: https://usda.library.cornell.edu/concern/publications/j098zb09z )and did NOT reduce the acreage as much as farmers suspect (a reduction of 5 to 7 million acres), corn prices basis the DEC19 contract declined by 19.00 cents and closed at 432.00 /bushel on Friday. The USDA expected to conduct special surveys during July to determine the acres planted more accurately and a report on those surveys would not be out until August 2019. The means more uncertainty ahead for corn prices. I’ll revisit this subject after reading more news on this development later this week.
BE ADVISED THE MARKETS ARE CLOSED THIS THURSDAY JULY 4, 2019.
Gold: Since there is talk of the USA’s FED reducing interest rates (aka: “dovish central bank dialog”), the EURO has been the winner while the US Dollar is declining. This and more talk of weak global economy are expected to continue to drive Gold price up. This is a speculation of course, not a fact. A few analyst have observed that investors have begun to move money into ETF holdings over the last two weeks; this is a bullish sign of course for gold.
Crude: Last week there was a 12.7 million barrel decline in US crude stocks and a record new all-time high for US crude oil exports of 3.77 million barrels per day (bpd.) USA Gasoline demand in the June 14th report suggests an all-time high demand of 9.928 million barrels. That is very close to the psychological level of 10 million barrel per day demand – that might be ahead. Also on the bullish side , Russia might be agreeing to extend product cuts agreements to help support crude prices. This has not developed yet, and if Russia goes back to full production, that could means prices head down to the $54-55 area this summer. Crude was down -1.25 on Friday. It seems things could be heading back to a more predictable price ranging behavior. This week the closed trading on Thursday -and a lot of people on holiday could limit the price ranges until next week. I’ll be watching for chances to sell a DEC19 PUT below $40 if prices drop off this week. If Russia does agree to continued production cuts, I might revisit selling some $90+ CALLs on the DEC19 again.
A subscriber had asked me just over a week ago about “selling some Corn PUT options.” I know the seasonal pattern normal for corn has the DEC19 futures prices declining a lot once harvest begins in the first two weeks of September (Norther Hemisphere.) For that reason, I am hesitant to sell DEC19 PUTs. However, I did see a comment by two analyst this weekend who were recommending selling Corn PUTs about 40 cents below DEC19 prices ($432) and both said they expect the August Corn acreage report to be reduced by 6 million acres, which – at this point would be bullish. I remember a week ago, talk was of over 7 to 10 million acre reductions. There is also a reasonable possibility that more reductions in yield might be forthcoming before the harvest. Selling either PUTS or CALLS right now is a calculated risk and until there is a little more news and time for farmers to report what’s happening, more price volatility could be ahead. For all the reporting and talks the last few weeks, nobody saw the big 19 cents drop on Friday coming! For now, I might be more comfortable finding very high CALL strikes to sell, but I feel even for that — I need to wait for a little more fact, and a little less speculation. Grains are known for huge moves in this type of uncertainty. And we have both trade talks, weather, acreage, and yield to consider – and they are all unknown at this point. I will give this more thought, do more reading and comment again about this over the next week or two.
Those in the USA, happy Independence Holiday on 4th July – and to everyone I hope you have a great week.
Thank you. – Don
FYI: I am often asked, ” What size account do I need to do this sort of trading?” I devised this hypothetical table that is only a studied suggestion with no guarantees. I had in mind that keeping about 50% of the account size in reserve for possible margin requirement, using something similar to the “200% rule” (see: ) to limit losses, might be close to the hypothetical numbers in this table. This type of trading often yields a lot, but also has greater risks. This type of trading is risky and not for everyone. My posted trades are real trades in my own account and are intended for education purposes. This is not a trade advisory service, each individual is totally responsible for their own activity. I am glad to discuss my reasons for trading and hypothetical examples, but I do not give individuals specific trading advice.
I often discuss this topic at my blog (free). Here are two related articles:
Money Management: https://sellingcommodityoptions.com/blog/money-management/
Trading Psychology (Risks): at: https://sellingcommodityoptions.com/blog/psychology/
And an Article on “5 Rules of Thumb for Option Trading” at: https://sellingcommodityoptions.com/blog/option-trading-rules/
I recommend all subscribers read these for they can help you determine the suitability of this type of trading for yourself – and can offer a few ideas to help you make those decisions for yourself. You will see in my trades in this educational newsletter- that I do not always follow my own advice to the letter. I often regret that fact, as it sometimes results in losses due to chances I chose to take. I have a portion of my available trading funds that I choose to put a higher risks from time to time. I would never, ever, advice anyone to trade all their money in the types of trades I post here – especially if they are new to this type of trading or lacking in the knowledge and experience to understand the risks. Whatever your decisions and trades, please know I wish you all the best in all facets of your trading and finances. – DAS
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