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Category Archives: Energy Futures


Mastering Vertical Spreads: A Guide to Risk-Defined Options Strategies + Trading Levels for June 3rd

May 31st, 2024 Filed under Charts & Indicators, Commodity Brokers, Commodity Trading, Corn Futures, Day Trading, E-Mini Futures, Energy Futures, Future Trading News, Futures Broker, Futures Trading, futures trading education, Options Trading, Weekly Newsletter | Comment (0)

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Cannon Futures Weekly Letter Issue # 1196

In this issue:
  • Important Notices – Non Farm Payrolls is the main event
  • Futures 101 – Vertical Option Spreads
  • Hot Market of the Week –
  • Broker’s Trading System of the Week – Crude Oil Day Trading System
  • Trading Levels for Next Week
  • Trading Reports for Next Week

 

Important Notices – Next Week Highlights:

  • Light Earnings week: Crowdstrike, LULULemon, Dollar Tree and HP are the 4 headliners
  • FOMC Blackout Period Begins in advance of the June 11-12 FOMC Mtg.
  • Econ Data: ISM MFG PMI Mon., JOLTS Tues., ISM SVCS PMI Wed, Jobless Claims Thur, NON Farm Payrolls B4 the open Fri.
  • August gold is front month
  • September is front month for bonds, 10 years, 5/2 notes.

 

 

 

Futures 101 :

Vertical Spreads

By Craig Bewick CMEGroup.com
“Vertical Spreads” involve buying (selling) a higher strike price option and selling (buying) a lower strike price option and can be executed with either Calls or Puts.
  • If a trader sells the lower strike CALL option and buys the higher strike CALL option, they would receive a CREDIT (the lower strike Call will trade at a higher price than the higher strike Call) for that trade. Selling the higher strike and buying the lower strike CALL would result in a DEBIT. The opposite is true if the trader executed a PUT spread.
These spreads are known as “risk defined” strategies because the max potential profit and loss is known to the trader at the time of execution.
If we hold all other variables constant, Call and Put Vertical spreads represent a bullish or bearish view on the price of the underlying instrument:
  • Long (debit) Call spreads and Short (credit) Put spreads represent a bullish view
  • Short (credit) Call spreads and Long (debit) Put spreads represent a bearish view
Of course, as with most options strategies, several factors, including volatility, can also impact the value of vertical spreads, as we’ll demonstrate below.
EXAMPLE:
Let’s look at a real-life example using E-mini S&P 500 options:
Using markets from 4/25 @ 10:35 AM CST, we selected the following options:
Futures: 5,038
Sell 1 5,090 Call | Premium 58.25 | IV: 14.3% | Delta: -.41 | Gamma: -.0019 | Vega: -550.8 | Theta: 1.35
Buy 1 5,130 Call | Premium 42.0 | IV: 13.9% | Delta: .33 | Gamma: .0018 | Vega: 513.8 | Theta: -1.23
Position: Delta: -.08 | Gamma: -.0001 | Vega: -37 | Theta: .12
Max profit and loss (excluding all fees and commissions):
  • The max profit that this position could realize is the credit taken in at execution
  • 58.25-42.0 = 16.25 pts (16.25*$50 = $812.50)
  • The max loss that this position could realize is the credit taken in minus the difference between the strike prices
  • 16.25-40.00 = 23.75 pts (23.75*$50 = $1,187.50)
  • The P&L graph of each option and the overall P&L is shown in the TOP image below
Short 5090 Call (Blue Line)
  • 58.25 points were collected at execution on the 5090 Call. At any price below 5090 at expiry, this option is worthless and the trader will keep the premium collected (58.25).
  • As the price rises above 5090, the option gains value incrementally which, because this position is short, has a negative impact on the P&L.
Long 5130 Call (Orange Line)
  • 42 points were paid at the execution of the 5130 Call. This option, at expiry, is worthless at any futures price at, or under, 5130.
  • Similar to the 5090, as the price rises above 5130, the option gains value incrementally, which, in this case, has a positive impact on the P&L.
Position P&L
  • They gray line represents the overall P&L of the position at expiration, based on the futures price on the X-axis. This is simply the addition of the value of the blue and orange lines.
P&L Scenarios Prior to Expiration
However, though the max profit and loss is defined at the entry point of the trade, as we mentioned earlier, because option pricing is multi-dimensional, factors like volatility and time can impact the value of the position between execution and expiration. Although it is impossible to illustrate all the different values at which this option could theoretically trade because of the dynamic nature of options pricing, we wanted to illustrate some “what-if” scenarios to demonstrate how things like implied volatility and time decay might impact the position. These are illustrated in the bottom image below.

