Exercising Our March Corn Option

We had purchased a March Corn Call option at a 445 Strike Price (see our post: We are Long Corn After Breakout Above 439 As Of 12/12/13) which expires today, 2/21/14.  Prices as of today are 453.5 (at the time of this post).  Since our March Corn Call option is worth a little less than we paid (we paid $437.50 back on 12/12/13, and as of now it’s worth ~$425.00 if we sold it, since there is no more time value left on this option) we are instead going to exercise our March Corn Call option and place our Stop-Loss at 437.25 (just below the support level on the Daily Corn chart below).

If prices move up from the current level of ~453, we will gradually move up our Stop-Loss to lock in more profits.  If prices move down below 437.50, we will have only lost our original investment in this option of $437.50 plus $400 (445 Strike Price minus 437.25 = 7.75 cents X $50/cent) if we get stopped out.  That’s a total risk of $837.50 in a market already trending up with huge upside potential.

Daily Corn - 2-21-2014 Support Level

Taking Profits in Gold

The April Call option we purchased (1265 strike price) for $2930.00 (see our post:  Going Long Gold on Breakout)  today is worth $6200.

We sold our April Call option and took the $3660 in profit.  Yes, prices could have gone up to 1488 or higher (see the 50% Retracement level according to the Weekly Gold chart in our post linked above), but whenever we can make triple-digit ROI gains in just a few weeks, we like to pocket the profits early while there is still time value left on our option.  Prices already surpassed the 50% Retracement level on the Daily Gold chart of ~1272 anyway.  We can always re-enter the Gold market at a later date.

 

Taking Profits in Silver

The May Call option we purchased (2140 strike price) for $2705.00 (see our post:  Going Long Silver on Breakout Above Sideways Channel)  today is worth $6200.

We sold our May Call option and took the $3489 in profit.  Yes, prices could have gone up to 24.00 or higher (see our previous post about how high we anticipate prices to go), but we don’t leave over 100% profit on the table unnecessarily (Remember:  30% ROI would be considered great in any other investment.  If we can get triple-digit percentage gains in just a few days with our commodity futures and options trades, there is no need to get greedy!)

 

Going Long Sugar After Our Last Option Expired

We owned a March Sugar #11 Call option (see our post here: We Are Long Sugar When Prices Broke Above 16.48 Today) that expired worthless on 2/18/14 yesterday.  Total loss:  $268.80 plus broker commission.  Then today, prices spiked above the #2 point of 16.58 in the wide 1-2-3 bottom formation (see Daily Sugar#11 chart below).

May Sugar #11 is currently at 16.49 at the time of this post.

We knew prices were going to move, but we missed it by what looks like a few days or so.   We are going to re-enter the Sugar market with a May option which expires in April, giving us a couple months.  We are very confident in prices heading higher towards the more conservative 50% Retracement level of 17.30 based on the most recent major move according to the Daily Sugar #11 chart – see below.  Typically, a wide 1-2-3 formation means a stronger move when prices break through the #2 point as they did today.  Therefore, we look to the Weekly Sugar chart (see below) to see where this more optimistic 50% Retracement level would be.

We purchased a 1675 May Call option for $828.80 which expires 4/15/14.  That’s just 2 strike prices out of the money and we are willing to pay a premium to get into this market at the 16.75 level.   Margin on a full contract is approx. $3000, so for a small move higher we will be in the money and will have only risked $828.80 (less than 1/3rd of the margin requirement).     If prices move to the 50% Retracement level of 23.28 (see Weekly Sugar chart below), we can make a very nice ROI on this trade.

If we consider the last major move to be from the high of 36.08 (see left-most high reached on the week of 2/4/2011 on Weekly Sugar #11 chart below) that puts the 50% Retracement at 25.39.  That would be our next target if prices continue past 23.28.

One strategy would be to simply exercise our option and go long a contract and put our stop-loss near our strike price of 16.75 (above to lock in some profits, or at or below 16.75 to  limit our risk capital to a comfortable amount.  We’ll have to see how prices move over the next couple months to see which strategy is most viable.

Daily Sugar #11 - May 2014

Weekly Sugar #11

 

Going Long Silver on Breakout Above Sideways Channel

As we discussed in our post: Silver Moving in Sideways Channel, we have been waiting for a break above or below the sideways channel that Silver Futures have been stuck in for the past 3 months.  See the Daily and Intraday Silver Charts below.

