November 25, 2015 Update

James Cordier Market Update

Good afternoon. This is James Cordier of OptionSellers.com with a market update for November 25th. Quite often, as we’re approaching the last month of year as we are now, many fund managers are starting to consider where are they going to go on vacation and what beautiful island they are going to spend some time on. To either going to lick their wounds or celebrate the last six months. I’d be lying if I didn’t say I wasn’t thinking about the say. However, going into December right now, we have some surprisingly large about of low hanging fruit. Anyone who has listened to me before, that means we’re looking at opportunities. Several of them are coming up in December.

The crude oil market is getting very interesting, trading in the mid-upper 40’s – recently, as some of the turmoil in the Middle East. Michael Gross and I have written many books and many different chapters, I’m Getting To The Party Late. And what does that mean? That means that a market that has been sanguine like oil has around the $45 level – it starts moving to the upside or slightly to the downside as we make a seasonal low in December.

Volatility increases, and even if you’re not exactly in the market at the lull, volatility does push up even put premium levels. Something we’ve just been observing just in the day or two as some of the Middle East headlines have been coming across the wire. Quite often, a market that starts its move actually increases its volatility, and a person actually gets to sell puts or calls in this case – puts in the oil market – at a higher level than the market was trading at when crude oil prices were actually lower. Something we’re really looking forward to in the next two to four weeks in the crude oil market.

We’re looking at selling July, August, and September crude oil puts in the $30 level. Anyone who has been following the crude oil market for a long time knows that it often falls in November and December. And low and behold the driving season the next year is quite a bit higher. That’s our favorite trading coming up now. The second market that we’re following extremely close right now is the coffee market. In October and November is flowering season. Quite often what happens in Brazil, the largest producer in the world, weather starts shifting from west to east. While it starts changing from south to north, it normally is dry. In many of the growing regions, in Brazil, that has happened. That scared the market slightly because there were some dry conditions in coffee growing regions, and that is now developing from south to north – that’s when precipitation does start to come in to that area. It started just recently. A lot of concerns about the market abound about dry conditions in Brazilian growing regions has put and call premiums extremely high.

Coffee right now trading around $1.25 to $1.30 a pound has a chance to maybe rally ten cents in the coming weeks going into December. However, the rains that are materializing tell us that Brazil is going to produce approximately 60 million bags in 2016, the largest crop ever. And when we have supplies like that, prices don’t double. Were looking at coffee calls around $2.80 to $3.00. We’re going to be putting on our tuxedo and jumping into that position in a big way in the next two to four weeks.

One other market that we’re following closely also is soybeans. A seasonal low normally takes place in December and January. The one thing that China still does need is that it is feeding their ever-expanding middle class. That does not require copper but it does require protein. We love the idea of getting along soybeans at very extremely depressed levels. We’re going to be doing that in the next thirty to sixty days as well.

Anyone wanting more information from OptionSellers.com can visit our website, or if you’d like to have your own account, feel free to contact our office – speak to David, R(continued)