 

  • Hot Market of the Week – December Corn

Hot market of the week is provided by QT Market Center, A Swiss army knife charting package that’s not just for Hedgers, Cooperatives and Farmers alike but also for Spread traders, Swing traders and shorter time frame application for intraday traders with a unique proprietary indicator that can be applied to your specific trading needs.
Dec Corn
The rally in December corn ran out of momentum after completing a second upside PriceCount objective. Now, on the correction lower the chart has activated downside counts too. The first downside objective project a run to the $4.61 area. It takes a trade below $4.56 1/2 to formally negate the remaining unmet upside counts
PriceCounts – Not about where we’ve been , but where we might be going next!
The PriceCount study is a tool that can help to project the distance of a move in price. The counts are not intended to be an ‘exact’ science but rather offer a target area for the four objectives which are based off the first leg of a move with each subsequent count having a smaller percentage of being achieved. It is normal for the chart to react by correcting or consolidating at an objective and then either resuming its move or reversing trend. Best utilized in conjunction with other technical tools, PriceCounts offer one more way to analyze charts and help to manage your positions and risk. Learn more at www.qtchartoftheday.com
Trading in futures, options, securities, derivatives or OTC products entails significant risks which must be understood prior to trading and may not be appropriate for all investors. Past performance of actual trades or strategies is not necessarily indicative of future results.

   Broker’s Trading System of the Week

With algorithmic trading systems becoming more prevalent in portfolio diversification, the following system has been selected as the broker’s choice for this month.

Agora Crude

PRODUCT
SYSTEM TYPE
Swing
Recommended Cannon Trading Starting Capital
$20,000
COST
USD 70 / monthly

The performance shown above is hypothetical in that the chart represents returns in a model account. The model account rises or falls by the average single contract profit and loss achieved by clients trading actual money pursuant to the listed system’s trading signals on the appropriate dates (client fills), or if no actual client profit or loss available – by the hypothetical single contract profit and loss of trades generated by the system’s trading signals on that day in real time (real‐time) less slippage, or if no real time profit or loss available – by the hypothetical single contract profit and loss of trades generated by running the system logic backwards on back adjusted data. Please read full disclaimer HERE.
Would you like to receive daily support & resistance levels?
Yes
No
If you are a day trader, below you will see markets that our proprietary ALGO has identified as being more suitable for attacking either from the long side or the short side.

Daily Levels for June 3rd 2024

Trading Reports for Next Week

First Notice (FN), Last trading (LT) Days for the Week:

Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572.

Explore trading methods. Register Here

* 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 here in 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 judgement in trading.


Commodity Market Milestones this week: Record-Breaking Trends Across Commodities and Economic Indicators

May 29th, 2024 Filed under Bitcoin Futures, Charts & Indicators, Commodity Brokers, Commodity Trading, Day Trading, E-Mini Futures, Energy Futures, Future Trading News, Futures Broker, Futures Trading | Comment (0)

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 The Rest of the Short Trading Week:

By Mark O’Brien, Senior Broker

General: 

 

Breaking records – either multi-year or all-time – has been in style for commodities in recent months.  Notable markets to set new all-time record highs include all three major stock index futures: S&P 500, Nasdaq, Dow Jones, cocoa, gold, silver and Bitcoin.

