traderkenny
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The Week Ahead
Trade Recommendations
Short Mini S&P 500 Futures
Trade Recommendation:
Sell 1 December Mini S&P500 at 1115.00 or better.
Margin: $5,625 initial, $4,500 maintenance
Stop on Short: 1142.50 - As with all futures, prices can gap through your stop price. The use of stop loss or contingent orders may not limit losses. Certain market conditions may make it difficult or impossible to execute such orders.
Target on Short: Target 1064.75 on the futures. Move stop to 1114.00 if the market trades below 1101.00, then move it again to 1094.50 when the market trades below 1081.50.
Long Natural Gas Futures
Trade Recommendation:
Buy 1 October Natural Gas at 3.89 or better.
Margin: $6,075 initial, $4,500 maintenance
Stop on Long: 3.60 - As with all futures, prices can gap through your stop price. The use of stop loss or contingent orders may not limit losses. Certain market conditions may make it difficult or impossible to execute such orders.
Target on Long: Target 4.28 on the futures. Move stop to 3.88 if the market trades above 4.11.
Sugar Puts – Important Trade Recommendation
Trade Recommendation:
Buy 1 July 2011 Sugar 1400 put for 30 ($386 including a typical commission and fee rate of $50/RT) or better with 2 ticks discretion.
Expiration: 6/15/11
Margin: Cost of the put*
Risk Scenarios:
Max risk is the cost of the trade* and occurs at expiration with the market above 1400. Loss at expiration is reduced by $11.20 per tick below 1400 to 1365 (breakeven*).
Profit Scenarios:
Max profit is theoretically nearly unlimited (to 0) and occurs at expiration at $11.20 per tick below 1365 (breakeven*). It is recommended to exit 50% of the puts at 48 ($537.60), 25% at 70 ($784) and the remaining 25% at 110 (1,232) or as per your personal aggressiveness.
Mini S&P500 Bear Put Spread
Trade Recommendation:
Buy 1 October Mini S&P500 1100 put and sell 1 October Mini S&P500 1060 put for a spread price of 11.00 ($650 including a typical commission and fee rate of $50/RT) or better.
Expiration: 10/15/10
Margin: Cost of the put spread*
Risk Scenarios:
Max risk is the cost of the spread* and occurs at expiration with the market above 1100. Loss at expiration is reduced by $12.50 per .25 1100.00 to 1087.00 (breakeven*).
Profit Scenarios:
Max profit is $2,000 minus the cost of the spread ($2,000 - $650 = $1,350 max profit) and occurs at expiration at $12.50 per .25 below 1087.00 (breakeven*). It is recommended to exit 50% of the spreads at 24.00 ($1,200) and the remaining 50% at 34.00 ($1,700).
Position Updates:
Canadian Dollar Spread – It is recommended to buy back the short December 88 put for 10 cents ($100) or better for this week only. This adjustment adds $100 additional cost component to the trade but allows for near unlimited profit potential to the downside and the ability to exit the long put on a volatility spike to the downside.
Treasury Bonds – Exit the entire 130/127 bear put spread for 1-16 or better – the original recommendation was for a 50% exit at this price but given the time left to expiration and current levels of the S&P500 it is recommended to adjust this exit strategy to a full exit at that price or better. This constitutes a solid near doubling of the spread value. If you cannot achieve that price by 1pm ET today it is recommended to exit for fair market value at that time.
Silver – the Oct/Dec Silver Ratio Calendar Spread should have been adjusted with a buyback of the short 17.50 silver put at 32 cents or better, thereby removing the majority of risk exposure on the trade. If you have not covered the short you may likely be able to do so for even less today. The remaining long October puts are a bit off from my target. Adjust the exit strategy as follows: for each spread you should have 3 October puts, therefore exit 1 put @ .03 ($150), 1@ .08 ($400) and the remaining put at .15 ($750).
General Comments:
The dollar’s recent choppy action has released a few markets from the currency correlation and let them run during a period of stock market strength. Oil, coffee, cotton and grains have all experienced strength. The stock market is brushing up against critical resistance and I suspect a top will be set in the next two to three trading days which will also spike the U.S. dollar. Therefore, I anticipate a commodity selloff for much of the rest of September. Critical reports this week for retail sales, PPI and CPI coincide with triple witching, all likely catalysts to a turning point in the stock market.
The sugar trade in this week’s report offers one of the best trade opportunities of the year for my subscribers so please review the option analysis in the market analysis section below.
http://moundreport.com/weekendreview.cfm?browseYear=2010&report=09-13-2010.html