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| International: | (310) 859-9572 |
| USA/Canada: | (800) 454-9572 | |
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| International: | (310) 859-9572 |
In This Issue
Note About Risk, Volatility and Margins
Crude Oil Spikes, Again is Key "Outside Market"
Reports and Expiration Notices
GOOD TRADING!
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Newsletter Archives
May 7, 2008
We published the note below regarding risk and margins about a month ago, we feel it is appropriate to send it again in light of some recent market moves.
Around 3:46 PM (CDT) yesterday, May crude oil began to rally from $63.05 (closed at $62.93) to sharply higher levels. The rally peaked at $68.09 at 3:52 – near a $5.00 price spike. At the same time, the June S&P abruptly dropped 9 points.
The cause of these moves was a rumor that Iran had attacked a U.S. ship in the Persian Gulf. The basis for the story proved difficult to track down until after the extremes of these two moves were made. Even though the event never occurred, the moves in these two markets show the sensitivity to the current geopolitical environment and in this case specifically, the situation involving Iran. As events of this nature continue to unfold around the world, these "unexpected" events in the markets may occur more frequently. Take heed and trade with this in mind.
The last few days we have witnessed volatility levels that the markets have not seen since July 2003 or even post-Sept. 11th.
Each trader must examine how this increased volatility (in our opinion the stock market has now changed its "personality" from choppy, quiet uptrend into a more nervous and volatile trading environment) affects his or her trading.
Each trader is different and must assess and understand his mental as well as financial risk tolerance.
There are two aspects we urge you to review. The first is your money management and survival; the second is the concept of margin, in theory and in reality.
Survival - This is the key! Do what you need to do in order to survive this brutal business and give yourself the chance of being here down the road with more experience and a better chance of success. Survival is probably the biggest key for beginner traders. There is a saying in this business "live to trade another day" it is so TRUE!
Money Management - While it is closely related to survival, money management can also stand alone. For your own survival, you must set trade/daily/weekly loss limits. Sound money management is closely associated with knowing your risk-reward ratio (per trade and per time frame).
Margin is an extremely important concept both in theory and practice. It can also to help you with money management and survival.
Day-trading margins apply to the amount of money one needs to have in his account for trades that are opened and closed within the same day. Many traders currently have access to trading with day-trading margins of $400 per contract - for example for the e-minis. While this allows for more aggressive buying power, it also increases your exposure in the market.
Overnight margins apply to holding an open position beyond the close at 4:15 p.m. New York time for 1 contract of the e-mini S&P 500 is currently, as set by the Chicago Mercantile Exchange, $3500.00 to be maintained above $2800.00.
Of course, if you have multiple positions you would multiply $3500.00 by the number of contracts that you will be responsible for.
For more information on current margins, visit our live margins page.
These markets are risky and when you leave positions open at the close of the Market at 4:15 pm New York time, you leave yourself and your broker at risk.
At 4:15 New York time you MUST be FULLY MARGINED for any position you hold.
May Crude oil futures for May delivery on the New York Mercantile Exchange spiked to a 6.5-month high of $68.09 a barrel in late electronic trading Tuesday, on rumors of an Iran-U.S naval altercation in the Persian Gulf. While those rumors proved unfounded, the tensions in the Gulf region are running high amid U.S. naval exercises presently being conducted in the Gulf. The jittery and "goosey" energy futures markets have again made crude oil the key "outside" market force for many markets, including not only raw commodity futures but also the currency, stock and financial markets. An early look at the price screens Wednesday morning found most commodity markets trading higher, while the U.S. stock indexes were under pressure, due to the spike in crude oil prices. More gains in crude oil is likely to continue to support buying interest in the raw commodity futures markets, including the potential of a resumption of strong commodity fund interest on the long side of these markets. May crude oil futures have been in an uptrend on the daily bar chart since scoring a low of $52.24 on Jan. 17. Market action Wednesday morning shows crude prices have backed well off from the overnight high. Now, the late-Wednesday spike high of $68.09 is stiff overhead technical resistance. The crude oil bears would begin to regain some fresh downside technical momentum by producing a close below solid chart support at $62.00 a barrel.
Jim has an EXCELLENT daily newsletter where he reviews different markets, alerts you for potential trades and much more. Included is his great bi-weekly newsletter with charts and a little longer term outlook. We recommend checking out his website, educational CDROM, and services at JimWyckoff.com
Disclaimer: There is a risk of financial loss in futures and options trading. Futures trading is neither easy nor an easy way to make money. It takes hard work to have success. Please use sound money management when trading futures. Past performance is not necessarily indicative of future results. Nothing in this newsletter is intended to be a trading recommendation for you to buy or sell futures or options. All information has been obtained from sources believed to be reliable, but accuracy is not guaranteed. Readers are solely responsible for how they use the information in this newsletter.
Source: Moore Research Center, Inc.
| Date | Reports | Expiration & Notice Dates |
|---|---|---|
| 03/29 Thu |
7:30 AM CDT - GDP-Final(Q4) 7:30 AM CDT - Chain Deflator-Final(Q4) 7:30 AM CDT - USDA Weekly Export Sales 7:30 AM CDT - Initial Claims-Weekly 9:00 AM CDT - Help-Wanted Index 9:30 AM CDT - EIA Gas Storage 3:30 PM CDT - Money Supply |
FN: Apr Natural Gas(NYM)
LT: Mar Feeder Cattle(CME) Mar Feeder Cattle Options(CME) |
| 03/30 Fri |
7:30 AM CDT - Personal Income & Spending(Feb)
7:30 AM CDT - Grain Stocks 8:45 AM CDT - Chicago PMI(Mar) 9:00 AM CDT - Construction Spending(Feb) 9:00 AM CDT - Michigan Sentiment-Rev(Mar) 2:00 PM CDT - Quarterly Hogs & Pigs |
FN: Apr Gold(CMX)
Apr Silver(CMX) Apr Copper(CMX) Apr Platinum(NYM) Apr Palladium(NYM) LT: Mar Fed Funds(CBOT) Mar US 2 yr & 5 Yr TNotes(CBT) Apr RB Unleaded Gas(NYM) Apr Heating Oil(NYM) Apr Lumber Options(CME) |
| 04/02 Mon |
9:00 AM CDT - ISM Index(Mar)
|
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| 04/03 Tue |
Auto & Truck Sales(Mar)
|
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| 04/04 Wed |
9:00 AM CDT - Factory Orders(Feb)
9:00 AM CDT - ISM Services(Mar) 9:30 AM CDT - API & DOE Energy Stats |
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| 04/05 Thu |
7:30 AM CDT - USDA Weekly Export Sales
7:30 AM CDT - Initial Claims-Weekly 9:30 AM CDT - EIA Gas Storage 3:30 PM CDT - Money Supply |
LT: Apr US Dollar Index Options(NYBOT)
Apr Live Cattle Options(CME) Apr Currency Options(CME) Apr Canadian Dollar Options(CME) May Cocoa Options(NYBOT) |
* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.
** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.
*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!