 

Not to be overlooked, in February natural gas traded to lows not seen in nearly 30 years.

 

One other record is garnering attention lately because of its sheer persistence and no sign of ending.  And while it’s not a futures market, it is an economic indicator futures traders and others watch closely – known as an inverted yield curve, in which yields on short-term Treasurys exceed those of longer-term government debt.  Long taken as a nearly surefire signal that an economic pullback is on the horizon (it happened prior to each of the last eight downturns in the U.S.), the current yield curve inversion has now stretched for over 400 trading sessions with no measurable signs of a major economic slow-down in sight.

 

It harkens to one of the principal rules in trading that we strive to drill into the minds of traders: Past performance is not indicative of future results.

 

Energies: 

 

Due to the short trading week, both the natural gas and the crude oil numbers will be released tomorrow.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a collection of nations that produces 40% of the world’s crude oil are getting together to decide their strategy at OPEC’s ministerial meeting on Sunday, June 2nd.  Traders and analysts are predicting the 2.2 million barrels per day voluntary production cuts will stay in place.

 

Metals: 

 

Last Tuesday, July silver closed at $32.20/ounce and at this typing, the contract is trading barely 3 cents from there at ±$32.17 per ounce.  Sandwiched between there – within five trading sessions – the contract dropped ±$2.00/ounce then rallied right back, a ±$10,000 per contract swing in both directions.

 

Crypto: 

 

Bitcoin futures have threatened to breach the 70,000 mark over the last eight trading sessions – dating to May 20.  The front month June contract’s all-time high close on March 13: 75,900.  This is a ±$12,000 per contract move from its last correction low on May 1 near 58,000.

 

 

If you are a day trader, below you will see markets that our proprietary ALGO has identified as being more suitable for attacking either from the long side or the short side for the next trading session.

Questions? We are happy to help!

 

Daily Levels for May 30th, 2024

Economic Reports
provided by: ForexFactory.com
All times are Eastern Time ( New York)

Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572.

Explore trading methods. Register Here

* 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 here in 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 judgement in trading.


Bullet Points, Highlights, Announcements  + Levels for April 24th

April 23rd, 2024 Filed under Charts & Indicators, Commodity Brokers, Commodity Trading, Crude Oil, Day Trading, Energy Futures, Future Trading News, Futures Broker, Futures Trading, Trading Guide | Comment (0)

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Bullet Points, Highlights, Announcements   

by Mark O’Brien, Senior Broker

General:  

 

Futures traders with positions in deliverable futures contracts keep an eye on the calendar for important dates at the end of the month. First Notice Day (FND) and Last Trading Day (LTD) for many futures contracts are close at hand. Make sure you steer safely clear of receiving delivery notices for physical commodities (FND), or greatly reduced liquidity (LTD). If you’re unsure, contact your Cannon Trading Co. broker.

 

The economic calendar for the rest of the week is scarce with Thursday’s Q1 GDP report taking center stage.

 

Prospects for a fed rate cut announcement at the Fed’s 4/30-5/1 meeting, as well as its mid-June meeting have all but evaporated and many Fed watchers expect the central bank to keep its “higher for longer” mantra in place for most and possibly all of 2024.

 

Worries over a wider Middle East conflict have subsided and traders are discounting the risk of further escalations. Case in point, June gold lost ±67 per ounce (±2%) yesterday after posting its latest all-time record high close of $2,413.80/ounce on Friday. Iran downplayed Israel’s retaliatory drone strike against it, in what appeared to be a move aimed at averting regional escalation.

 

Energies: 

 

  • The ±$2.50/barrel selloff in May crude oil and the ±¢9.75/gallon May RBOB gasoline futures last week likely signaled the markets do not see an Iranian supply disruption in the near future, so the markets will be given to focusing on global energy demand going forward

 

Softs:  

 

May Cocoa futures declined sharply yesterday and today, down nearly $1,300/ton (a $13,000 per contract move) marking its worst two-day slump since February. This after a 3-day / Wed.-Fri. rally of $1,635/ton to its all-time record high close of 11,878/ton on Friday. ICE U.S. has set the initial margin requirement to $11,260 per contract.

