Trade Ideas-Gasoline and Soybean Oil

GRANS

The all important USDA report came out this week and we have been watching Soybean futures. The USDA announced Monday on prospective plantings for grains, and our interest was for beans. The USDA reported that soybean planted area for 2014 is estimated at a record high 81.5 million acres, up 6 percent from last year. Compared with last year, planted acreage intentions are up or unchanged across all States with the exception of Missouri and Oklahoma. So what does this mean for soybeans? After the report came out soybeans rallied at the close, but the report was construed by traders as bearish. We are taking a different stance on the commodity, we have a bullish stance on soybeans as there is real demand and the market looks strong.

Trade Idea: Soybean Oil Dec14/Jan15 Seasonality for soybean oil typically starts in the beginning of May and trades until mid October. The 5 year and 15 year average is very strong and we believe we will have another strongly correlated year. We are looking to sell this spread (short Dec-long Jan) at 0.1 with potential risk up to .025, we are risking $90 per contract. Our target is -.02 to -.06, we are looking to profit $180-$420 per contract. Currently Soybean Oil Dec14/Jan15 is trading well below our entry level. If we are able to see soybean oil rally with soybeans we can expected this spread to rally up into this level. Remember the seasonality for soybean oil is bearish and typically starts in the beginning of May.

Soybeanoil

Win %—–93%

Days in Trade—-159

Win Rate Worst—-($37.6)

Down Best Up—–$124.4


 

ENERGY

This weeks watch list entry is on RBOB Gasoline Futures. We all hate higher gasoline prices at the pump, but our trading accounts can really benefit from this set-up. Looking over the data this week we saw plenty of supply and we have ample supply of blend-stocks on the U.S Gulf Coast, and U.S blend-stocks are 20% higher the Energy Department data showed. The data out-look seems fairly bearish, but seasonality strongly suggests otherwise.

Trade Idea: Gasoline June14/July14 Seasonality for June/July typically starts early to mid May. The 5 year and 15 year average is extremely strong suggesting higher gasoline prices, and based on strength and past performance we like the risk to reward with this set-up. Now we could see some more weakness in gasoline based on some of the fundamental news. But as driving season is also approaching we should see the demand increase over the next month. We are looking to get long this spread (long June-short July) at .020 with risk to .010. Currently we are trading about 60 ticks above our entry price. We are risking $420 per contact. Once we get long this spread our 1st target is .030 and our second target which is a better higher is .050, the second target may not get hit, but once the 1st target is hit we will manage the rest of the position with a stop.

Gas

Win%—–93%

Days in Trade—-15

Worst Down—-($269.36)

Best Up—–$1030.68


 

Our current positions are still being held. 1. Short June/July Crude @1.77 2.Long May/June Gasoline @.0176

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