Knowing More About Buying Commodity Options

One of the trading activities that people can really earn from is buying commodity options. However, they have to know something more about it before they venture into this kind of trading. Although there are underlying commodities that are used for the commodities contract which can be transformed into futures options by traders. People also have to take note that options are traded at various prices within a given month.

Just like any other markets, transactions are based on the predictions made on price movements. When traders expect prices to increase over a certain period of time, they buy a call option. In case they expect it to decrease on the other hand, then they should opt for a put option. One of the most important points to think about is the expiration date. The lesser time that the traders have in their contracts indicates higher amount of risk that they are taking. They tend to lose at the end of their trading if they are not able to buy the correct option.

Another consideration that people have to take note of when buying commodity options is the decreasing value as each day that passes by. Traders can gain more if they have ample time to wait for big movements to occur in the market. They also have to study the various strike prices from which they can decide which one will provide them profit based on the prevailing market trends and conditions. These strike prices include the following: in the money option, at the money option and out of the money option.

People who are first time buyers of commodity options can contemplate on the in the money option. This has a higher price than the strike price and people may still earn even in there are no huge price movements in the market. Those who are little more experienced may work on at the money option. They may be able to take advantage of the leverage by getting as much contracts because the amount that they are paying for represents only a fraction of the value of the underlying assets. People may gain when favorable price movements occur in the market due to the large number of contracts entered into.

The last type may only be used by the experts as most of the time beginner traders lose when they take out of the money option. The price is lower than the strike price but the time is not sufficient not unless there is a sudden favorable change. However, most of the time, traders lose as their options expire on a definite time.

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Commodity and Stock Markets Saved As High Frequency Trading Deemed Legal - Short Story

It was a late Friday afternoon, after 19-weeks of utter catastrophe in the stock and commodity markets, as the SEC and Justice department's new rule against high frequency trading had gone into full effect. The authorities thought that the stair-step approach to quelling this technique would suffice, but it hadn't, and now with all high frequency trades stopped which had ultimately accounted for nearly 65% of the commodity market, 75% of the carbon trading market, and 58% of the stock market trades, the volume was so far down, nothing was happening - 10 trillion dollars had left the stock market alone since the rule was announced.

It was June 10, 2016 when the final ruling came in from the Supreme Court. The court reasoned that since the corporations doing the high-frequency trading are considered legal citizens, they are allowed to trade as fast as they want or are able, just as any normal citizen would, if they could. Although the vote was very close, it appeared that once again the Supreme Court was playing politics, and doing what they thought was best for the country. After all if they didn't get the trading volume back up, the federal government could go bankrupt, as so many citizens wouldn't have enough retirement after the severe losses. With the budget pull-back in 2013, social services were already becoming a bare-bones affair.

There were also a multitude of farmers that had filed bankruptcy unable to make good on their commodity contracts, and it was causing food shortages, exacerbating commodity markets, and people were feeling the pain at the grocery store, people were getting angry, and there were periodic riots. Many said that the Supreme Court did the wrong thing, other political pundits and economic analysts said they did the only thing they could do to save the country.

One legal constitutional scholar reminded TV audiences that it wasn't the Supreme Court's job to save the country from itself, it was their job to interpret the Constitution, and what they did was bad for the Constitution all to help the political leadership, Chicago, and Wall Street from losing control. What will happen next everyone wondered and pondered? It was thought that the volume would come back up, and markets would recover, but some question this.

Their view is that if high frequency traders had the inside track, and if the game was rigged, fewer investors would put their money back into the stock market, and the high-frequency traders would continue to do mass market manipulation causing huge swings of volatility, making it almost impossible for a viable and sustainable distribution of food and materials to markets, or anyone using the stock market for investment, as it would be more like an insane never-ending-high-velocity online gaming affair. Tomorrow is June 11, 2016, the whole world has changed, and we won't know how much until the markets open on Monday.

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Follow the Market Makers - Not the Chasers

This year's corn market provides a textbook example of the accumulation and distribution of positions throughout a market's trend as well as identifying the strengths and weaknesses of the market's primary participants. We'll use empirical data to reveal why the Commodity Index Funds have little impact on the markets major moves as well as which trading group does move the market and finally, who comes up with the short straw when the market turns.

The corn futures market began the year with talk of steady to lower prices throughout the year. We commented ourselves in early April that this was going to be a, "Buy beans, sell corn" kind of year. Our expectations weren't based on rocket science. The early planting intentions called for record acreage and the beautiful spring weather accommodated the seeding process. These factors kept the price of corn in check between $5.50 and $6.50 per bushel. This also matched the USDA's crop insurance price threshold of $5.68 per bushel for the 2012 marketing year.

