-Lingering recession
-Massive government bailouts and money creation
-Fearful investors
-Tight finances and access to credit for institutions and investors alike
-Demand for stocks and commodities has dropped precipitously

Let’s look at a few of the positive elements:

-Energy costs have been cut drastically
-Commodities in general are cheap
-The dollar has had a nice 8 months, giving dollar holders some extra purchasing power in the short term
-If we haven’t reached the market bottom, we’re damn close
-The global growth story should receive another boost when inefficiencies and slack are flushed out and cheap commodities offer low input costs (at least in Asia)

An article on oil the other day (sorry, forgot the source) discussed the global build up of oil reserves as a result of the sharp decline in demand. This is something that could weigh on oil prices for some time to come, as the last time we saw a sharp increase in oil prices, the Iran oil crisis, US oil consumption fell sharply and took 20 years to reach levels it had been in the early 70’s, due not only to changes in driving habits, but also to more energy efficient cars. Oil will have its day again, but my guess is we have some time before we need to rush back in.

This development in oil I believe will be consistent for most industrial materials and perhaps some agricultural commodities for the near term. But there are many commodities where demand is less discretionary; certain agricultural and soft commodities, and investment metals like gold and silver. What sets these apart from the rest when the world seems to be coming to an end? Let’s review a few lessons from the 1970s, the last time the US had a long drawn out recession which held a pillow over stocks and pushed commodities to new all time highs throughout the decade.

When recessionary pressures took hold in the 70’s, our government responded the same way it is today, by printing money, tightening lending standards, and raising business standards and trade regulations. All of these things, while perhaps a step closer toward ethical business practices certainly don’t benefit businesses and economic growth as a whole in the short term. And the government, to win friends and punish poor business practices makes a whole bunch of new money for itself from nothing to make new things with. It produces jobs and public works projects and lends to large businesses that don’t like to exercise fiscal restraint. And this story always plays out the same way.

Recession strikes fear in the hearts of men…and women. Fear stimulates government spending to appease the masses. Government spending requires money creation, because a recession is an economic contraction where less money is produced through value creation. This new money flows in in tremendous quantities, creating more supply for dollars than exists demand, and consequently depreciating the value of all dollars in existence. This is inflation, and inevitably results in higher interest rates and the dollar cost of ‘real things’ rising considerably.

What kinds of real things turned out to be the best investments throughout the 1970’s? Commodities, most notably gold, silver, oil, real estate, and alternative energies. So in the midst of our little recession here, we are seeing a very interesting pattern surface. Gold and silver, while everything else has gone to shit, are up approximately 50% in the last 6 months. Real estate is dirt cheap, as are construction costs, while home builders are going out of business like building houses is going out of style. What does this mean? It means that should demand return, supply will take a long time to respond to the market. And from these prices, all those who own their homes will be sitting pretty when inflation pushes their home values higher over the coming years.

In addition to these three options, commodities, real estate, and alternative energies, all of which will prove again to be winners throughout the next 5 to 10 years, people need to eat. And at the rate the world is growing, and the rate at which China and India continue to grow, food is going to continue to be a hot commodity. So keep an eye on wheat, corn, cattle and hogs over the intermediate to long term. And in the short term, I believe we’ll see some impressive action from gold, silver and the soft commodities, most notably coffee, sugar, and cotton. The commodities bull is getting ready for its second leg up, and commodity trading is about to get very interesting.

On the bright side, news from Central and South America of tightness in the coffee pipeline is starting to become more prominent.  This could ignite an impressive rally before long in the style of 1997, where a two month spike to $3.50 rocked the markets.  I’ll continue to follow this futures options trade here, but I also created another website just to deal with the impending bull run in coffee futures.  On that blog I’ll focus more on information specific to coffee trading, coffee futures trading, and coffee fundamentals, so that this website doesn’t become any more onesided.

