On the Wings of Gold: GF's GAMBLING & COMMODITIES Thread

[G0ldfinger]

http://www.mongabay.com/commodities/price-...e-of-sugar.html

 

Plus many more charts for commodities if you scroll down.

 

Thanks. Here is also an interactive one: http://www.godmode-trader.de/Zucker/Zuckerpreis

 

[G0ldfinger]

SUGAR

 

Regarding sugar, I am annoyed that my broker does not let me buy the levered ETC. Instead they offer a plethora of levered certificates with certain strike and knock-out prices. The risk is obviously, besides many others, the getting knocked out part, which can not happen in the ETC case.

 

As for sugar and contango, it is hardcore backwardation as can be seen here:

http://www.cmegroup.com/trading/agricultur...sugar-no11.html

 

So, the ETC shouldn't do so badly in the rollovers. Well, I can't have it.

 

Besides the levered certificates, I am thinking about my own levered roll-over strategy, with deep-in-the-money calls as a proxy for actual futures.

 

I have to give it more thought.

[G0ldfinger]

SUGAR

 

http://www.bloomberg.com/news/2010-12-15/p...ge-ft-says.html

Portugal Tries to Prevent Sugar Hoarding Amid Shortage, FT Says

...

Portugal faces a sugar shortage, the first European country to find itself in this position in more than three decades, the Financial Times reported.

It's starting... I guess I should hurry up with my decision process.

[G0ldfinger]

Regarding sugar, I am annoyed that my broker does not let me buy the levered ETC. ...

Hmm, apparently now they have it again!?! Their platform is truly not perfect yet...

[G0ldfinger]

SUGAR

 

I have now bought levered sugar: http://www.boerse-frankfurt.de/EN/index.as...IN=DE000A0V9Y81

 

I am looking forward to backwardation working for me even if the spot price stays flat.

[G0ldfinger]

OIL

 

If anyone has been wondering why oil looks like it has been capped at the $92-$93 level for days now, it simply is a major resistance level there just below the $100 mark, as the chart below shows just before the 2008 run-up.

 

If we go through that, my $120 calls could be in the money in no time at all.

 

[G0ldfinger]

SUGAR

 

http://www.bloomberg.com/news/2010-11-19/s...group-says.html

South Africa Cuts Sugar Forecast by 0.8% to 1.949 Million Tons, Group Says

...

... marking the smallest crop in 15 years, the South African Sugar Association said.

 

...“severe drought” has disrupted its production.

BTW, I invest in sugar because I can morally justify it - which is harder with crops like wheat and rice. No one really needs sugar (besides natural fruit sugar).

[G0ldfinger]

Sugar should do well if Oil does well as the Brasilians will use more of it for fuel and limit exports. What ag. isn't affected by oil prices!

Good point, BTW.

[G0ldfinger]

The oil calls have stayed the same or gained a little since I bought them. The uranium miners are down quite a bit (especially Uranium One). The levered gas ETC is a widow maker indeed. Levered sugar has gone up since yesterday, but that doesn't mean anything.

 

Altogether I have made a 14% loss so far.

 

If the uranium miners continue to go down, I will add more next year. For the levered gas ETC, I want to give it a year or so. Is my original investment way down by then (<50%), then I will add more. Sugar I am more optimistic about, but essentially the 1-year rule as in gas will apply. Oil I will just sit out.

[G0ldfinger]

Still hovering around that mark (see above: http://www.greenenergyinvestors.com/index....t&p=197229).

 

[Perishabull]

Quite bearish on Nat Gas

\/

Shale gas could supply 100 years of consumption

http://www.reuters.com/article/idUSTRE62940520100310

 

My initial thought was, "You'd be mad to get into Natural Gas", but then usually when people think you're crazy going into a trade, that's how you know it's a good one.

