Weekly Update: June 17, 2015

| June 17, 2015

Weekly Update: June 17, 2015


Big Picture Outlook:

While today’s FOMC meeting went as expected, the post-meeting press conference revealed something interesting…

Federal Reserve Chairwoman Janet Yellen quipped that instead of focusing on when the US Central Bank raises interest rates, investors should be more focused on the rate of change.

For me, Yellen’s words are a clear signal the Fed isn’t about to raise rates drastically.

While there’s little question the Fed will raise interest rates this year (most likely in September), it’s more important to realize the pace of the raises will likely be very slow.

Investors took today’s FOMC statement as a dovish signal…

Judging by the market’s reaction to the Fed statement, the US Central Bank will stay accommodative for the foreseeable future.

Let’s see how some of our open positions reacted to today’s events…


Portfolio Highlights:

Editor’s Note: I won’t update every open position in every update. I focus on the positions with significant news or price movement.

. . . . US Oil Fund $USO July 17, 2015 $20 calls

Today’s crude market action seemed rather spurious. Despite another substantial decline in US oil stockpiles last week, the commodity succumbed to an abrupt early morning downturn.

But once the Fed revealed their interest rate plans later in the day, oil recovered swiftly off the lows to close at $59.73.

It was definitely a volatile day for the commodity.

Here’s what’s important…

Despite the fact the high-demand Summer driving season is upon us, oil is still stuck in a sideways trading pattern. At this point, it seems neither bulls nor bears are willing to make a stand in this commodity.

As a result, our worst enemy for this trade is the time decay in our call options. In order for these $20 calls to get profitable, we need a big bullish move from oil, and soon.

Since we only have a month left in this trade and $USO is trading just above our strike, I’m adjusting our risk-control line up to $19.85 from $19.00.

If $USO trades below $19.85, conservative investors should close this trade to preserve capital.

. . . . iShares Silver Trust $SLV July 17, 2015 $16.50 puts

Silver dropped to $15.80 an ounce last Friday. The short-lived downturn sent our $16.50 $SLV puts up to a $1.34 bid, which is a 100% gain from our entry at $0.67.

With this trade hitting our first profit target and achieving a 100% gain, everyone should have taken some money to the bank!

If you’re aggressive, you can hold your remaining contracts for the possibility of further downside in the price of silver.

. . . . Market Vectors Gold Miners $GDX July 17, 2015 $19 puts

Gold caught a bit of a bid off today’s FOMC meeting results. The dovish statements made by Janet Yellen sent the US Dollar lower and gold higher by $3.40 an ounce.

While it wasn’t much of a rally, we need to be careful…

We don’t want to see $GDX turn sharply higher and send our $19 July puts into the gutter due to a bit of short-term strength in gold.

So here’s what we’ll do…

Let’s drop the risk control line for this trade down to $19.25 from $20.10.

If the US Dollar succumbs to additional weakness, there’s a good possibility gold miners will find some bullish legs. If so, we’ll want to exit this trade before the value comes completely out of our $19 puts.

. . . . Silver Wheaton $SLW July 17, 2015 $18 puts

Unfortunately, $SLW managed a blistering late day rally off the FOMC meeting results. Let’s keep a close eye on this newly established trade.

We don’t want to see our July puts get run over by a short-term rally in this silver producer.

Remember, our risk control line is at $19.00, while our profit targets are at $18.00 and $17.00.


Category: Commodity Trading