As the new year rolls in, I hold these four option positions now as of 31st December 2018:
Short the APR19 Crude Oil 70-strike CALL at 0.18 ($180)
Short the FEB19 Gold 1100-strike PUT at 0.60 ($60)
Short the FEB19 Gold 1500-strike CALL at 0.70 ($70), and
Short the APR19 Gold 1600-strike CALL at 0.60 ($60)
Crude Oil: Russia refuses another invite to join OPEC. The recent OPEC news of a cut of 1.2 million bpd (barrels per day) has come and gone with oil prices barely noticing. There is some contradiction in the USA wanting OPEC to cut production, all the while increasing domestic production. There’s plenty of crude oil everywhere and everybody who pumps oil wants higher prices of course, but none of them want to sacrifice themselves (their own profits) to achieve higher prices. I can’t say what oil prices will do, but it doesn’t seem very likely that prices will rebound to above $60 a barrel over the next few months. Especially in light of the stock market showing all the volatility and reluctance to start climbing again in any undeniably strong surge upward.
I will continue in 2019 to place short strangles even though I suspect selling CALLs is more viable than selling PUTs at this time. I’ve considered that selling CALLs now, and when/if crude price decline in the next few weeks – trying to time the PUT-selling when prices might be lower than they are now.
Soybeans: I’ve already sold two rounds of soybean CALL options – and closed both those trades with profits. The fundamentals of soybeans remains neutral to bearish with supplies remaining historically very, very high. As the USA sends another envoy on a round of tariff-talks with China over the next two weeks, I’ll be watching for yet another opportunity to sell soybean CALLs. The price could move up again should there be progress in the tariff talks. To be clear: I’m thinking that some good news in these talks could bring soybean prices back up enough for me to sell more CALLs.
Corn: You may recall that while soybean stocks are very burdensome, corn stocks (supply) are decreasing. Compare these two Kansas State Univ/ Ag Department charts that display the latest USDA (WASDE) data in the video below:
Remember: Links to charts like these and more are indexed for you on the Resource: Links Library on this website. You can also find an excel worksheet to track your trades, option expiration dates for 2019, futures symbols, and other links to universities and government reporting agencies.
Please feel free to check out the free Selling Commodity Options blog for trading tips and commodity opportunities.
The commentary and examples are for teaching purposes only and are not intended to be a trading or trade advisory service. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein on the web site and/or newsletter, are committed at your own risk, financial or otherwise. Trading with leverage could lead to greater loss than your initial deposit. Trade at your own risk. Investors and traders are responsible for their own investment/trading decisions including entries, exits, position, sizing and use of stops or lack thereof. This is not a trade advisory service and is for educational purposes only. The content on the pages here is believed to be reliable - but we cannot guarantee it.
Don A. Singletary is a teacher and writer. For 25 years he was a commodity risk management (hedge) consultant for major corporations. He is the author of Option Income Training Bulletin, the only such publication dedicated to teaching small/medium personal investors how to sell commodity options for a second income, a strategy traditionally used mostly by professional investors, the wealthy, and money managers.
While this website is for subscribers only, you can get full access with a free trial subscription. Also you may visit his blog with many trade examples and articles on this valuable strategy at: SellingCommodityOptions.com
Happy New Year 2019
As the new year rolls in, I hold these four option positions now as of 31st December 2018:
Crude Oil: Russia refuses another invite to join OPEC. The recent OPEC news of a cut of 1.2 million bpd (barrels per day) has come and gone with oil prices barely noticing. There is some contradiction in the USA wanting OPEC to cut production, all the while increasing domestic production. There’s plenty of crude oil everywhere and everybody who pumps oil wants higher prices of course, but none of them want to sacrifice themselves (their own profits) to achieve higher prices. I can’t say what oil prices will do, but it doesn’t seem very likely that prices will rebound to above $60 a barrel over the next few months. Especially in light of the stock market showing all the volatility and reluctance to start climbing again in any undeniably strong surge upward.
I will continue in 2019 to place short strangles even though I suspect selling CALLs is more viable than selling PUTs at this time. I’ve considered that selling CALLs now, and when/if crude price decline in the next few weeks – trying to time the PUT-selling when prices might be lower than they are now.
Soybeans: I’ve already sold two rounds of soybean CALL options – and closed both those trades with profits. The fundamentals of soybeans remains neutral to bearish with supplies remaining historically very, very high. As the USA sends another envoy on a round of tariff-talks with China over the next two weeks, I’ll be watching for yet another opportunity to sell soybean CALLs. The price could move up again should there be progress in the tariff talks. To be clear: I’m thinking that some good news in these talks could bring soybean prices back up enough for me to sell more CALLs.
Corn: You may recall that while soybean stocks are very burdensome, corn stocks (supply) are decreasing. Compare these two Kansas State Univ/ Ag Department charts that display the latest USDA (WASDE) data in the video below:
The charts in the video are sourced from: https://www.agmanager.info/grain-marketing/grain-supply-and-demand-wasde
Remember: Links to charts like these and more are indexed for you on the Resource: Links Library on this website. You can also find an excel worksheet to track your trades, option expiration dates for 2019, futures symbols, and other links to universities and government reporting agencies.
Please feel free to check out the free Selling Commodity Options blog for trading tips and commodity opportunities.
The commentary and examples are for teaching purposes only and are not intended to be a trading or trade advisory service. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein on the web site and/or newsletter, are committed at your own risk, financial or otherwise. Trading with leverage could lead to greater loss than your initial deposit. Trade at your own risk. Investors and traders are responsible for their own investment/trading decisions including entries, exits, position, sizing and use of stops or lack thereof. This is not a trade advisory service and is for educational purposes only. The content on the pages here is believed to be reliable - but we cannot guarantee it.