[G0ldfinger]

Quite bearish on Nat Gas

\/

Shale gas could supply 100 years of consumption

http://www.reuters.com/article/idUSTRE62940520100310

 

My initial thought was, "You'd be mad to get into Natural Gas", but then usually when people think you're crazy going into a trade, that's how you know it's a good one.

It is a gamble. But as the report points out:

Concerns about how hydraulic fracturing might affect underground water tables has prompted Congress to consider increased regulation.

So one first has to see how much of that stuff will actually get produced.

[jerpy]

No, I really meant European gas as in contrast to North American gas. The ETCs above deal in Henry Hub Futures only, as far as I understand.

 

The more i've read on U.S Gas funds like the 2 i'm tracking, the more disappointed investor's comments I find. You would think someone would make good money sometime, but I think it's a short term trading play for low percentage gains at best?

 

Some old threads on GEI are testimony to my thoughts.

 

EDIT: For example

 

http://www.greenenergyinvestors.com/index....=2176&st=60

 

http://www.greenenergyinvestors.com/index.php?showtopic=4928

[G0ldfinger]

The more i've read on U.S Gas funds like the 2 i'm tracking, the more disappointed investor's comments I find. You would think someone would make good money sometime, but I think it's a short term trading play for low percentage gains at best?

 

Some old threads on GEI are testimony to my thoughts.

The problem is that the spot price has not done much (or worse), and that the contango works against you. However, if that baby blows one day, and it does every now and then, then it would be great to be in.

[G0ldfinger]

This article is 4 years old. How have things changed since then? Has shale gas become much bigger than could have been anticipated back then?

 

This is one of the most important natural gas charts you'll see:

 

 

Give yourself a moment to work out exactly what it's showing......

...

Sorry, article here: Natural Gas: how big is the problem?

[G0ldfinger]

For the levered gas ETC, I want to give it a year or so. Is my original investment way down by then (<50%), then I will add more.

Hmm, I have to give this more thought. That contango etc. issue is a problem. Maybe I will just cut the loss at 50% and run, and maybe come back if that thing will ever turn around for a while. These vehicles are only good on up moves as we have determined above, so if it doesn't materialize soon...

 

Ah, how easy is it to buy & hold gold and feel good. This gas thing is just too complicated and full of traps. Here again we see one of the main advantages of gold over many (most) other commodities: easy storage!

[DoctorSolar]

Dude! Your favourite market commentator is copying your festive style!

 

 

Bob Hoye

[G0ldfinger]

I have gotten fed up with my broker/market maker who does not show me any oil derivatives anymore for reasons unknown to me.

 

The issuer I had bought derivatives from earlier, Societe Generale, has more calls with far out maturities. For instance, I have discovered WTI Futures European Calls for May 2016 with strike between $84 and $95. Obviously, these babies are more expensive ($13-$16), but do I think the oil price will be below $100 in 2016? Heck, no!

 

There is also a good interview with Jim Puplava and Eric Townsend on peak oil ("The Trade of the Century"): http://www.netcastdaily.com/broadcast/fsn2010-1218-3.mp3

 

So, I might buy more oil calls, long dated, and obviously this is then not really in the gambling area anymore, but more in the investment section (in the money long term call options for a lack of futures). Although, I hate to hold some paper underwritten by SG, but for small investors there is simply hardly any other way to get exposure apart from shares.

[G0ldfinger]

I should add, that there are a lot of "certificates" out there, called "turbos" and "waves" and whatever, many open ended, that promise you some leverage on some underlying. But the drawback of all of them are the knock-outs of course which they all have, and the leverage that is getting lowered over time (strike prices increase) by the issuer to make money, and all that in a not very obvious way.

 

I think these vehicles are a way to screw the investor, and it is possibly better to do an own call option roll-over strategy. But the classical options seem to be getting less and less.

[G0ldfinger]

Because I will most likely start buying long term (May 2016) WTI Futures calls, I want to explain this a little better (especially to those who don't know much about options and futures), because, essentially, despite the lack of futures, and since it is about a cash settlement only, this is no bad way of investing in oil.