Today, prices spiked up to 21.32, clearing breaking though the top side of the channel shown in the Daily Silver Chart below.  Therefore, we are going long Silver Futures with the purchase of a 21.40 Call Option for a premium of $2,705.00.  This option expires on 4/24/14.

We anticipate prices to move up to the same degree as they moved sideways.  Therefore, we are looking at an upside target of approximately 24.00.

Daily Silver - May 2014Intraday Silver Prices

Lost Profits – Coffee Approaches Retracement Level

When we initiated our March Coffee long position, we anticipated prices to go all the way to 148 (the 50% Retracement Level per our post here:  Entering Coffee Futures on a Multiyear Low and Repeating 1-2-3 Bottom Formation)

We sold our contract and exited the Coffee Futures market when prices spiked up to 125 back on 1/31/14 (see our post: Taking Profit in Coffee Futures)

Looking at the Daily Coffee Futures chart below, coffee futures prices are hovering around 145, very close to the 148 Retracement Level.  Had we held on longer, we would have gained an extra 20 points (x $375/pt) or an extra $7500 in profit.  Instead of earning $4518.75 in ROI profit (a 265% ROI) we would have netted $12,018.75 (that’s 705% ROI!)

So why didn’t we hold on?  Why did we sell at 125?

Daily Coffee 2-14-14 May 2014

Even though trades like this come along fairly often (due to the massive leverage the futures markets afford us), coffee prices can swing wildly and we wanted to lock-in the profit we already had ($4518.75 and 265% ROI profit are pretty darn good!)  Let’s face it:  We could have made a lot more than even $12018.75 had we stacked or pyramided contracts.  We also could have invested some of our profits in some hedging insurance by purchasing a Put option at a 125 strike price (it wouldn’t have been cheap since it would have been at or near the money at the time).

Another option would have been to purchase more than 1 contract or option when we initiated the trade, then sold off some as prices went up.

There is no shortage of ways to make money in Commodity Futures, but if you can make 30% ROI on your money on average, that is considered great compared to any/all other investment opportunities.  Just because you can make make triple and quadruple (and higher) digit gains with some trades doesn’t mean you will every time, or even that you have to.  Protect your capital and you can take advantage of future opportunities.

Of course, everyone has their own trading style and if you wanted to hold until all the way up to the 148 Retracement Level (or employ some of the other trading strategies mentioned above) that’s your choice.

 

Going Long Wheat Futures on Breakout

Today (February 12, 2014) Wheat Futures broke above the #2 point of 592.75 in the 1-2-3 Bottom Formation shown in the Daily Wheat chart below.  The #1 point is a multiyear low.  As of this writing, prices for the day have gone as high as 597.75 before coming back down to 589.25.

We are going long Wheat by buying a May 2014 Call option at a 605 strike price (3 strike prices out of the money) for $862.  This option expires on 4/25/204.  The 50% Retracement Level on the Daily Wheat chart is 635.38 and the 50% Retracement Level on the Weekly Wheat chart is 748.74 so this trade has plenty of upside profit potential.

Daily Wheat CBOT - March 2014Weekly Wheat CBOT

Shorting Live Cattle Futures

Live Cattle Futures have hit historic highs.  Yes, we know the fundamentals:  Cattle ranchers have been cutting their head counts in recent years due to dropping demand and now there is a shortage of live cattle, hence the spike in prices.  In fact, there hasn’t been this few heads of cattle since the 1950s!

Despite all that, we don’t trade on fundamentals and looking at the technicals in the Daily and Weekly Live Cattle Futures charts below, you can see how the current prices are unprecedented.  What goes up must come down, at least correcting to the 50% level.  Therefore, with the 1-2-3 Top Formation shown in the April 2014 Live Cattle chart below, we have shorted the Live Cattle Futures market when prices broke below the #2 point of 139.45.  We purchased a 138.0 April Put option for $600.00 which expires 4/4/2014.

On the Daily Live Cattle chart below, the 50% Retracement is 137.64, which is why we bought the 138.0 Put Option, in case we are limited on the downside by this retracement level.  HOWEVER, on the Weekly Live Cattle chart (below) the 50% Retracement is 133.26 which gives us great downside profit potential.

Daily Live Cattle - April 2014Weekly Live Cattle