To Exercise, Or Not To Exercise (Options), That Is The Question

In a previous article, I explained commodity option expiration, exercising, and assignment. I noted a long (purchased) option position (call or put) has the right to exercise the contract. To make an informed decision, I will explain the result of exercising an option contract.

A commodity option contract is a decaying asset that will expire. As an option contract draws near its expiration date, set by the exchanges, both the time value and intrinsic value diminish. Time value is premium in relation to days until expiration. Intrinsic value is the premium in relation to the strike price’s distance from underlying futures contract price. Note that volatility will also play a role in the calculated premium price. The exception to intrinsic value diminishing is an in-the-money contract. At that point, the intrinsic value is a one-to-one ratio of the strike price in relation to the underlying futures contract. For example, a long April 2013 Gold 1600 call will be valued at 50 points (or $5,000) if futures are at 1650.0 on option expiration (March 25, 2013). On the other hand, if futures are at 1600.0 or below on expiration, the option contract is valued at zero. An in-the-money contract, before expiration, will also have time value included in the premium price. However, because there are a number of finite days until expiration, the time value diminishes from day one. Continue reading "To Exercise, Or Not To Exercise (Options), That Is The Question"

The Future of Managed Futures… Past, Present and Future!

The first Managed Futures Fund may have actually been established around 1948, but the investment vehicle really became en vogue as Richard Dennis and his infamous “Turtles” gained in popularity. Richard Dennis, although working his way up from a runner, really began his reputation as large trader in the 70’s. The 70’s had crop failures to contend with and inflationary conditions which Richard Dennis could use his trend-trading style to position trade. By 1983, he believed that he could teach his methodology to an average woman/man to trade successfully as he had. He had been quoted by the Wall Street Journal in 1989 saying “We are going to grow traders just like they grow turtles in Singapore” thus coining the name “Turtles”! He selected his 21 men and 2 woman to learn the trend-following system with success, increasing his notoriety and adding some new traders to the spotlight. Actually about 60% of the trades may have lost money getting stopped out while the balance of trades were held with trailing stops to garnish more from the position. Other traders sprang up into the spotlight like Paul Tudor Jones and John Henry. The methodology is proprietary to the trader and never really divulged, so the entries, stops and the targets remain exclusive in most managed products. The trading model may take years to cultivate! Futures trading is a zero-sum game where there is a loss for every gain and vice versa. The challenge for the trader was to create a percentage to his/her favor! Continue reading "The Future of Managed Futures… Past, Present and Future!"

Gold & Silver Speculator


Now that Thanksgiving has passed and the Holiday Season is in full swing with thoughts turning toward Hanukkah, Christmas, and the New Year, I’m getting asked more and more questions from traders and investors who are very concerned - even anxious, about the Fiscal Cliff, the Debt Ceiling, tax implications/considerations regarding both and how all of this will play out in the precious metals markets. So, in this edition of the GSS, I’d really like to focus on the bigger picture.

But before we delve into that, I must take a moment to address yesterday’s violent intraday price move in Gold (and Silver to a lesser extent). We witnessed another one of those counter-intuitive, intense, vicious “waterfall selloffs” or spikes lower that seem to “randomly” occur from time to time over the past couple of years.

Massive and concentrated volume hit the market immediately on the NY Pit open: Over 35,000 lots or contracts reportedly traded - the equivalent of 3.5 Million ounces of Gold - with nearly 7800 contracts (that’s 24 TONS!) traded electronically in a single minute, slamming the price of Gold down -$36. The price drop was not enormous in percentage terms, but the volume size and velocity of the move still shocked many market participants as there was no corresponding “news” to point to. Continue reading "Gold & Silver Speculator"

Fibonacci Tips For E-mini Futures Trading - Part Two


As traders, we are quick to put on mental shackles. Bind ourselves to a way of thinking that lives somewhere between no-sense and nonsense. No trader makes it through unscathed. We all get a little taste of the snake oil in one form or another. However, if you are going to succeed in building your trading business, you must learn how to trade. Interestingly enough, the most powerful tools available in today’s hi-tech trading arena, in my opinion, aren’t the new ones; it’s the tools that are steeped in a rich history, the ancient of days.

  • Candlestick Signals - 400 years old
  • Fibonacci Sequence - Created “In the beginning” discovered by man recently in 1202

In our previous article, Fibonacci Tips For E-mini Futures Trading, we covered the basics of Fibonacci Retracements in the context of an uptrend. In this article, we will use the same concept and approach, but we will simply apply them in the context of a down trend. This is a large part of why Day trading E-mini Futures is so attractive. Unlike investing in a company where you often wait weeks, months, or even years for the stock to appreciate, E-mini Futures’ profit opportunities are as readily available in a downtrend as they are in an uptrend. Continue reading "Fibonacci Tips For E-mini Futures Trading - Part Two"

Beyond the "Spotlight"

The GBE Trade Spotlight advisory service applies the GBE trading methodology (buying or selling commodity contracts based on breakouts of chart formations and technical indicators) to identify one to two trade setups per week.

Highlighting This Week’s Potential Breakouts:

December 2012 Australian Dollar

The December 2012 Australian Dollar contract closed at 1.0305 below a lower trend line on November 15. There are three touches on the lower trend line at 1.0089 (10/08/12), 1.0191 (10/23/12), and 1.0340 (11/14/12). In the same November 15 trading session the MACD Indicator crossed over to a bearish signal; the Stochastic indicator crossed over earlier in the week. The market is currently trading below a 20 day exponential Moving Average but right at the 50 day Moving Average. The Trend Seeker (a US Chart Company tool to help identify market trend) is still Up. It appears the market will need further downside movement for the trend to flip bearish to confirm a short entry. The ADX is at 14.05 showing signs of a lack of Momentum currently. A break of a support line consisting of lows at 1.0095 (7/27/12), 1.0077 (9/05/12), and 1.0089 (10/08/12) can see prices break the 1.000 level and test the twelve month low of .9545 (6/01/12). Continue reading "Beyond the "Spotlight""