Well, it’s 10 pm here in Shanghai. So good evening to all those in the east, and good morning to all those in the west. I’m feeling the itch to do some teaching tonight on a fascinating and sexy new commodities futures options lesson for the aspiring Hobo. Tonight we’re going to talk about writing (also known as selling) call options. (The same principles apply to Put Options, but I’ll keep with the former for the sake of simplicity and brevity). Writing call options is not a very difficult concept, but the lingo and explanation may and often does suggest otherwise. If a futures contract is an agreement between a seller of a commodity and a buyer, deliverable at some future date, and an option on a futures contract is the right, but not the obligation to buy the underlying commodity at a set price (options can be converted to futures contracts if someone wishes to take possession of a commodity once their option is in the money (or the price of the futures contract exceeds the strike price of the option), then writing (selling) a call option is selling the right to buy the underlying commodity of the contract for which you’ve written the option. That’s a mouth full and I apologize.

Perhaps it’ll make more sense if I put it another way. My friend comes over to my house and sees a car in my driveway. He likes it. He wants it. Perhaps it’s a hybrid in high demand and will be worth more in two years than it is today…he ponders. He tried to buy one and can’t. He assumes the car is mine and wants to buy it. Since my roommate is out of town, and will be for 6 months, I tell my friend, sure, why the hell not. But “I can’t give it to you today; I’ve got no other ride. I’ll need it for six months. If you give me a deposit today, I guarantee you I’ll reserve the right for you to buy the car in six months. If you change your mind however, I keep the deposit.” My friend agrees.

I’ve just sold a car I don’t own and certainly can’t afford to give. But I won’t need to. Because I know that the price of this particular car will come down within the next few months due to a ramping up of hybrid production and distribution. And perhaps there’s some kind of a financial crisis a brewing. So the odds are my friend, if still interested in purchasing that model car, will opt for a cheaper new one rather than the used one I’m selling at a higher price. My friend still owns the right to buy it, but he wouldn’t, because he’d over pay for the car and wind up with a depreciating liability. So he’d let our contract expire, leaving me with his deposit. What I just did is a metaphor for what occurs in a commodities futures options trade. My good friend bought an option (an option to buy my roommates car). In this case, the option was a call option because my friend believed the car would retain its value or appreciate in value by expiration.

This beautiful interchange, the selling of something one does not own, and may not even exist, for profit, is the quintessence of hobofinance philosophy. It’s modern day alchemy. Money from nothing…and chicks for free. I sold something I didn’t own, and I don’t go to jail. Welcome to the world of commodities futures options trading. For those bright souls that just put two and two together, yes, all the options I purchased in coffee, the ones that expired worthless, all of those were written by a person who most likely does not own a coffee futures contract. He was playing the odds and won. Most options contracts expire worthless, which means that the sellers of options are pocketing the premiums paid for those options while the buyers stay up at night and blog about how stupid they were to buy a shit load of em.

That said…there is another side to this bazaar coin. Let’s say that the next shipment of hybrids was accidentally bombed by a misguided Bush missile headed for Iraq on their way here from Germany or wherever they produce futuristic cars. The shortage of hybrids tips the supply and demand dynamic, creating an imbalance and pushing prices through the roof. Now my friend is seeing the dollar signs and feeling like a genius. And I’m sweating my balls off without a clue as to how I’m going to come up with a car for him. You see, as the price rises the likelihood of my friend calling in his call option to purchase the car increases. The other option he has, and perhaps a more favorable one for me, the poor seller, is to ask for the difference in price in cash. Let’s say the value of the car the day the option was sold was 30 grand. The current value is 40. He thinks, “I don’t want the car, so why don’t you pay me 10 grand and we’ll call it even.” This is the dreaded downside to writing options…the one time the market moves against you you’re probably going bust. Limited potential return, unlimited risk.

So how do we feel about these curious commodities futures options? On the one hand they serve no real world function. They’re a contrived derivative which usually serves as an efficient method for those in the know to fleece lots of money from newcomers. On the other hand, they provide incredible leverage, perhaps more than any other financial instrument, and can be as good as a winning lotto ticket when the right cards are dealt. And if for no other reason, there is something priceless in the notion of selling hope. An option is nothing but a promise. And that promise was never intended to be kept. A promise that made Yours Truly dive in after the dream and watch it get flushed down the toilet. But keep this in mind friends; while we’re hurting today in coffee, some other asshole out there is eating steak tonight with our sixty grand. He deserves a hobo courtesy bow…and perhaps the knife. He is the Commodities Futures Options Writer. He is the modern day alchemist!

