Sugar #11 - March 08 Contract - SBH08

Airelon said: "I'm wondering if this one is going to see a pullback soon enough. A huge short position is being held by the Commercials. They seem to have entered a new phase in the last two months, but still, they haven't held this net of short positions in over two years. Of course they are hedging, but even in the last two weeks, they've piled on an excessive amount of shorts. Strangely enough though, I'm not out actively looking for a short position in this market. My 'feel' is that I like to long Sugar. Don't ask me why. Just do. :) But I've already had one profitable time shorting Sugar this year, and looks like January 1st might see another pullback. Seasonally, looking to the 15 and 30 year pattern, Sugar #11 tends to fall come the 1st of the year, for about 10 trading days. Looking to the 5 year pattern, it's weak to flat. Cyclically speaking, it's a good time for a short as well. Looking to Williams Accumulation / Distribution bias, there is a very small selling bias. Volume is descending on this rally. Keeping my eye on this one for now . . . With the right type of setup, on a break below 10.87, I might buy a put option or two, I'm eyeing up the 1050 put specifically"

Airelon said: "Depending on the open we receive in this market on Monday? I might end up buying the option right away. Much depends on the type of open we receive. If our open is higher than 11.20, then I probably wait another day before I purchase the option. If the open is between 10.98 and 11.12, I'll go ahead and buy a March 08 10.00 Put. If the open is lower than 10.87, then I will wait to see if the market climbs higher, and I can get the put option for a cheaper price. Looking for a 1:3 reward ratio as a goal. . ."

Airelon said: "Watching the market confirm my hypothesis. But unfortunately, the pit guys that are still left at the NYBOT don't seem to want to play along ([I]option pits are still there[/I]). Should fire every one of those *(&#$&^(*&^'s - this is like the 5th time this year I've had a problem with the pits, and usually, it's the NYBOT pit guys. Wanted to change my limit order to a market. The bid-ask is 6x8, and my limit was .08. It jumped to .09 when I wanted to change to market, but the pit guys are just not playing along. They are not updating the bid-ask for the brokers that are electronic, so the platforms can't recognize that it can't recognize where the market is at. optionsXpress is trying to get my limit order changed to a market order as I watch this market fall another 13 cents. Waiting for word of my fill at the moment. Not fun. This is why I do not feel bad for pit guys put out of work. God d&^^@ F^#&3125!!!!!"

Airelon said: "A "Marvin" or "Mark" ? ? (Didn't hear the name too clearly) got my fill for me at .08 - which was my goal, and within the bid-ask. Thank god. I haven't had service like that since I was at a full-service futures broker. The pits are just behind the technology of the rest of the world. We've moved beyond that. Was in freaking limbo as I was watching the market move in my direction."

ratAphooey said: "Long term Sugar has to be a buy...doesn't it? People eat more sugar than ever."

Airelon said: "When it comes to commodities, I'm completely opposite my "Stock Investment" self. I'm very short term. The leverage with commodity futures is so garganteoun, that unless you have funds like Larry Williams or JP Morgan - there is no way to position yourself, across many commodities - for the long term. It can't be done without at least 2 or 3 mill to spare for such investments. The small trader can't invest across the broad spectrum of futures (as I do - I trade in about 20 different commodity markets) for the long term without at least 2.5 million in the brokerage account to do it. I generally don't like to talk about my account size, but I will let you know that it's not 2.5 million. :) So short-term, I play the volume / demand / seasonality / insider following - of commodity futures. Speaking of? Yee-ha. :) That current bid-ask spread is a thing of beauty. :) Last I checked, it was down 17 cents, and the bid ask spread was something like 10.64 (314) x 10.65 (30) Entered at .08 ($89.60) - with a profit goal of .21 to .25 ($235 to $280)"

lil dickie said: "How are the commission costs for commodities trades?"

Airelon said: "Well, I don't trade actual contracts. I don't like the thought of the market going lock-limit on me for days straight (it happens) and losing my cars, my computer, and all of my posessions. :) For Futures options? Around $15.00 in and out where I'm at [I](optionsXpress at the moment - which may change[/I])"

lil dickie said: "All right. So these are futures and not full contracts - for obvious reason. Each trade is $15. How much do you stand to lose or win on each trade? And how long do you hold?"

Airelon said: "Futures options, yeah. When I was with Xpresstrade - it had a calculator that told you your average time in a trade. I think all told, it was something like around 11.4 days. I've had trades that went 2 days (An E-mini S&P Put a while back) and some that went 22 days. But I average around 11 days. Any longer, and the theta premium on the option loses too much for it to be worth it. Risk per option generally changes in the amount of total premium, but I always, always have a risk / reward goal of 1:4, but I average in actual practice a risk / reward ratio of 1:2.67"

lil dickie said: "I take it this is not a huge source of income then?"

Airelon said: "[QUOTE=lil dickie;60602]I take it this is not a huge source of income then?[/QUOTE] It does ok. 40 or 50 trades a year. As the account equity increases, so does the number of options I play with each trade. But I never look for this to be my main stay. Futures is a zero-sum game. It's like playing poker. So I'd have to think a lot of my skill to look to this for my main source of income. And quite frankly - as strange as this sounds coming from someone involved in Futures Options - I like the safe play. I generally a percentage of all profits to feed my CD's ([I]CD Ladders[/I]) and Investment accounts, and vice versa. I try to have 3 investment / trade vehicles, all of which feed each other."

lil dickie said: "I like your thinking. As long as your investment pot keeps growing there is no reason not to keep doing your thing. I am studying commodities a lot lately as they seem to be one thing where demand shouldnt fall in the next few years. A rising population seems to guarantee us a continued increase in demand for most commodities."

ratAphooey said: "Do commodities work in groupings at all? Like if Sugar goes down, corn goes up or something like that?"

Airelon said: "At times. Sugar tends to be a bit isolated as far as sectors go. It *can* be tied to Cocoa. But they are all so regionally based, that the supply and demand can work much differently. Sugar's big players besides who the states usually deals with are India and Brazil. Whereas African countries are huge when it comes to the Cocoa market. Of course, major financial news can move the futures markets as well. An interest rate cut in the last 3 months has basically done nothing but push commodity prices higher and higher across the board. Then looking at it further, at times the grains (with 3 different Soy markets which can all relate to each other) can relate to the Meat markets (Cattle on Feed, which relates to Corn). Lately, with the Interest rate cuts and the market uncertainty though - the usual moves have sort of gone away. I haven't done as much Futures options trading, because things are pretty screwy at the moment . . ."

Airelon said: "The market surged ahead yesterday, and then again last night. I'm going to sell the option back to the market as soon as possible to recoup any possible loss. There was a seasonal tendency for the market to be weaker during this period, but the market continues to make higher highs. No sense in holding onto the option if that's the case. Remember, the only way to hold onto gains made from the market, is to not allow our bad trades to wipe out any gains."

AlfredSokol said: "Indeed that is true. Cut your losses and let your winners run."