There have been several significant moves in the Commodity Space this year. Crude Oil, obviously, has been quite volatile. First it shed a significant portion of its value and then retraced its steps and accumulated a significant gain for the year. Gold has experienced an even greater move up, but mostly in a direct fashion. Stocks, as represented by the E-mini S&P Futures had a volatile start to the year and have since floundered with a gain as of Friday’s close of just around 2% on the year.
In the meantime, Sugar, Soybeans, Silver and Gold have been the biggest winners. They all have gains in excess of 18%. A full list of returns year to date are shown below as of 4PM ET on Friday. Included on the list are a multitude of commodities and some currencies as well as a couple of Stock Indices. Whether it’s been political unrest or bad weather in South America, commodities have rallied and as the markets’ rally, the funds and speculators join the party. The more people get involved in trading a market, the greater the potential for a correction. If you are thinking about getting in now, be sure to manage your risk.
There are Options Trading Strategies for Bulls and Bears in these markets. It is important to evaluate the liquidity of the options you will be trading, the Implied and Historical Volatility, the Implied Volatility Skew and the appropriate Options Trading Strategy that provides the best value to meet these goals. If you are not clear on these points, consider an Individual Options Training Session to Improve your Trading Technique. If you have been fortunate enough to participate in many of these rallies since the beginning of the year, you obviously had significant returns. If you’re looking to get in now, you better be careful. As seen yesterday when Gold traded as high as 1318.90 based on people purchasing above the 1300 level to either cover shorts or initiate new Long Positions, it’s easy for the market to turn on a dime. After Gold reached its high, it traded as low as 1280. For those who initiated new longs, it was a difficult move. Gold, as you can see below, came back nicely to just below the $1300 level.
There are Options Trading Strategies like Fences, Call Spreads and Strangles which might provide the correct opportunity for you to get involved in the markets without the risk of trading Futures Contracts. Our Options Syllabus provides a quick outline to make sure that you understand the essentials of Options Trading before you get started committing too much speculative capital to trading that you don’t fully understand.
Amazingly, if you look at the Futures Contracts below, there are very few contracts showing losses for the year. All of the losers and the NASDAQ 100 is the biggest one on the board, have all lost about 5% or less for the year. For the first six months of the year, it is clearly the year of the Futures Contract with commodities providing the gains. If you are speculating, keep in mind that prices generally regress towards the mean. Look at your long-term Charts, they may provide an inkling as to whether you should participate or not. If you have Options Related questions: Contact US.
Options trading involves significant risk and is not suitable for every investor. The information is obtained from sources believed to be reliable, but is in no way guaranteed. Past results are not indicative of future results.