Crude was down 5% today which hurts being we’ve let a wining trade become a loser for clients. They are out of all their futures with no damage done but still hold May $7 call spreads. Relatively speaking we are only back to levels from 4 days ago but the path we took here is why I’m concerned. On a $2 bounce in the futures they should be able to get back to cost. We advised clients to go flat on all their natural gas. We used the near 10 cent correction in RBOB today to buy; clients are long 12 cent call spreads in June.
We used a day like today to buy because premiums were hit hard. The rally we were looking to sell never materialized and with Indices making new lows into the close we may miss the trade on futures. We will have an option strategy in coming sessions but no doubt the trend is DOWN. We highly suggest lightening up on your equity exposure or implementing hedging strategies. From zero to hero in 3 days in the sugar calendar spreads (short March/ long July) as we exited today for clients at a profit of just over $500/per after being down $1600 just a few sessions ago. On a further retracement in sugar we will be looking to get outright long. In March the 50 day moving average and 50% Fibonacci retracement comes in at about 26 cents; about 5.5% from the current levels. We may not wait for $1.50 on the May OJ if we can get a smaller profit for clients tomorrow we are going to cash. As long as there are sovereign debt concerns
Treasuries will move higher! At the moment we are not trading 30-yr bonds or 10-yr notes for clients but we are anxious to get short if prices are bid up in the coming sessions. Use the rally in Euro-dollars to scale into shorts. Even in the face of a global sell off Agriculture gained on the day. We maintain bullish exposure in soy meal and corn for clients after taking a small loss in soybeans. We suggest light long exposure in corn into Monday’s USDA report. A $200 profit did not seem worth it when we exited clients June gold spreads yesterday but we are thankful we did after today’s action. Clients futures were stopped at $1105/1107 and current prices are $1065…thank you stop loss.
On April gold we see the next stop $1025/1040. Silver was lower by 6.5% today; $14.75 would be a 61.8% Fibonacci retracement. Buying futures blindly is not wise unless you have plenty of margin or you’re using stop losses. We suggest May and even July option exposure. Today some clients bought May $17/19 call spreads and July $20 calls. The dollar is at a 5 month high but as we suggested in our commentary Monday we think that this move is nearing an end and would expect a sideways 77/80 range moving forward. We are sorry to say we got back in the Euro-Yen spread with clients and took some serious heat today. On a rally to 1.3825/1.3850 in the Euro-currency we will leg out. As for the Yen as things worsened intra-day we suggested clients to buy June 111/118 call spreads against their March shorts. This trade is volatile and unless you can swallow heavy swings it is not for you.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.
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