Best long plays: Oil, gold, corn, sugar, cotton, soybeans

Quote from scriabinop23:
"Probably because people have been eating these things (rice, wheat, soybeans, and coffee) all along, and demand has not changed considerably with respect to production. But the runup in metals and energy is pretty clearly a byproduct of modernization and rapid development of emerging markets.
Just stating the obvious."

Right, this is exactly what I'm saying. There hasn't been an increase in demand for softs and grains similar to what we've seen in precious metals. However, fundamental research is in consensus about an increase in FUTURE demand. At some point, all of this future demand will be priced in and we'll see higher resistence levels. If the demand doesn't materialize, no shift in floor (minimum) prices, but if it does, a shift. If you see this shift beginning to occur, you can catch the move.



"So if you want a long macro view on those commodities, I'd probably look to long term climate change and isolated strange events as a source of inspiration, as well as changing world tastes. Next mad cow event would be an excellent opportunity to go long on beef."

I agree. I think climate change and increased weather "volatility" and unpredictability are factors that underpin the fundaemtnal view and support a long-bias.
 
Quote from daddyeaux:

Market imbalances are the greatest that I've seen in 30 years of trading. Risk is being discounted or ignored and the general population is acustomed to one way markets....
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I agree here as well. I am overall bearish on the equity and bond markets and am currently in the procees of figuring out what positions I can put in place to maximize profits if we do experience a hard landing. Looking at long OTM puts on russel, spx, qqq, 2 and 10 yrs, etc. Also looking at long OTM calls on 100oz gold. I'm just bullish on the specific commodity markets I mentioned -but I do agree that any fat-tail event will affect depress most markets, even those with strong fundamentals or bullish technicals.

side question here. looking for a good broker. I'm only looking to swing trade with avg holding time btwn 5 and 15 days. IB and TS seem to be great for intraday traders, while Ameitrade and Scottrade are great for research equity investors, but who can give me access to all of the diff markets without charging me for DIRECT ACCESS like IB? I think I am willing to settle for avg execution on a swing trade rather than pay hundreds in direct access fees.

Is there a good broker that offers a happy medium for someone who plans to make less than 10 trades a month? sorry for off-topic
 
Quote from traderyin:
A quick question: How can you trade short-term and use fundamental insitutional research? I'm not attacking you here, but isn't fundamental generally support a longer term view?
You're right, I haven't worked out my tactical approach yet. I do believe that these markets will rise over the next 1 to 3 years, but understand that the daily price movements are dominated by technical factors. My goal is to be able to catch a significant portion of any sustained uptrend while weathering the drawdowns. I may hedge with OTM puts or simply use cascading stops.


With $25K you might want to buy into long only commodity fund, if your research gives you such bullish view on those commodities.
I think commodity funds are for a) people who shouldn't be trading their own money in the market (for whatever reason), or b) don't have the time to manage their own investments properly. I don't think I fall into either of these two categories. Plus my 5k stake in gold will get more attention and focus if I'm managing it that some guy overseeing $50m. Not saying I know the markets better, just more comfortable managing m own money.


If you do trade short-term and use future contracts, you'll have to roll the contract every couple months and take a hit on short-term volatility?
I may go through drawdowns, or I may choose to get my exposure through options. Not sure. Assume I will be risk/money managing and position-sizing to the extent possible.
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Quote from traderaaa:

Commodity analysis based upon demand prediction almost never works-commodity pricing, for any commodity that is easily reproduced (corn, soybeans etc.) is dominated by supply issues. Why is that we seem to have corn running out of the elevators onto the ground, because supply is the dominant force in the market.
I agree that price outlook for easily reproduced commodities is dominated by supply-side issues. In fact, much of the bullish argument from fundamelntalists deals with supply shocks such as crop failure due to climate/disease/natural disasters, decreased land available for production due to urbanization and development. Most of these supply threats stem from globalization - a phenomenom that accurately describes the unique and unprecedented inter-linking of global markets. Things are happening that have no precedent in the era of post-1971 markets, thngs like the painstaking integration of an additional 2.6 billion people into the global economy, Ch In Br, and their effects on global financial markets. (I say "post-1971" b/c that's when the dollar decoupled from gold, became fiat, and created the market dynamics that persist today)

Ethanol will surely impact this but won't the market respond with increased supply? In a free market the price of commodities that can be reproduced, grown etc. will trend lower over time. Having said that I do think we could see higher prices for commodities like corn but I am not in the Jim Rogers camp either. Why don't you just buy a commodity index like the Rogers Raw Material Index. It contains virtually every commodity and the weightings are more sensible than the GSCI.
Well, I am actually in the Jim Rogers camp, so we may just have contrasting views. I haven't looked closely at hisindex, but I will right now. I'm not completely cofortable lumping all of the commodities together as I feel that there are much diff pressures at play btwn energy, precious metal, and agricultural markets.


