Portfolio Returns: Stocks Are Up 6%, But Numerous Commodities Put That To Shame: Strategy Outlook

Stock market returns look great as the recovery from Brexit has propelled the market to record highs. However, the returns on stocks, as measured by the E-mini S&P are substantially smaller than the returns of at least eight popularly traded commodities.

If you've just been trading equities this year, it's surprising the returns you've missed out on. Unfortunately, commodities are highly volatile, leveraged instruments that although they have performed beautifully since December 31st, could easily reverse course. For example, this week Gold had a range of more than $57 and closed the week at 1337.70 almost $40 from its highs.

The Table below provides the returns of numerous trading vehicles since the end of the year. If you are a contrarian, there are a number of contracts you may consider getting short in. Options contracts are an excellent way to speculate on market direction with limited risk. Our Options Guide PDF is a comprehensive look at options trading and should provide pointers for traders at all levels of the knowledge spectrum. The Table includes information about the British Pound, the Euro, the Dollar Index, Crude Oil, Cotton, E-mini S&P, Gold, Copper, Coffee, Natural Gas, E-mini NASDAQ , Sugar, Silver, Corn, Soybeans and Wheat. It provides the prices at 4PM ET Friday for the contracts listed above and their returns on the year.

 

There are numerous options trading strategies which can be useful with speculative capital, but I wouldn’t consider trading options unless I had a complete understanding of the Guide above and our Webinar Preview PDF, a more advanced version of the first PDF. Both resources should provide you with a test of your options understanding. There are so many ways to lose money trading options that it is essential for a trader to be prepared. Understanding comparative values of spreads, conversions and butterflies enables you to discover the best opportunity for trading. Reviewing liquidity is essential.

Strategies to be considered might include:

BULL STRATEGIESPurchase of Outright Calls

Purchase of Call Spreads

Purchase or Sale of Ratio Spreads

Bull Fence

Long Options Pairs

Sell Puts

Sell Put Spreads

BEAR STRATEGIES

Purchase of Outright Puts

Purchase of Put Spreads

Purchase or Sale of Ratio Spreads

Bear Fence

Short Options Pairs

Sell Calls

Sell Call Spreads

VOLATILITY STRATEGIES:

Long Straddles

Long Strangles

Long Outright Options

Long Condors

Long Ratio Spreads

Long Butterflies

Short Straddles

Short Strangles

Short Outright Options

Short Condors

Short Ratio Spreads

Short Butterflies

If you are comfortable with these strategies and understand the main concepts behind synthetic options pricing, in and out-of-the money options, butterfly and spread valuation techniques, then you are prepared to implement options trading strategies to speculate (with risk capital) or hedge your risk requirements using options contracts. The year has provided significant movement in the commodities space, utilizing the appropriate strategy may permit profitable participation in the future. If you would benefit from an Individual Options Training Webinar Session: Contact Us. We can help clarify the essential knowledge base needed for trading options.

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. 

 

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