Managing Risk 2/3/10
Disappointing inventory news and oil still held up well only down 25 cents on the day. Use $76 as support in the March contract; our objectives on the upside are $78.25 & then $79.60-$80. Depending on how tight your stops were on natural gas you may have been stopped at a profit; prices traded 1-2 cents lower than yesterday. We suggest on a trade above $5.75 to take remaining futures off and to exit your call spreads. We are still waiting for a trade up to 1105/1115 to be a seller in ES and SP for clients; until then no action taken. The correction in sugar we were anticipating is in play with prices breaking the 20 day moving average today. The calendar spread (short March/ long July) picked up 72 ticks today per ($806.40). We will be unwinding this spread for clients tomorrow if spread narrows just a touch more. Remember on a trade up to $1.50 in May OJ exit your back ratio spreads. Anyone who shorted lumber which we had mentioned in passing a few days ago should have been stopped out at a loss $800-1200/per depending on your placement as prices have advanced 12% in the last 4 days. We are looking for a way to get short Treasuries pricing out a variety of time frames in both futures and options…stay tuned. Continue to scale into shorts in 2011 Euro-dollars. Agriculture got hit hard today on NO real news. We were forced to hedge off some of the risk for clients long December futures; we advised buying March $3.60 puts which will give downside protection into the USDA report. On a trade below $9.14 cut losses on your May soybeans, you should have got stopped at a loss on soy meal for approx. $500/per. We suggest holding your May soy meal call options. In live cattle clients shorted April futures today against a purchase of (3) April 92 cent calls. This is a delta neutral strategy to take advantage of downside in the short run while having protection if prices move higher. In a perfect world we break lower cover futures at a profit and then see prices trade higher several weeks from now. Being we could not take out the upward trend line we advised clients to liquidate their June call spreads in gold at a slight profit today. Those who still wanted exposure we advised lightly buying April gold futures with stops between $1105/1107 gtc. We tried to scalp silver and lost 10 cents when the 100 day moving average gave way. Option traders in May stay the course; we still like buying May $2 call spreads. We took the Euro/yen spread off today for clients and will look to re-enter below.2900 on overnight or tomorrow early. Be nimble if trading forex as the ECB and BoE meet tomorrow and NFP # is out Friday.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.
Tags: BOE, bradbard, carry trade, commodity, corn, crude oil, ECB, futures, gold, japanese yen, live catlle, natural gas, NFP, options, risk aversion, silver, soy meal, soybeans, us dollar
