Buy Alert: October 8, 2013
Buy Alert: October 8, 2013
Option Strategy:
Buy PowerShares DB Agriculture Fund (DBA) November 2013 $26.00 calls for $0.35 or better.
Commodity Outlook: Agriculture
It’s really starting to heat up in agricultural commodities…
Cocoa is soaring to a new 52-week high, wheat is breaking above an important technical resistance level, and feeder cattle are trading at record prices.
Luckily, all three of those commodities are included in the PowerShares DB Agriculture Fund (DBA).
But that’s just the beginning…
The DBA fund also includes futures contracts in corn, soybeans, lean hogs, coffee, and sugar. No doubt about it, this ETF a great mix of all agricultural commodities.
And since Ags are really starting to look like they’ll outperform in coming weeks, now’s the perfect time to get long this entire sector.
Here are the important details you’ll need for this trade…
Trade Metrics:
| Underlying ETF Symbol: | DBA |
| Call or Put: | CALL |
| Expiration Month, Day, Year: | November 15, 2013 |
| Strike Price: | $26.00 |
| Current Bid/Ask Price: | $0.20/$0.25 |
| Maximum Buy Up To Price: | $0.35 |
| Maximum Risk Per Contract: | $35 |
Here’s a breakdown of the important technical support and resistance zones in DBA…
Exit Strategy:
Remember, we want DBA to move higher. Our first profit target is $26.40. If this ETF can break through that important level, we may see it jump to $27.00.
The risk control line for this trade is $25.00. If DBA drops below that level, conservative investors should consider closing this trade.
Now let me clarify something…
DBA is different than the other commodity ETFs we’ve traded thus far. Instead of tracking one specific commodity, it averages out the performance of all the agricultural assets I mentioned above.
As a result, we’ll be using the actual ETF (DBA) to track this trade instead of a specific commodity like we usually do.
Category: Commodity Trading
