Weekly Update: February 19, 2014

Weekly Update: February 19, 2014

 

Commodity Watch:

Judging by the recent bullish price action in crude, investors are growing wary of the political unrest in Venezuela.  WTI pushed to a multi-month high near $104 a barrel in today’s trading session.

Since Venezuela is the world’s fourth largest exporter of oil to the US, ongoing anti-government protests in the country have crude investors building a risk premium into the WTI market.

While the technical outlook remains bullish for oil, supply/demand fundamentals are going to limit the upside price potential of this commodity.  As a matter of fact, the recent rise in crude is setting up an excellent put buying opportunity in the US Oil Fund (USO).

Let’s look at our open positions…

 

Portfolio Recap:

. . . . US Natural Gas Fund (UNG) April 2014 $21 Puts

Believe it or not, natural gas is shooting to yet another 52-week high today thanks to the NOAA’s recently revised long-range forecast.  Just when you thought the weather couldn’t get any worse, another hefty dose of extreme cold is expected to hit the Midwest and Eastern US starting early next week.

At this point, we have no other choice but to wait for this cold weather to subside.  When it does, natural gas prices should ease dramatically from current levels.

For now, keep holding the April $21 UNG puts and the April $23 UNG puts for a drop in natural gas.  We still have plenty of time until expiration for these calls to play out profitably.

. . . . iShares COMEX Gold Trust (IAU) April 2014 $12 Calls

No doubt about it, gold made a nice run higher over the past week.  In fact, the yellow metal ran to $1,330 an ounce in yesterday’s trading session- up from $1,290 last Wednesday.

We may see the metal take a breather over the next few days due to profit taking. But once that runs its course, the increasingly bullish market sentiment and technical situation point to a continued run higher for gold.

As of this writing, our IAU calls are selling for $0.85 a contract… a 30% gain from our $0.65 buy price.  Keep holding these calls for additional gains!

 

Category: Commodity Trading