Let’s hope today’s dramatic move is the end of the beginning.  These last few months have been a purging of all impurity from the markets.  Whether it represents an omniscient act of god, a sadistic act of satan or shiva, an indifferent and cosmically balanced act of nahuatl, or an account rebalancing by Jim Rogers, the carnage resulting from some incomprehensible power screwing with the natural order of things has finally ceased.  Or perhaps it is manifesting elsewhere…like in that 3 ton family on the discovery channel.  Come on people, stop eating.  No one needs an airlift to get a liposuction.  Nonetheless, Coffee has finally started to care about things like truth and nature again. 

By some mundane miracle we’re seeing signs of life.  We saw an 8 cent rally after a 3 cent down day, which brings us back into position to challenge resistance while at the same time breaching short term trend.  It’s a bit early to see whether this is a significant change in trend or merely a short squeeze (heavy and rapid buying which forces speculators who are short the market to cover their positions by buying back, causing a short term dramatic rally that feeds on itself), but that should become clear within a week or so.  Nonetheless it is the first promising development in the short term technical picture, as prices breached the trend line that dates back to October.  The long term trend line as of today would require prices to cross the $1.35 marker to verify a long term change.  But given the tight fundamental situation that 20 cent gap could be bridged quickly.

My current meager position includes:

Long 3 May 140 calls.  No cash.

That’s it… I covered the remaining short call I had as time was dragging on, and I didn’t want to wind up with another margin call should prices rally and settle just moderately higher over the next month.  This reduced my profit potential drastically, but it also reduced my risk drastically.  A hobo playing it safe…sinful.  Let’s see how this rally plays out the rest of the week.  If life comes back to this market, so too will it come back to this blog.  Peace out Hoboes.  Peace the fuck out.

If you’re still with me you deserve some thanks.  This can probably be summed up with a simple ‘Thanks Mom’.  Despite the fact that your candid blogger is down he is still holding on with hope.  I haven’t posted in about a month now, and for good reason.  Absolutely nothing of import has happened.  Coffee has been up and down and relatively flat since then, with the exception of a potentially pernicious breakout, or should I say breakdown, of previous support.  Coffee fell to the 102/103 are for all of a day and recovered quickly.  A quick reminder to all of us bulls that the bear isn’t dead yet, and until he is, respect those traders who rightly sell all rallies in such a market.

That said, this last week the news has started to turn.  For us fundamental observers, the tight conditions we’ve been anticipating are surfacing in Columbia, manifesting as cash prices exceeding futures prices by a good 20 cents.  This is a significant differential that shouldn’t take long to impact the futures trade.  On top of this, the USDA has revised their figures for Vietnam down sharply, by approximately 3 million bags.  And though the long term balance sheet is skewed in favor of the bulls, prices have been able to deteriorate due to ample short term supply.  This alteration in figures and the Columbia situation should finally call that short term perspective into public question.  There is not enough coffee in the world!

Since I last wrote I learned a valuable lesson on call ratio back spreads.  Try not to do them!  I quickly ran into a margin call that forced the trade desk to liquidate a third of my position.  In reality my position was well balance, having a 3 to 1 ratio of long calls to short, with only a 20 cent spread.  There was no immediate threat of an account deficit.  But on paper they were overly concerned with the short position and acted on it before I could.  Thus, my current position, after some adroit maneuvering is as follows:

Long 5 May $1.40 call options

Long 1 May $1.70 call option

Short 1 May $1.20 call options

Total Equity: Less than 5K. 

Admittedly a meager position given my bold start in this market a few months back, but it has some potential of vindicating my honor.  Wave the flag and drink your morning cup of joe.

At present I have three spreads for May 09 Coffee.
Short 1 $1.15 call and long 3 $1.40 calls
Short 2 $1.20 calls and long 4 $1.40 calls.

 
I was also able to trade out of 4 of my 6 initial May $1.70 calls and put some of that equity toward an additional May 09 $1.40 call giving me a ratio of Short 3 calls around $1.20 to Long 8 at $1.40. This, assuming the market turns up in the next few months will give me a net long position of five contracts somewhere in the $1.50 range, and a net liability of 3 contracts should futures prices settle in the $1.15 to $1.40 range.

