Futures Market Showing Signs Of Life

Natural Gas Futures

Natural gas futures in the September contract settled last Friday in New York at 1.86 while currently trading at 1.85 unchanged for the trading week and looking for a trend to develop to the upside, in my opinion. Currently, I am not involved as I am waiting for a bullish trend to develop. I think there's a high probability that a spike bottom was created on June 26th at 1.58. In general, the commodity markets are starting to show signs of life as the U.S. dollar continues its bearish trend.

Gas prices are now trading above its 20-day but still below its 100-day moving average. However, if you take a look at the daily chart, major support has developed between 1.60/1.65, so look to play this to the upside in the coming weeks ahead as I believe the risk/reward would be in your favor. The chart structure will also start to improve daily; therefore, the monetary risk will be reduced in next week's trade. Historically speaking, prices are incredibly depressed.


Silver Futures

Silver futures in the September contract settled last Friday in New York at 22.85 an ounce while currently trading at 23.94 up over $1.00 for the trading week as prices are right near a 7-year high. Continue reading "Futures Market Showing Signs Of Life"

Post COVID-19 -100% Options Win Rate

A total of 76 options trades were placed in May, June, and July as the market rebounded after the COVID-19 market lows. During this timeframe, all 76 trades were winning trades to lock-in a 100% option win rate with an average income per trade of $190 and an average return on investment (ROI) per trade of 7.6%. After the tumultuous market lows of March and into early April, leveraging a minimal amount of capital, mitigating risk and maximizing returns was paramount. The objective of an options-based portfolio can offer the optimal balance between risk and reward while providing a margin of downside protection with high probability win rates.

As the market continues to rebound, optimal risk management is essential when engaging in options trading as a means to drive portfolio performance. When engaging in options trading, risk mitigation needs to be built into each trade via risk-defining trades, staggering options expiration dates, trading across a wide array of uncorrelated tickers, maximizing the number of trades, appropriate position allocation and selling options to collect the premium income.

Getting creative and customizing your option trade structure is another element that can be layered into the overall strategy for long-term success in options trading. Maintaining disciple via continuing to risk-define trades, leveraging small amounts of capital while maximizing return on investment, is essential despite the impressive streak of 76 consecutive winning trades.

3 Months Post COVID-19 Results

After placing 76 trades throughout May, June, and July, a 100% win rate, 99% premium capture, and 7.6% ROI per trade was achieved. This was accomplished via leveraging a minimal amount of capital and maximizing return on investment with risk-defined trades. Deploying a combination of put spreads and custom put spreads was used to optimize the risk-reward profile for these 76 trades. Whether you have a small account or a large account, a defined risk (i.e., custom put spreads) strategy enables you to leverage a minimal amount of capital, which opens the door to trading virtually any stock on the market regardless of the share price. Risk-defined options can easily yield double-digit realized gains over the course of a typical one month contract (Figures 1, 2, and 3).

Figure 1 – Average income per trade of $190, the average return per trade of 7.6% and 99% premium capture over 76 trades in May and June
Continue reading "Post COVID-19 -100% Options Win Rate"

Big Tech Post Earnings Blowout

Facebook, Apple, and Amazon are leading the tech sector after announcing better than expected earnings. However, as we head into the close, all three major indexes have dipped into the red for the day.

As far as the weekly numbers go, the S&P 500 will likely eke out a weekly gain of roughly +.5%. The DOW, on the other hand, will suffer it's second straight weekly loss standing at -1.3% while the NASDAQ, on the back of the big earnings blowout by the big three, will post a weekly gain of +2.4%.

Facebook (FB) reported earnings of $1.80 vs. $1.39 per share with a revenue of $18.7 billion vs. $17.4 billion. Continue reading "Big Tech Post Earnings Blowout"

Precious Metals Warn Of Increased Volatility

Are the precious metals patterns predicting a big downside price event?

Our trading team witnessed a big drop in Platinum and Palladium prices early this morning while Gold and Silver continued to push moderately higher. We began to question this move and investigate any historical relevance to previous patterns. Our research team pointed out that both Platinum and Palladium rolled lower just 3 to 4 days before the breakdown in the US stock markets on February 24, 2020, while Gold and Silver were reaching recent price peaks. Could the patterns in precious metals be a warning of another potential volatility spike and price decline in the near future?

Our research team created the charts below to help highlight the pattern that we are seeing in Precious Metals right now. First, we highlighted February 24, 2020, with a light blue vertical line to more clearly illustrate where the markets initiated the COVID-19 breakdown event. Next, we drew shaded rectangles around new downside price rotation levels that took place near this peak in the US stock markets. Lastly, we drew a red line that highlights the subsequent price decline that took place in Precious Metals as the markets tanked in late February and early March 2020.

Precious Metals

The current downside price move in Platinum and Palladium are very interesting because it appears Platinum and Palladium both initiated a downside/contraction price event just 3 to 4 days before Gold and Silver, as well as the rest of the US stock market, began to collapse on February 25, 2020. You can clearly see in the bottom two charts that Platinum and Palladium initiated a downside price correction a few days before both Gold and Silver reached their peak levels and began to move lower. Once this peak rotation took place, all four of the major metals groups moved moderately lower for about 7 days before pausing, then collapsed even further. Continue reading "Precious Metals Warn Of Increased Volatility"

Analysis Of US Crude Production

According to the Energy Information Administration, U.S. petroleum inventories (excluding SPR) built by 8.8 million barrels last week to 1.461 billion, whereas SPR stocks were unchanged. Total stocks stand 171 mmb above the rising, rolling 5-year average and about 157 mmb higher than a year ago. Comparing total inventories to the pre-glut average (end-2014), stocks are 402 mmb above that average.

Total US Oil Stocks

Crude Production

Production averaged 11.1 mmbd last week, up 100,000 b/d from the prior week, and 11.025 mmbd over the past 4 weeks, off 7.7 % v. a year ago. In the year-to-date, crude production averaged 12.129 mmbd, up 0.4 % v. last year, about 50,000 barrels per day higher than a year ago.

US Crude Production

Other Supply

I have previously noted how the "Other Supply," primarily natural gas liquids and renewables, are integral to petroleum supply. The EIA reported that it fell by 30,000 b/d v. last week at 6.789 mmbd. The 4-week trend in "Other Supply" averaged 6.958 mmbd, off 0.4 % over the same weeks last year. In YTD, they are 0.7 % higher than in 2019. Continue reading "Analysis Of US Crude Production"