Soybeans & Corn: President Trump and China’s President Xi are scheduled to meet on November 30, 2018 at the G-20 conference in Buenos Aires. It still seems unlikely any major resolutions are imminent and there are more sanctions scheduled to go into effect in January 2019. I am, as you know – short the MAR19 soybean 1100-strike CALLs. They closed Friday at 3.0 cents ($150), the same price I sold them for. Since soybean prices are being held down due to record stocks of beans, more (United States) farmers could choose to plant corn acres instead of soybean acres. If this becomes true, that would be news that could limit corn prices in the next season. And you may recall from last Monday’s Trade Commentary – see: LAST WEEK – the November USDA/WASDE report increased World stocks of Corn by making major multi-year adjustments to China’s stocks of corn (an unusual thing to happen.) Back to just soybeans for a moment: Brazil and the United States are the top soybean producers in the world. Due to opposite hemisphere growing seasons, the Brazil soybean harvest begins in January 2019. The news for soybeans is definitely NOT bullish, which plays in to my short MAR19 1100-strike soybean CALLs. And if – in the United States, corn planted acreage goes up due to poor soybean price performance, this could have a limiting effect on corn prices. I think it’s too early to portend 2019 corn prices, but it seems that soybean price increases in the first few months of 2019 may be limited. So to try and “bottom line” all this is difficult. I’ll still hold the short MAR19 1100-strike soybean CALLs. I think it is too early to do anything else with any of this news for now.
Gold: The nearby DEC18 Gold futures closed at $1222 per ounce on Friday. It seems likely the two most important factors for gold pricing into the first half of calendar 2019 will be: 1) Stock market performance. When the stocks market(s) gets more volatile and/or have some large sell-offs, there is tendency for gold prices to rise (the ‘safe haven effect’ I have spoken of before.) and, 2) The Feds interest rate hikes and policy. The two short strangles I hold now: the FEB19 1100P/1500C and the APR19 1100P/1600C are steady for now. I cannot know what the price of the gold underlying will do but -at least for now- the short strikes I hold are acceptable for me to continue these two positions. The FEB19 are about 70 days from expiration. The APR19’s are about 128 days until expiration.
Crude Oil: My short PUTs in Crude Oil: The short $50-strike PUTS in both the JAN19 and APR19 are in a precarious position. Crude closed Friday at: JAN19 at 57.03 and the APR19 at 57.62. The JAN19 expires in about 25 days on 13DEC18, and the APR19 expire on 14MAR2019.
The precipitous drop of oil prices from the $79 down to $57 a barrel has placed these PUTs in the danger zone. It is only slightly encouraging that the last few trading days have seen a slight rebound from the low of 54.90 to close just above 57.00 (basis JAN19) on Friday’s close. I already have had to exit my DEC18 55-strike CALLs because they were way too close to the money. I cannot rule out I may have to do the same with the JAN19 and/or the APR19, should crude prices not continue to rebound or at least find some support this week.
The next OPEC meeting will be December 6, 2018. On the meeting’s agenda is a discussion about production cuts in December and in the first half of 2019. There are a lot of news stories about possible production cuts coming up, but most of the talk is speculation about what might/could happen. I found no hard evidence of production cuts yet. I’ll be following this situation and news developments of course.
Here are links to two such stories. You can Google for more:
This week in trading: Most markets will closed and/or close early during: November 21-23, 2018. Check with the exchanges and your broker for specific information. Since so many traders and investors will either cease or curtail trading during this holiday week, the volume and trade activity is usually very limited.
A reminder for new and regular readers: I have written many articles and posted them on my blog at SellingCommodityOptions.com about money management for all sizes of accounts. This type of trading is considered risky. If you haven’t read or wish to review a few of them, please visit them at:
For those of you celebrating the holidays, I wish you safe trips and happy hours of relaxation and fun. And to the rest of you, the same. I will be watching the markets until they close on Wednesday this week, and then taking holidays on Thursday and Friday.
That is all today. Thank you. – Don
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