As such, I believe I’ve taken on enough risk with these spreads, and will try to work the remaining $1.70 calls into a better position. For example, on a bounce to $1.25 or so, I may sell both of those and perhaps one of the $1.40 calls to use on a chance pullback to buy back some of my short puts. The overall trend in this market is still down and as such demands respect on the downside. But I do believe we’ve seen the bottom already at $1.05, and that this market is in the process of establishing a base. Furthermore, if I had to place an intermediate term bottom on the Dow, I’d bet on today’s reversal in prices accompanied by both MACD Histogram and RSI bullish divergence.

Both the MACD Histogram and the Relative Strength Index gave bullish divergence buy signals today. Both have, on the whole, been very accurate over the last several years in indicating long term tops and bottoms. Both of these also flashed bullish divergence in the $1.35 area and were proved false by plummeting prices. Why should I trust them now you might ask? What is different today than a month and a half ago?

For starters, no one is in this market. Volume has been incredibly thin recently, a result no doubt of low open interest (the number of open contracts in the market). In order to have persistent selling, you typically need a large number of bulls who have yet to give up hope in a surge of selling. I argue that we’ve seen that capitulation already. If not in terms of extreme volatility, than in terms of both camps fleeing positions, meaning bulls have given up hope and bears are unwilling to add to short positions, seeing the danger in low prices and having made their profits.

This, in my opinion is very bullish. This market is exhausted, frustrated, and nervous. And in spite of it, Commercials have taken a strong stance on the long side. Again, not to sound like a broken record, Commercials have successfully picked and/or created every long term bottom in this market for the last 8 years, evidenced by their net long position at those times. And again I ask, who, if anyone, ought to know the long term relative value of a commodity if not those who actually need to deal in the physical product? Those in the know are telling us loud and clear that coffee is cheap.

The later into the season we get, the more pressure there is on this market to anticipate coming shortfalls. October through May is typically a very bullish time period, as the Brazilian harvest finished and the Vietnam harvest is currently underway. The peak of supply typically coincides with price bottoms in October through December. And while we should have learned our lesson already about picking bottoms, I still try to apply the principle of buying low and selling high (as determined by commercial positions and technical indicators).

The end of last week and the start of this one I’ve managed to add two spreads to my account:

1. Sold 1 $1.20 call and bought 2 $1.40 calls
2. Sold 1 $1.30 call and bought 3 $1.40 calls

I’m going to try to add one more spread to this ratio, giving me a net long position of 4 or 5 contracts which will begin to show a profit in the $1.40 to $1.50 price range and up. As I mentioned before, I’ll use rallies to liquidate my worthless Dec. $1.30 calls of which I still have 4, and perhaps a few of my May $1.70 calls, which are not serving much of a purpose at these prices. On price declines I’ll attempt to buy back my short call positions, thereby increasing my ratio of long calls to short, and consequently my leverage and earning potential.

But what can a hobo do with a mere 2.5 grand in cash, and another 4 in contracts nobody else currently wants because they’re so far out of the money? Well, a hobo does what a hobo do, he figures shit out. He buckles down and rummages through his hobo bag, looking for any and every devise conducive to survival. If his foe was a landlord he’d use the ol point and run, if a drunken Irishman he’d head butt and bite, if a garrulous nuisance of a hobo, alas, the knife. But when fighting the intangible one has to use more specious devices, those created by evil financiers to fleece the ignorant masses of their hard earned dollars. One has to use money knowledge. But again you ask, “What can a hobo do with a mere 2.5 grand in cash, another 4 in worthless out of the money options?” He lowers his head soberly. Nothing my friends. Nothing. I haven’t the tools with what I’ve got. Not enough to make back the 60 grand I’ve borrowed and lost, and not enough to make a little something extra to live on. But I do have the tools with what I don’t got!

Pop quiz. Where do options come from (points to nerd in front row)? We know I bought a bunch of em, but who is the smart ass on the other side of my trade? Doesn’t matter, he’ll get his in due time. What does matters is I too can be that smart ass. Just as one can buy an option, one can write, or sell an option. This is not a recommended approach toward trading because if buying an option awards you limited risk and unlimited earning potential then writing an option does the opposite, awarding you with unlimited risk and limited earning potential. Earning potential is limited to the cost of the option in fact, and on top of that one needs to keep a good deal of capital handy on margin to cover it. Ok, so it’s dangerous and risky, accepted. But will it allow us any maneuvering we couldn’t have otherwise. I think so.

