Well, I'll also say that after seeing several spikes, esp in ag, I spent a good number of hours trying to figure out how to play them. Plants grow back, weather changes, seeds improve, there are substitutes. So if you look at a long-term monthly chart, like in a big CRB book, you find that there's a kind of "normal" range, usually falling over time, of prices punctuated by spikes. Actually really long charts show the same thing, going back hundreds of years. Hard to tell how high the spikes can go, but they usually fall. Of course something like hyperinflation would be a different story... So there are great shorts to be had, and when a spike is in place you know you can start looking. The spike could last a while, however. I also realized that futures wouldn't do it. Far too dangerous. Maybe spreads, but even there it can be really hairy esp w/ new vs old crop dynamics. These spikes are the stuff of limit days... So options. Long puts, and small bets with big payouts. "Lottery tickets" but with lots of time. And cheap enough that you can be wrong several times, but when you are right, it's all paid back and more. I recommended many people buy 9 dollar mar soybean puts when beans were at $16. Those things exploded and i mean exploded! A $100 option literally turning into $10,000! People really thought i was crazy b/c they thought beans were going up up up up to $25. I didn't know the crisis was coming, a recession, ok, but not the huge credit crunch. I did think oil would fall but not all the way into the 30's. Though I was telling people it could fall "to 45" -- so even I, thinking I was being extreme, was underestimating the real moves of the market. The monthly charts show it though -- spikes higher have come crashing down time and time again. And while the upside of a spike can be hard to predict, a spike usually only lasts so long once it goes parabolic. So to me it's not dumb at all to look for shorts in a spike. Plus, you're doing a good deed. Nobody needs sugar at 25 cents let alone 40. Just like beans at $16 or corn or wheat way high literally can cause starvation. High prices bring the relief, but the spike is the unnecessary market madness part usually... People shouldn't starve because of a short squeeze of because of trend followers...
I am on board with this, essentially doing a Black Swan play, buying the best-priced, lowest-vol OTM puts you can find each month, and be willing to lose for quite a few months in a row, until you hit it right and then recoup you previous losses and then some. Going long futures insured with a long put seems the only other sensible (but expensive) play, unless you have gap-proof stops and want to risk going long that way. Anyone looked at the vols on the SB options lately?
Take a look at the chart on today's Oct. Futures. Short Term double top? Support at 21.25, then $19.50? Thoughts?
Agreed, if 21.25-21.50 cannot hold support, SBV9 will see 19.50-20.00 pretty quick. Maybe Frank Dux will come in and give it the Death Touch.
A sugar/corn syrup sin tax would look pretty good right now. Might pay for the health care reform as well.
Interesting market, loading up on some spreads there are some pretty attractive low risk high reward opps. right now.
Technical indicators often lead news that can change the market. Look at the failure on volumne delta and failure(s) in stohs. Sugar is in for a big drop.
The beauty of it all is Sugar #11 currently has no daily price limits Only problem is that everyone is bearish on it so we know what happens....