Daily Levels for April 24th, 2024

Economic Reports
provided by: ForexFactory.com
All times are Eastern Time ( New York)

Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572.

Explore trading methods. Register Here

* 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 here in 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 judgement in trading.


Markets Post CPI + Levels for April 11th

April 10th, 2024 Filed under Commodity Brokers, Commodity Trading, Crude Oil, Day Trading, Energy Futures, Future Trading News, Futures Broker, Futures Trading, Metal Futures | Comment (0)

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Life After CPI …..

by Mark O’Brien, Senior Broker

General:

 

It’s been ten months since the central bank paused its rate hike cycle.  It seems as though Jay Powell’s motto throughout his entire tenure as chairman of the Fed has been, “The data will guide our decisions,” and today the Bureau of Labor Statistics released another chunk of data: its March Consumer Price Index (CPI) report, which measures the prices paid by consumers for a basket of consumer goods and services.  The consumer-price index rose 0.4% in March and 3.5% on an annual basis.  Economists had expected 0.3% and 3.4%.  Core CPI, which removes the volatile food and energy categories, was up 0.4% from February, topping an expected 0.3%.  Now, after strong prints in January and February, are these new readings stronger evidence of a “sticky” inflation situation?

 

At their March meeting, according to its minutes released later this morning, Federal Reserve officials expressed concern that inflation wasn’t moving lower quickly enough.  The CPI report likely didn’t moderate those concerns and the timing for the first long-anticipated rate cut has presumably drifted further out on the calendar.

 

Energies: 

 

Speaking of inflation, the first three months of 2024 saw crude oil jump ±$17 per barrel – a ±$17,000 move for the main 1,000-barrel futures contract – with the front-month May contract trading to the year’s high of $87.63 intraday just last Friday.

 

Softs: 

 

After a one-day 321-point/$3,210 move up on March 12 to close above $7,000/ton – its latest all-time high – May cocoa continued its “no top in sight,” rally, closing today at $10,476/ton, a staggering ±$34,700 per contract move in twenty trading sessions.

 

Metals:  

 

While cocoa retained its “king of the all-time highs” crown for the month, gold did not disappoint bulls in this market, setting its own new all-time high yesterday, trading up to $2,384.50/oz. intraday (basis the June futures contract).  This is a $199.00/oz. move ($19,900 per contract for the standard 100-oz. futures contract) over the same 20-sesson span as the move in cocoa referenced above.

 

Grains: 

 

Keep an eye out for tomorrow’s U.S. Department of Agriculture’s two main reports: its monthly Crop Production and World Agricultural Supply and Demand Estimates (WASDE). These serve as the primary informers of the fundamentals underlying domestic and global agricultural futures markets.

 

 

 

 

 

Daily Levels for April 11th, 2024

Economic Reports
provided by: ForexFactory.com
All times are Eastern Time ( New York)

Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572.

Explore trading methods. Register Here

* 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 here in 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 judgement in trading.


Weekly Newsletter: Notional Value, May Copper Outlook & Trading Levels for April 8th

April 5th, 2024 Filed under Commodity Brokers, Commodity Trading, Day Trading, Energy Futures, Future Trading News, Futures Broker, Futures Trading, Metal Futures, Weekly Newsletter | Comment (0)

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Cannon Futures Weekly Letter Issue # 1188

In this issue:
  •  Important Notices – Earnings Season Starts April 12th
  • Trading Resource of the Week – About Contract Notional Value
  • Hot Market of the Week – May Copper
  • Broker’s Trading System of the Week – RBOB Swing System
  • Trading Levels for Next Week
  • Trading Reports for Next Week

 

Important Notices –

  • Market Moving Data Wed. /Thur.  CPI and PPI respectively , w/Jobless Claims Thur. as well
  • 1 Fed discussion RE: new BASEL lll requirements Wed. AM (raises min. Cap Req from 2% to 4.5% for all banks)
  • AG WASDE Thur.
  • Q1 Earnings Season Begins Fri. the 12th Bank Earnings, JPM, C, WFC, BLK all report on this day.

