Head Trader James Cordier Comments on Latest News and Outlines Current Option Selling Trades
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July 2, 2018 Update
Good afternoon. This is James Cordier of OptionSellers.com with a market update for July 2nd. Well, with the first half of 2018 now in the books, we start looking forward to the third and fourth quarter of what has been a very loud economic market. Talks of tariffs and China and interest rates, inflation finally beginning, however many commodity prices basically in a sideways a trading fashion. Who in the world would think that the gold market would make a very strong move earlier this year with North Korea in the United States trying to draw battle lines interest rates negative in Europe and of course what’s always going on in China and now tariffs.
We took a speculative move thinking that commodities especially precious metals would probably start to languishing and going into a sideways fashion, and so far this year that’s exactly what’s happened. Silver has traded an approximately $1 trading range, gold has traded in approximately 80 to $85 trading range for the first six months of the year. To watch some of the business shows you would think that those have made large moves but actually that’s just a lot of noise and a lot of headlines which of course plays into our hands.
A lot of discussion about China and interest rates and inflation caused a lot of investors to buy options and if we’re following along correctly quite often the fundamentals don’t justify a big move and then you sell calls much above the market and puts much below the market and certainly that has worked out quite well so far in 2018.
The new market that is now possibly heading into a consolidated of type would be crude oil. The crude oil market had dramatic moves over the last 24 months, right now we feel that that could be turning into a sideways market as well. Both Russia and Saudi Arabia recently have discussed and arranged to increase production somewhat going forward. Clearly oil which has now increased some ten to fifteen dollars a barrel over the last six months is probably going to start pinching some of the economies around the world. If you look at Germany for instance they have some of the most negative business ideas right now going forward. We still have negative rates in Europe and of course China this past week enter what’s called the bear market where their stock market is down over 20% from its high. High energy prices during times of weaker economies around the world is probably not going to sit very well. Russia, Saudi Arabia, some of the largest oil producers — they know that and they don’t need to be greedy right now. They produce oil for 35 to 40 dollars a barrel and trying to push it above 80 and turn some economies into recessions certainly is not their idea.
We think that oil is probably going to start settling into a ten dollar trading range, Brent probably in the 70s and WTI in the 60s. We think that putting a $50 strangle around crude oil right now is an excellent idea similar to what we did into precious metals earlier this year. We think both of those positions are going to continue to bear fruit in last half of 2018 we will just have to wait and see.
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