You see my biggest problem right now is and has been time decay on my December contracts, and illiquidity on my May contracts. So if I wanted to increase my trading size at these attractive prices I’d need to sell, which I can’t, unless of course I sell what I don’t have. This, like I said, is normally very risky. But I can not only allay some of that risk, I can also increase my position by using the premium from contracts I sell to by a greater number of cheaper out-of-the-money options for the same price. This will have an offsetting break even effect for several months and cost me nothing. The risk of this I’ll go into later on the chance this fails and I have nothing else to do but explain my stupidity. But should this succeed I’ll have a temporary liability that is covered by two or more assets should prices rise sharply. Should prices continue to fall and remain down, I loose nothing, as the contract I wrote expires worthless, and the options I purchased were paid for by the premium received from said written one. If prices come to rest between my strike prices after 3 months or so I’ll be hurting something awful, liable then for the difference in value. The technical name for this maneuver is called a call ratio back spread. But we’ll just refer to it as the hail marry play.

A couple days ago I put on one spread, selling a May of 09 $1.20 call, and using that premium to buy two May 09 $1.40 calls for a dead even exchange costing me nothing…now. I intend to put on another as soon as the market allows. If the market falls ten cents, I’ll buy back one of the $1.20 calls I wrote at a cheaper price, improving my ratio to [short one $1.20 call and long four $1.40 calls]. Should the market rise a dime or so I’ll use the bounce to liquidate my December $1.30 calls and perhaps some May $1.70 calls on a scale up. And after, using that cash to buy back some of the puts I’ve written on the next pullback in prices. This strategy should allow me to re-establish a position with a lot more time, as well as allow me to take advantage of short term volatility and uncertainty. Hope is still alive, though flogged mercilessly.

Current Position:
Long: 4 Dec. $1.30 calls, 6 May $1.70 calls, 2 May $1.40 calls (just added via the spread)
Short: 1 May $1.20 call (just sold via the spread)

Reasons for Skepticism
Let me start by saying that this decline, while damaging to the short and intermediate term technical picture, is a very bullish long term development, expounded in the section below. My skepticism is time based only, as my call option contracts are set to expire November 11th. A recovery in prices of 15 to 25 cents in thirty days is possible, but not likely given the current financial crisis. Coffee has been beaten down terribly with the rest of the commodities complex and may continue to trade on fear rather than on fundamentals over the intermediate term. While I don’t believe this will continue to be the case, I can’t rule it out. Furthermore, at present there is no real lack of supply.

Reasons for Hope
1. Coffee is currently 20 cents below the cost of production.
2. Coffee has fallen to and held at $1.15, which happens to be a perfect retracement to the long term trend line, connecting lows each year from 2005 to present.
3. Seasonality is exceedingly bullish October through December, and remains strong through May.
4. Commercials have finally finally finally gone long this market. The last indicator I was unwilling to wait for two months ago before buying in. Commercial traders have picked and/or caused every long term bottom in coffee over the last 5 years, and each of those lows was followed by a strong rally taking prices 30 to 70 cents higher depending on the year.
5. Friday, October 10th 08, all commodities fell sharply, the dollar rallied sharply, and coffee miraculously closed up on the day after opening 4 cents down. It showed remarkable strength amidst complete chaos and deterioration all around it.
6. Depressed prices translates to decreased investment translates to cutbacks in crop care, hired help, and eventually production.
7. I expect coffee to show surprising resilience to the looming recession. Where copper and cotton may have a sharp contraction in demand; coffee may experience an increase for three reasons:
          1. Coffee drinkers will shift from more expensive coffee house specialty drinks to basic black they can brew at home for a tenth of the price. In so doing more coffee will be washed down the sink than occurs using the more efficient methods of coffee houses.
          2. Coffee is less a discretionary expense than a staple, and its use benefits from stress and hard work, both of which are occurring in copious amounts at present, induced by fear of financial ruin or lack of security. Coffee drinkers are like smokers and alcoholics, relying on caffeine in good times and bad to make it through the day.
          3. It’s very cheap.

