The views expressed are only the author's opinions and should not be considered investment advice.
I am thankful that I have a pretty good trading platform where I can see not only the market bids and offers, but the bids and offers below and above the market, as well as the iceberg bids and offers. It is like being able to see the entire market. I can pretty much tell where there is support and resistance at the present time. I must add that the market can change on any given day. I will try to make a habit out of posting my trades and recommendations on a frequent basis, so check back often and you can see how right or wrong I am.
Here is what I have seen and what I see now:
When gold was trading over $1200, it looked weak to me. There were a lot more offers on the table than bids. I would guess that it was short-covering and exercising call options that drove market buying.
Corn looked strong near 380 (I could see the big boys were lined up at 380), whereas wheat looked weak in the upper 500's. Corn is now over 400 and looks evenly matched. I'm neutral-to-slightly-bullish at this price. Wheat looked like it was showing signs of strength around 515, but it looks like we start to see resistance in the 530's. I'm neutral-to-slightly-bearish on wheat in the 530's.
For gold and silver, it looks to me like there is some support near present prices. My guess is that we are seeing long-covering and exercising put options. The market looks a little thin right now. I'd like to see something south of 1050 for gold and something closer to 16.50 for silver. But then again, maybe I am being too greedy. Either way, I will let you know when I see the big boys lined up.
I am not a huge fan of options in general. Any decent option is going to have a hefty premium, and options are known as wasting assets for a reason. That said, I do see a role for an eclectic trading strategy that uses both options and futures positions, where the option is a hedge against the futures position.
Suppose you want to protect yourself from a precipitous drop in the price of an asset class that you own, e.g., silver. You would buy a deep out-of-the-money put option as an insurance policy against that precipitous drop in prices.
When it comes to using options as part of a trading strategy, you want to look for those sixty-day moving averages and ranges. If we are trading near the top of the range (e.g., when silver was over $19), you would buy a put option at, say, $16. Now that we are back down near $17, you then look for a long entry point in the futures market as close to $16 as possible. Your put option at $16 provides you with a hedge against your futures position. Now that we are at $17, you would do the opposite (i.e., buy a call near, say, $20). If we get close to $20, you then take your short position in the futures market.
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Biography - Mark Alvarez-Anderson
Mark served honorably for four years on active duty in the Marine Corps infantry, and was a Libertarian endorsed candidate for a municipal office in 2002. He has held the NFA Series 3 license (commodity futures and futures options broker) which he did a voluntary withdrawal on so that he can trade futures for his personal account. Since the year 2000, he has spent much of his free time reading the great minds of the Austrian School of economics, such as Murray Rothbard, Henry Hazlitt, Ludwig von Mises, et al.
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Mark served honorably for four years on active duty in the Marine Corps infantry, and was a Libertarian endorsed candidate for a municipal office in 2002. He has held the NFA Series 3 license (commodity futures and futures options broker) which he did a voluntary withdrawal on so that he can trade futures for his personal account. Since the year 2000, he has spent much of his free time reading the great minds of the Austrian School of economics, such as Murray Rothbard, Henry Hazlitt, Ludwig von Mises, et al.