Why We’re NOT Shorting Natural Gas Futures

Looking at the Daily Natural Gas June 2014 chart below, you can see that Natural Gas prices came off a spike in prices to 4.893 back on 2/24 (#1 point) and over the past couple weeks has formed a wide 1-2-3 top before breaking thru the #2 point of 4.416 today.  The 50% Retracement level on the Daily Natural Gas chart is 4.215.  The reason we are looking at the June Daily chart is because Margin on a Natural Gas Futures Contract is too high (~$9,800).  If we were to trade this market, we would buy an out-of-the-money Put option with at least a couple months of time left on it, which would cost a fraction of the Contract Margin.  Therefore, we look at the June chart which has plenty of open interest volume.

A 430 June Put option is currently ~$1100 at the time of this post and June 2014 Natural Gas Prices are currently trading around 4.42.  Today, prices have been as low as 4.385, which is below the #2 point on the Daily Natural Gas chart.

The problem with this trade is there isn’t much room between a 430 Put option and the 50% Retracement level of 4.215 (assuming prices drop that low).  To risk $1100 on an option (or less, if we sell it while it has value) for the possibility of making ~9 points ($900) is not the kind of opportunity we like to trade, so we’re going to pass.

If you look at the Weekly Natural Gas chart (see below) you’ll note the 50% Retracement level is 4.20 (not much different from the Daily Natural Gas chart 50% Retracement Level).  This means we don’t really have any expectations that prices could drop much past ~4.20 and therefore not much profit potential.  No thanks.

Daily Natural Gas 3-13-14 June 2014Weekly Natural Gas 3-13-14

Record Highs in Lean Hogs Futures

Lean Hogs Futures prices have reached a record high today of 118.575 (at the time of this post).   Lean Hog Futures haven’t ever been this high.  See the Daily and Weekly Lean Hogs charts below.  What goes up must come down, so we will be monitoring this market over the next few days to see what transpires.

Daily Lean HogsWeekly Lean Hogs

New Multiyear Low in Copper Reached Yesterday

Yesterday, March 10th 2014, Copper Futures reached a low of 2.9955.   Copper Futures prices haven’t been below 3.00 since 2010 making the low reached yesterday a multiyear low.  We will be watching this market carefully over the next few days to see what develops.  Stay tuned.

Moving Our Stop-Loss in March Corn Futures

We have been long March Corn futures since 445 (see:  Corn Futures Prices Spiked Today), and today, March 5th, 2014, prices shot up to 481 and are current hovering around 478 at the time of this post.   Our original Stop-Loss was at 437.25, but we contacted our broker today and had him move our Stop-Loss to 446, just below the support level shown in the Daily March Corn chart below.   Since we are long from 445, if we get stopped out we will have risked nothing on this trade (and may even make a few bucks).

Daily Corn - March 2014 - 3-5-14

Wheat Futures Prices Spiked Today

We are long May Wheat with our 605 Call option we paid $862 for.  May Wheat futures spiked to 644.50 before closing at 631.50 today.  The 50% Retracement level on the Daily May Wheat chart was 635.38 which was surpassed today.  Our next target is the 50% Retracement level on the Weekly Wheat chart of 748.74 (see our previous post:  Going Long Wheat Futures on Breakout)

Our 605 May Call option closed today worth $2193.75  If we were to sell this option now, we would profit $2193.75 – $862 (cost) = $1331.72 net profit.   That’s 154% ROI.  Since we still have time on this option (it doesn’t expire until 4/25/14) and there is still a lot of upside potential, we are going to hold this option a little longer.

Corn Futures Prices Spiked Today

We have been long March Corn from 445 with our stop-loss set at 437.25.  Today, prices spiked up to 470.50 before closing at 464.00.

Looking at the Weekly Corn chart below, our target is the 50% Retracement level of 562.75.  We could move our stop-up to the support level of 446.50 to lock in some profits, but since that is just barely above where we entered the market (at 445) that we are going to wait until prices move up some more.

Weekly Corn chart

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!)