 

The price of the May 17 2016 WTI Futures European Call with a strike price of USD 85.00 is EUR 16.49 right now. This is approx. USD 21.75. In other terms, if I buy one such call and hold it to the end, the return

 

 

= payoff on 17/05/2016 - USD 21.75

 

= (payoff on 17/05/2016 + USD 85.00) - (USD 21.75 + USD 85.00)

 

= Futures price on 17/05/2016 - USD 106.75

 

 

is equivalent to paying USD 106.75 for one barrel of WTI now and selling it on 17/05/2016 (where the corresponding future expires) at (essentially) the prevailing spot price.

 

However, since actually

 

 

payoff on 17/05/2016 = MAX(0, Futures price on 17/05/2016 - USD 85.00)

 

 

the deal is even better since most of the potential downside (below USD 85.00) is missing as I am holding a call and not a future. So, despit the fact that one overpays with USD 106.75 rather than the USD 88.00 where WTI spot is right now, if the expectation until middle of 2016(!) is much higher prices, this is a good way to invest.

 

The main issue remaining is of course the default risk of the counterparty: Societe Generale. But this would be given in the case of a cash settlement future as well.

 

The other thing to keep in mind is that indeed the investment has more a size of USD 106 rather than USD 21 since it is levered, but then again, the downside is very limited with a total of USD 21.75 that are at risk.

[Rosco]

I have gotten fed up with my broker/market maker who does not show me any oil derivatives anymore for reasons unknown to me.

 

The issuer I had bought derivatives from earlier, Societe Generale, has more calls with far out maturities. For instance, I have discovered WTI Futures European Calls for May 2016 with strike between $84 and $95. Obviously, these babies are more expensive ($13-$16), but do I think the oil price will be below $100 in 2016? Heck, no!

 

There is also a good interview with Jim Puplava and Eric Townsend on peak oil ("The Trade of the Century"): http://www.netcastdaily.com/broadcast/fsn2010-1218-3.mp3

 

So, I might buy more oil calls, long dated, and obviously this is then not really in the gambling area anymore, but more in the investment section (in the money long term call options for a lack of futures). Although, I hate to hold some paper underwritten by SG, but for small investors there is simply hardly any other way to get exposure apart from shares.

 

 

When you say "lack of futures" , I believe WTI futures trade to Dec 2018 , although I dont know the liquidity out there.......

[G0ldfinger]

When you say "lack of futures" , I believe WTI futures trade to Dec 2018 , although I dont know the liquidity out there.......

I can't buy any through my broker. Maybe they're considered too risky?

[Rosco]

I can't buy any through my broker. Maybe they're considered too risky?

 

 

Yeah, maybe.

 

You can trade them on Interactive Brokers... for reference closing prices were 90.61, 91.03, and 91.49 for Dec 2016, 17 & 18

[G0ldfinger]

Yeah, maybe.

 

You can trade them on Interactive Brokers... for reference closing prices were 90.61, 91.03, and 91.49 for Dec 2016, 17 & 18

I mean, the other advantage of playing this with options is that there is no need for a margin account. However, as I pointed out above, having a 100% margin account "in your head" at least puts a possible total loss of the original option premium into perspective (as not too dramatic). As long as I don't want any big trucks show up in front of the house, all this has to stay a paper bet anyway.

[Rosco]

I mean, the other advantage of playing this with options is that there is no need for a margin account. However, as I pointed out above, having a 100% margin account "in your head" at least puts a possible total loss of the original option premium into perspective (as not too dramatic). As long as I don't want any big trucks show up in front of the house, all this has to stay a paper bet anyway.

 

yep, in my opinion the options dont look that expensive but one drawback is their liquidity. With those OTC warrant style contracts you are at their mercy if you want to close out. At least with a liquid listed future you get fair value pricing either buying or selling.