Uncorrelated Asset!

Uncorrelated Asset!
Apr

11

2018

Uncorrelated Asset!

Spring can be the BEST TIME to Diversify YOUR Portfolio into US Agricultural Markets

As high net worth investors around the world sweat out the latest stock market swing, they’ll continue to wrestle with the question of what to do now. Should we “let it ride” and hope we’re still in the thick of a healthy bull market?

Or is it time to take some of those profits from the last 10 years and start putting them to work in alternate, uncorrelated asset classes?


it won’t matter if it’s a “good” year or a “bad” year for ag prices. You can potentially make money in both – consistently.

For those choosing the latter, the farming/agricultural industry is always a popular consideration . For one, growing global populations and the fact that food demand will never go away makes it at least an industry that’s not going anywhere – at least until robots take over the world.

farm land

Investing in the farming and agricultural asset class is an increasingly popular choice amongst high net worth individuals.


Secondly, it has a very low correlation to US equities performance and thus, can make it a valuable portfolio addition for a high net worth investor, family office, hedge fund or pension fund looking to protect its assets by spreading its risk.

But investing in Agriculture can be tricky. What should you do? Buy farming stocks or ETFs? Invest in agricultural REITs? Heck, maybe you should go out and buy a farm.

All are possible choices. But they might not be the best choices.

Ag Investing – What are Your Choices?

Farming Stocks or ETFs:

May do well if stocks are moving higher as a whole. But these will have a high correlation to the overall stock market – exactly what you are trying to avoid.

Agricultural REITs:

May provide some income. But farming can be a feast or famine business. Values of these type of assets will be dependent on a “good” year or a “bad” year for ag prices. They’re OK, but your gains will, like stocks or ETFs, likely depend on prices of ag commodities being strong and/or appreciating. That doesn’t happen every year and doesn’t bode well for consistency.

Mand standing on a plowed farm field

Investing in Ag stocks, REITs or even direct investment in farmland typically depends on high crop prices or appreciation to generate profits – often a hit or miss proposition.


Buy a Farm:

This is the most direct route to investing in agriculture. However, it has obvious downside. First, it is immensely labor intensive and requires a labor force. Secondly, you’ll likely need a lot of time committed to it – even if you are investing with partners and have someone to run it for you. Lastly, you should, ah, possibly know something about commercial farming.

Now, all of the above can be good choices depending on what you are trying to accomplish. But there is a better way.

Ag Option Selling: Premium Without Ownership

If you’re seeking potentially high returns that can be duplicated annually AND an investment that is completely uncorrelated to equities, selling options in the US agricultural futures markets can deliver.

First and foremost, there is no ownership of anything and thus, no reliance on value appreciation of that asset. It won’t matter if it’s a “good” year or a “bad” year for ag prices. You can potentially make money in both – consistently.


Agricultural markets are some of the best and most predictable markets on the board to trade seasonally.

Secondly, you’ll find that these old school core commodities such as corn, soybeans, wheat and cotton (cotton actually had the first futures contract traded back in the 1700s) have very little price correlation to the stock market.

Lastly, these are some of the most liquid markets on the board for options – making them attractive harvest grounds for option writers. But that is not the only reason why these markets are popular with well-informed investors.

Agricultural Markets – A Favorite for the Option Seller

If you have never directly invested in commodities or commodities options, every commodity may appear the same to you.

But this is not true.

Some markets lend themselves to fundamental analysis better than others. Learning what these fundamentals are and how to interpret them can give you a tremendous advantage in trading these markets. This is the basis for the FUDOM method of selling options that you read about here.

Grains such as Corn and Wheat, oilseeds such as soybeans and soybean oil and fibers such as cotton lend themselves very well to fundamental analysis.

Man smiling at computer

Agricultural markets can be ideal markets for option selling – for those willing to do a little fundamental homework.


Supply demand data is readily available , updated monthly and can give informed investors a clear picture of not necessarily where prices WILL go, but where they most likely will NOT go. This is golden for Option Sellers.

Secondly, agricultural prices can be very dependent on the planting/harvest cycle. Agricultural markets are some of the best and most predictable markets on the board to trade seasonally.

And some of the best opportunities for agricultural option sellers come in the Springtime.

Springtime is the Right Time

For the fundamentally and seasonally informed, spring can be an outstanding time of opportunity for option selling investors. Planting is in full swing in the US, which often leads to historically repeated price patterns – patterns that can be utilized by the informed option seller.

So much so that we’ve dedicated the entire April issue of the Option Seller Newsletter to the US Agricultural markets – and putting your money to work in this uncorrelated potentially, lucrative asset class.

Spring is finally here! Lets enjoy it with some inflated option premiums in some of our favorite markets. And if you haven’t yet diversified your assets into agriculture, there is no better time to begin.

Have a great month of option selling.

Regards,

James


For more information on managed option selling portfolios with James Cordier and OptionSellers.com, visit www.OptionSellers.com/Discovery for a Free Investor Information Pack. (Recommended opening deposit US $1 MM)

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