The corn market has two strong seasonal periods. The first is planting time. There is always fear that the crop won't get in the ground and therefore, limit the year's crop. Small speculators and end line users of corn tend to bid up early prices. Speculators hope that this the drought year and they finally hit a home run while end line users hope to lock in the year's input prices in the production of cereals and chips. The early seasonal attempts to rally were cut short by commercial traders hedging their crop above $6.25 while hoping to lock in trend line yields around 160 bushels per acre. This would've generated about $1,000 per acre.

The mild spring finally flushed out the small speculators as prices made new lows for the year by the end of May, around $5.50 per bushel. The commercial hedgers then began to cover the hedge positions they had placed above $6.35 per bushel. This represented a cash gain of more than 12% to the supply side commercial traders. The decline brought prices down to the low end of the year's forecast. At this point aggregate global demand for 2012 put a fundamental floor under prices.

Corn buying from commercial producers and Commodity Index Funds took place in waves. This also represents the low point for small speculator positions as they had been forced out of the market on the April-May decline.

The June 12th USDA Supply and Demand Report was the first evidence that spring's early plantings were wilting in the heat of May and June. The market pushed to new highs by June 26th. The rally provided a definite shift in mentality. Traders were now in the classic, "accumulation phase" of the market. This is characterized by rising open interest and new highs in price. This shows that the market is welcoming new participants who are happy to enter - even at all time high prices.

Commodity Index Fund position changes are tied very closely to the accumulation and distribution processes of the market. Commodity Index Funds are forced to maintain a percentage allocation stated in their prospectus. Therefore, as the market climbs, they are forced to buy more while they are forced to sell as the market declines. The net result is that Commodity Index Funds will raise the floor price of a commodity as they venture into a new market and establish their position. However, once their position is established, their position management only affects the speed with which the market moves, not the final prices. Thus, Commodity Index Funds may only be guilty of increasing the volatility of a market as they add or, shed positions accordingly. Throughout this summer, the number of contracts they've held has remained within 4% of their starting point. Their value, on the other hand has fluctuated by more than 20% as the market has rallied.

Finally, the market has stabilized between $7.75 and $8.40 per bushel. The decline in volatility over the last six weeks has brought the retail traders back to the game. Just like clockwork, we can see that the small traders are purchasing their contracts from the commercial traders. Commercial traders have shed about 27% of their total position over the last month while small speculators have increased their positions by 25.5%. This is the classic distribution pattern as those who've ridden the trend take profits by selling their positions out to the small speculators. The small speculators will be left holding the hot potato and will be burnt at the top of this market just like they were at the bottom in April and May.

The likely outcome is that the corn market will fall through the support it has built up around $7.75. This will likely trigger the exit for most small speculators. The fall may be swift as Commodity Index Funds shed contracts to maintain their portfolio balance. Finally, the commercial traders will be waiting as ready buyers who will now cover the short positions they've initiated over the last month between $7.75 and $8.40 per bushel.

Sandy's Effect on the Cattle Market   

Online Commodity Trading

People all over the world today can now participate in online commodity trading. Unlike the traditional trading platforms where they have to be present in authorized exchanges, traders can now simply do their activities wherever they are as long as they get connected through the internet. The tasks that traders have to perform are more convenient and easy as well. They also have the advantage of seeing the results right away. Traders today can do this through online brokers who earn by the fees that they have to pay as they use their online commodity trading facilities.

Although online trading may be very convenient, people still have to be careful so that they do not lose their money in the process. They have to learn how the trading platforms work and they should get the opportunity to give it a try especially if they are allowed to work on practice accounts first. Their brokers may provide them with all the things that they need such as charts, quotes as well as technical analysis and current market trend information. Even those who are new to the trading business may easily learn as everything is practically provided by their brokers though they have to learn how to make sound decisions about their trading moves.

People may also hire professionals to manage their trading accounts for them so they do not have to worry about anything. But those who would like to do it on their own will have to find the best online brokers whom they can trust. They have to find brokers that charge lower commission rates on their trading activities. Those who would like to start trading but may not have a big capital to start with can opt for online commodity trading instead. People can also learn how to make use of tools in analyzing the market so that they can earn more profit in the process.

There are other options that they can look into such as trading options or trading futures. These will allow them to maximize profit through the use of spreads and other strategies like leveraging. New traders though have to be aware that they do not over trade given the small capital that they need and the lower commission fees that they have to pay for. They also have to take note that once they are taken over by greed or by the intense need to recover from losses, they may end up losing more in the end.

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What Is Direct Market Access in Spread Betting?

