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Strategies & Market Trends : Commodities - The Coming Bull Market -- Ignore unavailable to you. Want to Upgrade?

To: Steve Huskey who wrote (1535)	4/16/2003 6:18:34 PM
From: Steve Huskey	Respond to of 1643

Ok last post. The best long-term trade (IMHO) on the board today. Eurodollars. They CANNOT go above 100. Eurodollar price is figured off interest rates. Right now they are near 99. That makes total risk for each position around $2000 at the most. Each point in ED is worth $2500. This is a rare instance where I am willing to go short. 100 is the ceiling so I can clearly define my risk. Look at the long-term chart. A reasonable target to the downside will be 96.5 - 97. That's 100-150% on your money. In all probability, your risk is probably only about $1000, but I like to be conservative and assume that immediately after I enter a trade it will go to crap. So I construct a scenario where if this happens, I can still hold on. In fact with ED, I have been pyramiding my position with options. They are really cheap. When it goes up, I sell 9900 calls and buy 9800 puts. Then, I attempt to get a "free" option position. i.e. When it goes down, I buy back the call so that the total money I spent is close to nothing. Then when it goes up... I do it again. Actually, this is a good way to play many markets where you cant get an outright position because of the risk. You can use options. I like to leg into spreads. i.e. If I want to go long, then I wait for a move down and buy a call. If it squirts up, then I sell a call of greater value than first option, trying to get all my cash back and creating a "seed" of intrinsic value if the market moves like I think. And I didnt spend any cash. Cool. I'll take free opportunities any day. It's best to try and set these up 6-9 months or longer down the road because things always seem to take longer than I think they will. It's all about buying time and being patient. I hope that makes sense.