Thursday, June 30, 2005

Gold & Crude Update

Both Gold and Crude have retracted from their recent highs, leaving us with the profit in the bank.

If you had placed trades in either of both, you would now be much more relaxed, as the prices have dropped.

These two trades may have been too early for you to execute, since buying Gold Options Made Easy - there will be more.

Other markets of note this week:
  • Soybean has had a made drop
  • Coffee continues to fall
  • Sugar is near it's 2 year high (not good for options)
  • Silver is dropped, modelling what Gold is doing
So, stay tuned and I'll point out some trading opportunities as I see them.

Murray

Saturday, June 25, 2005

Addendum - Overtrading

There has been discussion that Gold Options Made Easy misses a key point with regard to overtrading. Overtrading means trading too many positions for the amount of capital you have in your account.


Guy Bower put this together to clarify some rules.


A key question in options trading is that of how many contracts to trade on any one trade.

This is a pivotal question. The concept of money management can have the most dramatic effect, both positive and negative, on your trading performance and capital.

Trading systems will recommend an allocation based on measured or perceived risk of any one position. An example of such a recommendation is: “In this trade allocate $5000 per contract”.

It means for every $5000 in your account, you trade one contract in the specific recommendation. It is unwise to ever trade more contracts than suggested, but you can certainly trade fewer.

Multiple positions

At any one time your trading system may have two or three recommended strategies. It is intended that you trade these simultaneously. Suppose the recommendation is three new trades with the following allocation rules:

  • Trade A: One contract per $5,000
  • Trade B: One contract per $10,000
  • Trade C: One contract per $10,000

And suppose you have an account balance of $50,000. With these examples you would trade 10 contracts in Trade A and 5 contracts in each of Trade B and C. Note you can trade these positions simultaneously.

Margins

It is important to note that the $5000 or $10,000 number is not the margin for the position. Margin is the deposit taken by the exchange or the broker from your account as a deposit for holding a position. For options, this figure will change daily based on factors such as the underlying market price, the option price, time to expiry and volatility. The margin for a single contract might range from a couple of hundred dollars to a few thousand depending on these circumstances.

The statement from your broker will show you margin amount for any one position or all positions. If it’s not clear on your statement, just ask your broker for an explanation.

Margin to Equity Ratio

A key measure for you to calculate is the margin to equity ratio. This is simply your total margin divided by your total balance.

Margin to Equity Ratio =

Total Margin

%

Account Balance


Most New Trades in option trading systems should have a Margin to Equity Ratio of around 20% when first placed. Some might have more, some less.

Rule of Thumb: It is not recommended you take on a New Trade when your Margin to Equity Ratio is greater than 50% or 60% for your total account (all positions). This means you are trading too much.

Thursday, June 23, 2005

Further Update on Gold

Well as soon as I said it was going down, it jumps back up again - countering the recent trend.

Gold now meets our criteria, save for it's low volatility.

Yesterday I wrote:

OCT Gold 480 calls and get $280 US per contract -> moved to $300 today
AUG Gold 465 calls and get $140 US per contract -> moved to $150 today

Murray
www.GoldOptionsMadeEasy.com

Wednesday, June 22, 2005

Update on Gold & Crude

Well, I hope you've been watching the Gold market of late.

From our indicators, Gold, ever so slightly, missed hitting our main technical indicator. But there are still some good trades there.

The current volatility is still low - 11.2%, which makes the net returns lower than we'd normally expect.

For example, as of today you could trade OCT Gold 480 calls and get $2.80 or $280 US per contract. This would have a 93% probability of profit, with 97 days left before expiry.

Another example would be AUG Gold 465 calls, which only have 34 days left, but would return $140 per contract with a 96% chance of profit.

Crude Oil remains at very high volatility levels, but still offers some good trades. But be careful of a quick ramp up and make sure you know how to exit if it does.

Other markets that are close to our parameters include: Soybean, Sugar & Coffee.

Murray

Friday, June 17, 2005

Wow - big jump in Crude

You will no doubt have noticed the large jump in Crude Oil on Friday. Crude is certainly on a trend northwards.

Using your system rules, take note of the volatility and technical indicators. Click here for a quick chart.

There are definitely some selling opportunities here, but take care as this one is sitting on a lot of volatility and might just continue to rise.

Murray

Wednesday, June 15, 2005

Is The Gold Bull Market Over?

This article came out recently and highlights some of the fundamentals that drive the Gold
market. I don't expect that it will change our perspective, so long as we are aware of it.