If you really think that commodities in general are a value then buy commodities in general. To me it is very hard to trade value in commodity futures but buying a basket of long-date commodity futures or an index seems to make some sense.
I agree with this point as well. However, I'm looking for the kind of leverage unique to futures contracts, so I think options of futures contracts probably are my best bet. And this way I can avoid margin fluctuations.

This is all sound advice.
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Quote from BCE:

Great thread BrandNewTrader (added you to my "buddy list") and other participants. Ah, an intelligent discussion. On Elite Trader? What's the world coming to? :D
One thought is, don't let other people tell you that "you can't" trade this way and that way without a certain amount of capital. If you listen to that you're dead before you've even started. Although all markets are easier to trade with more capital. Just don't like the word "can't". The key word mentioned here was that it is "risk" capital. And the man is obviously an intelligent, thoughtful person and at the same time realizes trading success doesn't necessarily correlate directly to that. At least I think you realize that. If not, you should. You learn a lot about trading, and learn a lot about yourself really, from actually trading and being involved in the markets directly, not just from doing research, although this can be very helpful too, or not.
How's that for a run-on sentence? :D
The thing about research is, no matter how much you do, it can only point you in a certain direction and it may be the wrong direction. Ultimately the market is right. Period. There are so many variables that influence price movement in the market and they're greater than all the research anyone can do. Which isn't to say don't do any. And there are so many other things involved in actually trading the market even if you are right about the direction of the underlying issue you're trading. Things like position size, stops, etc. You only learn about trading, which is how you "get the money out of the market", from actually doing it.
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Thanks =). I think traders are inherently "intellectually competitive" and assume others know less than they. Add to that the "ego" element - also more prevalent than normal amongst traders - and it makes sense why we have all of the misunderstandings and bickering on these boards. I intend to use the research as a guide to the direction of my trades and understand the importance of traditional trading tactics and management on an intraday basis.

I will probably not put any positions on in these markets anytime soon, save for oil and gold. There's alot I still need to read about the dynamics of each particular softs and grains market, but as far as debt, equity, gold and oil. I am bearish, bearish, bullish, bullish respectively. I think I will stick to long OTM options on futures for these and continue to track the softs/grains.

Basically, I'd like to make a shitload of money in the event of a 4 to 6 sigma event, an event that would most likely be brought about by a hard landing from the current imbalanaces, or an unexpected disaster/conflict. I want to position myself so that when/if this occurs, I will get rich. If it doesn't happen, I'll be somewhat hedged and will be managing my downside to minimize loss (spreads, etc).
 
Quote from daddyeaux:

i still have to say that $25K account is lite....

since you should only commit 20% of that at any one time, that limits things greatly....

and a 2 sigma event against you and now what?
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Yeah 25k is light for daytrading on 4 times leverage, but luckily thats not what i'm talking about here. I am about to begin daytrading equities, but that's my "job" and entirely separate from my personal futures investments.

Given the 25k is pure risk capital, and given current speculator margin requirements, I should be able to get enough exposure to make the trade worthwhile, although it does present a problem, which is why I am focusing on options on futures.

All of this discussion is good. I got ahead of myself as far as the diff agricultural markets. I don't have enough of a grasp on their individual dynamics to actually risk $ on rice and wheat, etc. But I stand by the bullish fundamentals and will hopefully do something there over the next 6 months to a year. I suppose I will concentrate the 25k on debt equity gold oil, where I am actually BETTING on a 4 to 6 sigma event brought on by the unravelling of these imbalances. These fat tail events are already occurring in foreign markets (iceland, hungary, turkey, etc) and it's only a matter of time before the chain reaction affects a more developed market and its plunge forces global investors to tighten risk controls and pull more money out of global markets.
 
BNT,

good luck to you, and don't turn your back on you positions...the markets can and do grow claws

a few of my trader buds got mauled on 9/11 because they couldn't get out of stuff....Osama is still out there wanting to play with matches.........
 
Quote from BrandNewTrader:

[B
Basically, I'd like to make a shitload of money in the event of a 4 to 6 sigma event, an event that would most likely be brought about by a hard landing from the current imbalanaces, or an unexpected disaster/conflict. I want to position myself so that when/if this occurs, I will get rich. If it doesn't happen, I'll be somewhat hedged and will be managing my downside to minimize loss (spreads, etc). [/B]
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Go long with those options then. You know, by the deltas, that the probability of this crash that you'll capitalize on is pretty low. Don't hold your breath and spend too much on these options. There's a reason OTM options can be so cheap.

And if you do, and there is a crash , I'll just be a mildly envious trader for it. :)
 
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