Reminder: Markets Closed for Good Friday Holiday this week on 19th April 2019
Trade Commentary: Monday 15 April 2019:
Crude Oil: Here’s the chart with my current positions in Crude,the two short strangles. SEP19 Crude closed Friday 63.90. Just in time for North American vacation season and more driving, gasoline stocks dropped and prices went up. This same ‘surprise’ happens almost every year. OPEC is shaky on holding production cuts at present levels, and production goes up a bit prices could moderate if not go back down a bit. The global economic outlook also has a lot to do with demand. With the United States doing all it can to increase production as fast as possible, the producers in OPEC and the rest of the world may have less incentive to cut production to hold prices up at present levels. Higher prices put world oil producers in jeopardy of losing share; this dynamic is more important now that the USA is top consumer and top crude oil producer in the world. News of a healthy Chinese economy and oil demand could means more sales and profits for world producers by increasing sales and market share. The USA producers must be hoping that other oil producers will cut production to keep prices up while it continues to produce and export record amounts of crude oil. How long can the USA “have it both ways?” There is no world oil or gasoline shortage now or in the foreseeable future.
Corn: The chart (below) is the “Corn Price vs. Ending Stocks as % of total Usage” from Kansas State Univ. (source: KSU ) It uses the USDA numbers from the monthly April’s WASDE (supply-demand) report. The report indicates planted acreage of 89.1 million, about a million acres from last year (no change from the month-ago report.) Perhaps the most important number in the report in April is the ‘ending stocks’ at 2.140 billion bushels. This is up from expectations earlier in the year due to bushels added last month due to feed usage down by 75 million bushels and ethanol production down by 50 million bushels. The report this month is considered by most to be ‘neutral.’ The average to-farm price range not changed much at: US$ 3.35 – 3.75, and average of $3.55. So far the prices seemed now to have mostly absorbed the bigger acres and larger stocks in prices, but there doesn’t seem to be any weather premium. Remember too, should there be some provision in trade agreements between USA and China, there could come news of USA corn buying as well as a reduction of the 70% tariff on USA ethanol going to China.
I am currently holding a short strangle on DEC19 Corn, short the 330-strike PUT and the 540-strike CALL. As I have previously posted, I have a GTC (good til cancelled) order in at 1.375 to buy back this CALL that I sold for 2.875. I am also shopping to sell more DEC19 Corn CALLs soon. The recent fundamental numbers (mentioned above on this page) seem to suggest I might be able to sell CALLs DEC19 at much lower strike than the 540, perhaps something 470 to 520 range. Friday, the DEC19 Corn closed at 389.25. I am looking closely at the 500 CALL DEC19 that last traded Friday at 3.375; if Corn goes up a little bit, I might be able to sell them for 5.0 cents – so I’m watching this possibility.
Gold: I’m short the JUL19 short Strangle the 1450 CALLs and short the1200 PUTs (the underlying is AUG19 Gold Futures.)
With the $US Dollar trend shifting downward, I might sell more PUTs in the short term and then add some CALL soon after IF Gold does move UP sooner rather than later. It is only 72 days until the short JUL19 options expire. I’ll be watching the $US Dollar this week, along with trade news, and more on slowing Chinese economy for new to help me reach a decision. Gold trades inverse to the $US Dollar, and when/if China’s economy slows Gold demand (and prices) go down.
Over the next two weeks, I expect to be adding more trades in corn, soybeans, and gold – and to try and do so with contracts 4 to 8 months out in time. This way over the next few months, time decay can do its thing and add to the tally of profits as time ticks on this year.
There is an article I wrote a while back on “ladders” of short strangles at this link:LADDERS
I will be posting a new video this week about shopping options to trade on Corn and Soybeans; you will be alerted by email when it’s available (probably on WED.)
Just so you know: Anytime you want/need a summary of current trades, all you have to do is find the most recent “newsletter” edition on the website. They are always in chronological order at the tab titled:TRADE COMMENTARY & NEWSLETTERon the home page here on the subscriber website.
That is all today. Remember that Friday this week, the markets will be close for Good Friday holiday. Thank you – Don
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