Murray

----------------------------------

MAY 5 2005
by Nick Barisheff


In an April 28, 2005 news release, GFMS announced that the year-end price of gold could reach a 22 year high of US$500. With the price of precious metals in a trading range and mining stocks experiencing double digit declines this announcement comes as a surprise to many gold bugs and analysts. It is particularly noteworthy, since GFMS is notoriously conservative when it comes to predicting future gold price trends.

Of even greater significance are the two main reasons behind GFMS’s position.

First, GFMS states first that growing US deficits, a weakening US dollar and the prospect of a marked US economic slowdown will push up the market value of gold bullion this year and next. Ally that with an event driven rally in the oil price then gold heading for the $500 mark no longer looks fanciful. Second, the downside for the gold price is negligible. This is because of a “robust demand” for physical bullion, and an increased willingness on the part of investors to buy gold on price weakness.

In its Gold Survey 2005, GFMS mentions several developments that together show an increasing interest in physical gold ownership.

1. Gold coin fabrication rose 7.0 percent in 2004.

2. Bar hoarding rose a whopping 38 percent in 2004.

3. Producer de-hedging rose to record levels of just over 440 tonnes in 2004.

4. Gold mine production fell by 5 percent.

5. Net official sector sales dropped 23 percent to a five-year low.

6. Scrap gold supply fell to a three-year low of just 828 tonnes.


Based on my own research, which dates back to 1997, I concluded that precious metals were about to begin a new bull market that would likely last for decades and surpass the previous bull market of the 1970s. This conclusion was based primarily on the growing money supply in most western economies, but especially in the US, as well as the unsustainable mountain of debt at every level.

In three recent presentations to the US congress Chairman Greenspan warned that the great American growth machine may be in trouble and admonished government officials to reduce today’s massive spending and trade deficits, or face a marked slowdown in economic growth.

Previously, Greenspan’s warnings have included the many other vulnerabilities looming over the US economy, such as derivatives, Fannie Mae, Social Security, Medicare, consumer credit, consumer savings, energy costs, and costs incurred by the ongoing conflict in Iraq.

Others, such as former Fed Chairman Paul Volker, Congressman Ron Paul and Stephen Roach have issued similar warnings:

"I think we are skating on increasingly thin ice. On the present trajectory, the deficits and imbalances will increase. At some point, the sense of confidence in capital markets that today so benignly supports the flow of funds to the United States and the growing world economy could fade. Then some event, or combination of events, could come along to disturb markets, with damaging volatility in both exchange markets and interest rates. We had a taste of that in the stagflation of the 1970s -- a volatile and depressed dollar, inflationary pressures, a sudden increase in interest rates and a couple of big recessions."
Paul Volker

Congressman Ron Paul recently warned:

"The economic situation today is reminiscent of the 1970s. The economic malaise of that era resulted from the profligacy of the 1960s, when Congress wildly expanded the welfare state and fought an expensive war in south east Asia. Large federal deficits led to stagflation-- a combination of high price inflation, high interest rates, high unemployment, and stagnant economic growth. I fear that today's economic fundamentals are worse than the 1970s: federal deficits are higher, the supply of fiat dollars is much greater, and personal savings rates are much lower. If the federal government won't stop spending, borrowing, printing, and taxing, we may find ourselves in far worse shape than 30 years ago."

Morgan Stanley Chief Economist and Director of Global Economic Analysis, Stephen Roach, paints an equally dismal picture of future American economic growth. In a recent article entitled Trapped, Roach calls what some politicians refer to as another economic “soft patch” a very real “ongoing post-bubble shakeout of the U.S. economy.”

Roach believes that overly generous fiscal and monetary policy has left the US economy without effective and sufficient policy stimulus. Highly accommodative interest rate and tax refund policies over the past few years have depleted the government’s ability to prod the economy into higher, sustained productivity. Roach says:

"It was a great ride on the US growth front for a while. But post-bubble excesses have only been compounded during this cyclical respite. An unprecedented drawdown of saving and an ominous build-up of debt, in conjunction with a lasting shortfall of organic income generation [employment and wage growth], solidified the emergence of the Asset Economy. If the US economy were truly healthy, the Fed should target the federal funds rate in the 5% to 5.5% zone. However, with America’s cyclical impetus fading, post-bubble fault lines could deepen—making it all but impossible for the Fed to normalize real interest rates. Under those circumstances, this week could mark the Fed’s last rate hike of this cycle."

US financial markets have not yet fully accounted for this highly possible prospect of economic stagnation. If Roach’s observations are correct, this situation will put corporate growth and earnings expectations at risk and cause stock markets to fall. Another equity market rout would cripple US economic growth for years and cause chaos in investment markets worldwide. This is bad news for stock investors.

