Weekly Update: November 13, 2013

| November 14, 2013

Weekly Update: November 13, 2013

 

Commodity Watch:

Tomorrow is an important day for the commodity space… 

As you may know, Federal Reserve Vice Chair Janet Yellen, speaks before a Congressional confirmation committee at 10 AM.  Mrs. Yellen is the nominee to replace current Fed Chairman Ben Bernanke.  If confirmed, she will take over the Chairman position in late January 2014.

Investors will be listening closely as she may give insight into the Fed’s plans going into 2014…

Of course, with last Friday’s remarkably strong US Nonfarm payrolls report there’s a growing consensus the Fed will start tapering sooner rather than later.  If Mrs. Yellen says otherwise, we could see a hefty rally for dollar-sensitive commodities like gold and silver.

Let’s get to our open position updates…

 

Portfolio Recap:

. . . . PowerShares DB Agriculture Fund (DBA) November 2013 $26 Calls

As you know, sugar and cocoa experienced a nasty bearish reversal a few weeks ago and have never recovered.  Since these commodities are a major component of the DBA fund, they’re downfall hurt the value of our $26 calls.

Unfortunately, it looks like the $26 DBA calls will expire worthless this Friday.

. . . . iShares Comex Gold Trust (IAU) November $12 Puts

Gold is back on the downswing in recent trading.  In fact, the yellow metal is nearing the lows set in mid-October at $1,250 an ounce.  However, it’s unlikely gold will drop enough in the next few days to send our $12 IAU puts back into a profitable position.  As a result, we’ll likely see these puts expire worthless.

Now remember…

The IAU Puts and the DBA calls were extremely low risk trades.  We picked up each of these trades for $20 and $25 a contract, respectively.

. . . . US Oil Fund (USO) December $36.50 Puts

WTI crude is sliding lower…

In fact, the commodity dropped to $93 a barrel is recent trading on Fed tapering worries.  As you may know, this week’s EIA crude inventory report is delayed until tomorrow due to the Veterans Day holiday this past Monday.

It’s tempting to lock in a profit on this trade since we’re currently sitting on a gain of 98%.  But since we still have a month until expiration, let’s keep holding these puts for further upside. 

As long as Middle East uncertainty doesn’t flare up again, oil should trade near $85 a barrel by mid-December.

. . . . US Natural Gas Fund (UNG) January 2014 $19 Calls

Natural gas ran to the multi-week high of $3.65 mmBtu in recent trading. 

Why the sudden uptick?

Weather forecasts are starting to shift to the colder side, which is supportive of higher prices.  Important heating regions are expected to see a return to normal seasonal temperatures by the end of November.

Of course, since it was relatively warm this past week, tomorrow’s EIA natural gas inventory number won’t likely be all that bullish.  But once a solid week of cold temperatures hit, we’ll likely see inventory data get more bullish.

Keep holding the UNG January 2014 $19.00 calls for further upside!

 

Category: Commodity Trading

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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