Hello and welcome back to CRI's OnlyDoubles New Trades blog.
I thought I would make a quick comment on Sugar's explosive move higher of late. Indeed, those October, 2014 $20 Calls suggested at or near $.46 are currently well into the .70 area (quote link).
As previously suggested too, if one were fortunate enough to have done the trade you would be wise to have an order working to sell half of the position at double your purchase price. In the original blog post write up I mentioned the low .90 area and I still like that as an exit point.
While I myself was unable to do the trade (no fill) I hope to see a pullback in price so I get a chance to get in on the long side before this move is done. A 50% retracement of this current run (on the daily charts) would bring prices back into the low 18 area and that is where I will be watching to trying to get in.
That's all for this post,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
http://www.therationalinvestor.ca/RI_Tradents.php#ODNTbloglink
therationalinvestor.ca
Hello and welcome back to CRI's OnlyDoubles New Trades blog.
While the stock market has done well over the past few years, not all
assets have been in bull markets. Many of the 'soft' markets have been
just that. But those days may soon be behind us as one by one, the
sector looks to be turning the corner. While it is still very early,
there are some signs of life within the international sugar market.
Considering the substantial potential gain of a move back to the OTE
short sweet spot of this bear market, I am more than happy to entertain
the idea of long dated call option purchases and even a bit of bottom
hunting within the futures pits. 17.29 seems to stand out and should be
an interesting level to keep an eye on going forward.
After some thought, it occurred to me that this is a classic CRI's
OnlyDoubles Trade Idea. Indeed, one can go and buy a 1 year call option on
#11 Sugar and literally 'lock in' a position on this commodity for
relatively little money.
For OnlyDoubles blog purposes, I like the
October, 2014 $20 call options currently at 46 points (at $11.40/ point
that equates to $524.40). The October, 2014 Sugar futures contract is current $17.84 so a 10% move on a futures contract over the next year isn't too out of the question. Indeed, should the market go back to our '1st stop'
target (38.2% fib at $22.50) this option will have an intrinsic value of 250 points (or
$2850). Considering too, this is a one year option, there is lots of
time for this idea to play out....
One should always follow CRI's 2nd rule of investing - that being never risk more than 5% of your stake on any one single trading idea. So with that in mind, your trade size should calculate itself. Ideally I would like to put $1000 to work here (so you should know how big of an account I need to consider this trade idea) and buy 2 contracts, I will consider the entire $1000 risk capital (which means I can afford to lose it) and will have an open order to sell half the position at double our purchase price (open order to sell 1 contract at 92 points or better).....hence the blog's name....OnlyDoubles
That's all for this post,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
therationalinvestor.ca
Of course, all legal disclaimers are relevant. Consult your financial adviser as to the appropriateness of any strategies mentioned here. And none of you are ever going to consider a trade unless it is with money you can afford to lose - right!