However, it is good news for precious metals. As history is fond of reminding us, gold prices tend to rise as economic growth declines. This occurs because people purchase more gold bullion to help protect purchasing power as other assets and asset classes decline in value.

As the world’s reserve currency continues its decline other nations will be forced to take measures to reduce their currencies against the US dollar in order to maintain export competitiveness. Eventually all paper currencies will decline against precious metals. As the price of imported goods and services rises, the US Federal Reserve will be forced to increase interest rates. This will result in higher debt service costs to governments, corporations and individuals while at the same time curtailing consumer demand. If the Fed loses control this could easily lead to a prolonged period of stagflation.

As long as today's economic vulnerabilities continue, or become worse, the bull market in precious metals is not over but is only in it’s first phase. As it experiences the cyclical corrections and pullbacks, typical of any bull market, many investors, will misunderstand these corrections and sell their holdings.

Richard Russell, editor of the Dow Theory Letters, has said that bull markets are like a rodeo bull.

When you are in a long-term bull market it will do everything in its power to throw you off and make you leave prematurely. The safest, easiest way to accumulate real wealth in these conditions is to hang on until the ride is over.
________________________________________________________________________

Nick Barisheff is the co-founder and President of Bullion Management Services Inc., which was established to create and manage The Millennium BullionFund. The fund is Canada’s first and only RRSP eligible open-end Mutual Fund Trust that holds physical Gold, Silver and Platinum bullion www.bmsinc.ca

The opinions, estimates and projections stated are those of the author as of the date hereof and are subject to change without notice. The author has made every effort to ensure that the contents have been compiled or derived from sources believed to be reliable and contain information and opinions, which are accurate and complete. Neither Nick Barisheff, nor Bullion Management Group Inc. or any of its affiliates take responsibility for errors or omissions which may be contained therein. Neither the information nor any opinion expressed herein constitutes a solicitation for the sale or purchase of securities, and investors are encouraged to seek advice from a qualified investment advisor before making any investment decisions.

Tuesday, June 14, 2005

Temporary Blackout

Hi,

You may have noticed that our main Gold Options Made Easy web site has been off the air for a few days.

UPDATE - It's finally remedied.

We're having some hosting problems and have decided to move the entire site to another host.

To do this requires us to change nameservers, which can take up to 48 hrs to propagate the new host IP address around to your nameservers. These are boxes which tell your browsers what actual IP address that a specific www.name.com can be found.

We apologize for the inconvenience.

Murray

PS: Recent moves in Gold are looking great for us. Stay tuned.

Tuesday, June 07, 2005

Highly Liquid Markets

When trading commodity options, it's best to stick to highly liquid markets. This means markets that always have plenty of open interest (contracts). A liquid market means that you have a greater chance of having a buyer, if your selling and vice versa.

The following are the markets that I scan on a daily basis for possible trades.

New York Coffee Cocoa and Sugar Exchange
* Coffee
* Cocoa
* Sugar
* Cotton
* Soybean

Chicago Mercantile Exchange
* Swiss Franc
* British Pound
* Japanese Yen
* Canadian Dollar
* Australian Dollar
* S&P 500 Stock Index (emini & full)
* NASDAQ Stock Index (emini & full)
* Eurodollar
* 90 Day U.S. Treasury Bill

Comex
* Gold
* Silver
* Copper

New York Mercantile Exchange
* Crude Oil
* Heating Oil

Good trading,

Murray

Thursday, June 02, 2005

Volatility Update - June 3rd

Last night Gold rose $5 - which is it’s biggest single day move for quite some time. Gold volatility remains at 11.2%, lowest since December 2001.

Another market that might be more interesting for our strategy is Crude Oil. Volatility is high (35.3%) and has been steadily rising since October 2002. Prices have been rising this week - so watch your indicators for opportunities here in the AUG contracts.

While your scanning other markets, have a look at Silver and Soybean.

Murray

Wednesday, June 01, 2005

It's Official...

After nine months of focus and effort, it's finally ready.

This is our first product for fellow traders. We've taken a long time to make sure we included the right level of information and we've had a special group of traders stress testing the method for us.

Suffice to say, it came through with flying colors.

This does not provide you with more bookshelf material, we focused exactly on demonstrating how we trade and give you a step-by-step video and documentation for our proven method.

This course is not for beginners.

Our course assumes you know something about options already.

But for those who are ready to jump in, our approach is straightforward, easy to follow and could bring you a great deal of profit.

To check it out, please go to: http://www.GoldOptionsMadeEasy.com/

Enjoy,
Murray