 

 

 

 

Trading Resource of the Week : About Contract Notional Value by CMEgroup.com

Contract Unit
The contract unit is a standardized size unique to each futures contract and can be based on volume, weight, or a financial measurement, depending on the contract and the underlying product or market.
For example, a single COMEX Gold contract unit (GC) is 100 troy ounces, which is measured by weight.
A NYMEX WTI Crude Oil contract unit (CL) is 1,000 barrels of oil, measured by volume.
The E-mini S&P 500 contract unit (ES) is a financial calculation based on a fixed multiplier times the S&P 500 Index.
Contract Notional Value
Contract notional value, also known as contract value, is the financial expression of the contract unit and the current futures contract price.
Determining Notional Value
Assume a Gold futures contract is trading at price of $1,000. The notional value of the contract is calculated by multiplying the contract unit by the futures price.
Contract unit x contract price = notional value
100 (troy ounces) x $1,000 = $100,000
If WTI Crude Oil is trading at $50 dollars and the contract unit is 1000 barrels, the notional would be;
$50 x 1,000 = $50,000
Now assume E-mini S&P 500 futures are trading at 2120.00. The multiplier for this contract is $50.
$50 x 2120.00 = $106,000

 

 

  • Hot Market of the Week – May Copper
Hot market of the week is provided by QT Market Center, A Swiss army knife charting package that’s not just for Hedgers, Cooperatives and Farmers alike but also for Spread traders, Swing traders and shorter time frame application for intraday traders with a unique proprietary indicator that can be applied to your specific trading needs.
May Copper
May copper is completing its third upside PriceCount objective that is consistent with a challenge of the contract high. It would be normal to get a reaction in the form of a near term consolidation or corrective trade, at least, from this level. From here, IF the chart can sustain further gains, we are left with the low percentage fourth upside count to the 4.94 area to aim for (not shown here for presentation purposes).
PriceCounts – Not about where we’ve been , but where we might be going next!
The PriceCount study is a tool that can help to project the distance of a move in price. The counts are not intended to be an ‘exact’ science but rather offer a target area for the four objectives which are based off the first leg of a move with each subsequent count having a smaller percentage of being achieved. It is normal for the chart to react by correcting or consolidating at an objective and then either resuming its move or reversing trend. Best utilized in conjunction with other technical tools, PriceCounts offer one more way to analyze charts and help to manage your positions and risk. Learn more at www.qtchartoftheday.com
Trading in futures, options, securities, derivatives or OTC products entails significant risks which must be understood prior to trading and may not be appropriate for all investors. Past performance of actual trades or strategies is not necessarily indicative of future results.
  • Broker’s Trading System of the Week

With algorithmic trading systems becoming more prevalent in portfolio diversification, the following system has been selected as the broker’s choice for this month.
PRODUCT
SYSTEM TYPE
Swing
COST
USD 160 / monthly
Recommended Cannon Trading Starting Capital
$25,000
The performance shown above is hypothetical in that the chart represents returns in a model account. The model account rises or falls by the average single contract profit and loss achieved by clients trading actual money pursuant to the listed system’s trading signals on the appropriate dates (client fills), or if no actual client profit or loss available – by the hypothetical single contract profit and loss of trades generated by the system’s trading signals on that day in real time (real‐time) less slippage, or if no real time profit or loss available – by the hypothetical single contract profit and loss of trades generated by running the system logic backwards on back adjusted data. Please read full disclaimer HERE.
Would you like to receive daily support & resistance levels?
Yes
No

 

Daily Levels for April 8th 2024

Trading Reports for Next Week

First Notice (FN), Last trading (LT) Days for the Week:

Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572.

Explore trading methods. Register Here

* 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 here in 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 judgement in trading.

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