The approach and access of most traders nowadays are easier, more convenient and open than what it has been long time ago. This is because there are already so many financial venues and platforms nowadays that can offer opportunities and possibilities for different financial markets in an instant manner, which is non-existent, even in the past 20 years. Aside from that, the growth of the retail financial investment platform has also been incredible in the past years, through the help of various pioneering financial instruments like the contracts-for-difference or CFD.

Among the biggest and most innovative developments in the field of CFD trading is the growth of direct market access or DMA. This allows traders to put their trading decisions personally, regardless of the size and level of the trade. In other words, as its name suggests, DMA is a platform that allows investors and traders to directly participate and access the market.

The usual and conventional financial trading takes place by placing a position through a broker. This relationship and way of trading through a broker is a contract with two (2) parties, which isolates the markets first. Of course, the value of the position still depends on what will happen to the market. However, the contract is primarily between the trader and the broker and does not involve the movements in the market yet. Aside from that, traders do not get to touch the market position at all. This is because, by proxy, the broker is the one who has the direct contact and involvement to the market.

However, with DMA, traders can do it on their own, monitor the developments of the market on their own, as well as put trading positions on their own. Well, this is because with this innovative platform, they can already access their positions through the use of the internet, without necessitating for the trader to go to the stock exchange market place or other platforms, just to make a position on their trade.

With the foregoing, the advantage of DMA to CFD trading is not just the accessibility of the market. This is because aside from that, there is something else that really helps traders in making their positions. One good thing here is the transparency of the price, if traders will compare the price from the DMA to the quote of the broker, there will surely be a variance. Well, this is the good thing about being open to the market in a direct manner. Consequently, this allows traders to buy or even sell this instrument in the optimal price in the market. This is way better than accepting prices of brokers that are usually higher and clipped. Hence, traders can really save money from this platform while having the chance to earn.

Sandy's Effect on the Cattle Market   

Peak Silver Redux

As prices at the pump gradually move back up, one finds no shortage of people calling for new financial regulations.Frequently blamed on speculators, higher gasoline prices are - as some politicians say - the result of lax laws regulating the financial system.

Nevertheless, can it really be only speculators that are driving up the price of oil? Surely, the petroleum market is deeper than that.

Without question, those with very deep pockets can drive up the price of just about any commodity, but typically only for a very short amount of time. Unless of course they have access to a virtually unlimited supply of paper money.

Monetary Stimulus

Today, monetary stimulus implemented by the Federal Reserve is transmitted primarily through incentivizing risk-taking and leveraging in the securities, derivatives and other risk asset markets.

Nevertheless, as Doug Noland recently put it,

"Traditionally, central bank stimulus would entail adding reserves into the banking system to effectively reduce the cost of funds, thereby incentivizing additional bank lending.

The U.S. financial authorities now have about 20 years of experience supporting the thesis that a dangerously powerful interplay exists between activist central banking, marketable debt and financial speculation.

Yet the Fed makes quite sure that its analysis avoids addressing the associated risks of its ever-increasing role in manipulating the pricing and trading dynamics of an ever-expanding quantity of securities, derivatives and market speculation".

Oil Versus Silver

Once past the stag flationary 1970's, oil prices remained relatively reasonable all the way up until the 2000's. Throughout the 1990's, the average American family enjoyed driving their minivans all around town with the price of gasoline fluctuating no higher than $0.80 a gallon.

Perhaps they are starting to wonder why those days of moderate gas prices now seem to be long gone. Why will gasoline never come back to $0.80 a gallon?Because the cheap oil is gone. Potential silver investors need to understand that the cheap silver will soon also be gone.

Throughout recent history, governments have subsidized energy consumption and production, so people consumed too much because it was kept too cheap. Now that all the easily found oil has been brought to the surface, the only oil remaining is harder to find and apparently considerably more expensive to produce as well.

Investors might wonder if the same situation may exist for silver. The widespread and expanding use of silver in electronics will be costly to recycle.

Also, an informal survey of dealers and buyers indicated that 40 ounces is the average amount of silverware held by those households who still possess it, although it remains difficult to assess how much of this source of silver was recycled in the 70's and early 80's. Nevertheless, compared to the previous generation, baby boomers seem much less likely to own real silverware.

Furthermore, having had its price manipulated by large banking interests using the futures markets, physical silver remained far too cheap throughout the 1990's and even into the early 2000's.

As the second decade of this new millennium begins an era where people are more dependent on electronics than at any other time in history, perhaps this will also be the ten years that lead silver to a new price boom analogous to oil's recent historical rise.

Basically, this demonstrates the very obvious problem involved with subsidizing the use of any valuable commodity -either directly or indirectly - that remains in finite supply.

For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit http://www.silver-coin-investor.com

Sandy's Effect on the Cattle Market