Just so people don’t take me for a reckless carefree hobo; I am experiencing a great deal of stress and fear at present. This situation is frightening, especially because the money I’ve lost is not mine. I’m having trouble sleeping and concentrating on things other than the losses I’ve incurred. It’s borrowed, and there is no easy way for me to pay it back. I’ve resolved to rework my plan and then to work that plan until the market capitulates to my will and does whatever the hell I wish. To do this I unfortunately need to fight my way out of this hole or go deeper into debt. I need more capital and quick if I’m not only going to take advantage of these prices, but if I have any real hope of digging myself out of debt and maybe making some profit to boot. There’s no room for pride in this game. The second you start to think you know something, the whole financial system collapses and, defying all reason, your diamond in the rough is dragged straight down to hell. But alas I am humble, and I have no problem asking for and with any luck borrowing more green to speculate with.

I crapped my pants today. I’ve always known coffee is a diuretic, but what I seem to need a constant reminder of is the rare ability of coffee futures to elicit the same internal response. The market not only fell through long term support around 135, it dropped 6 cents on the day and closed at the low. One has to wonder why. One has to wonder why they were so stupid as to borrow 60 K and go all in when the entire commodities complex is going to shit, neigh, the entire financial institution is going to shit. As of today I’m down 50 %, quite a swing. After two weeks I was up 20K and now currently down 30K. So I’m left with the same two options I had before I lost 30 grand; do I stay in or get out?

Problem 1: Strong buy signals were given from both the MACD Histogram and the Relative Strength index on September 19th, marking the base for a nice little rally. These two indicators have been on the ball at the beginning of every major trend change in coffee for the last four years. Today however prices fell through previous lows and proved both of those buy signals incorrect. When such an event happens one needs to throw out all indicators because, well, they’re not working. This leaves a trader a tad naked, with only his discretion to guide him. This is basically the same as being naked because a trader’s discretion is as whimsical as a child’s love of a new toy.

Problem 2: There is no support for this market for a ways down, leaving me with the very real risk of watching this 50% loss becoming a 90% loss very quickly (which may only be another 5 to 10 cent decline if I had to estimate). This is when the vice of options trading, no liquidity, really hurts. If I wanted an out today in order to let this market get flushed out with all the rest, I’d have to give my options away for someone to be willing to take them off my hands.

Problem 3: Gold, Silver, and Crude have also given failed signals, and the markets spiraled further south.

Problem 4: I feel sick to my stomach and the panic that comes with riding a loss. And I crapped my pants.

Possible Explanations for today’s price move:

1. This plummet today is an example of throwing the baby out with the bath water. Coffee still has strong fundamentals, and even though damage can be done to prices temporarily people need caffeine and aren’t going to stop drinking just because a few assholes on Wall Street were successful at robbing millions of assholes on main street. This is the washout coffee needs to dump the last of the overleveraged hedge funds and welcome the last bit of commercial hedging before this market bottoms long term.
2. The rapid strengthening of the dollar has thrown off valuations of commodities to where comparing these prices with those 5 months ago are meaningless. The dollar has strengthened against the Brazilian Real, making current prices much less appealing to farmers, somewhere to the tune of 8 to 15% less appealing in real terms. Producers are capitalizing on higher exchange rates and selling this bottom regardless of what appears to be relatively cheap prices on the daily charts.
3. Manipulators are having a ball and taking out stops below the 135 level in order to make a quick buck. (Could be the case, but when prices close at the bottom of this 6 cent range I have to wonder where the buyers are. Not to mention days like this tend to precede larger declines. Coffee eats like a bird and shits like an elephant they say.)

Questions:
1. Why is coffee falling out of bed in late September when it refused to break support throughout the Brazilian harvest in May through August? I don’t believe that the harvest is flooding the market, even if exports from Brazil picked up pace. This is actually a normal seasonal pullback before prices commit to an uptrend, but it is rare for the September pullback to break support set in August or July.
2. Why have commercials not gone heavily long as of yet (as of today they may have, we won’t know until open interest and the Commitments of Traders report are released Friday). Commercial traders have been net long at the bottom of every seasonal change in trend for the last 5 years.
3. How do I protect myself at this point?

I still believe this market has reason to rise (I knew I was early to enter the market when I did). Therefore a fire sale won’t do here, not to mention no one is going to take my call options off my hands if the market continues to tank. So at the very least I’ll wait for a rally, large or small to liquidate my December contracts. Even if this market falls ten cents tomorrow, and it could, wiping out the rest of my equity in the process, I refuse to sell cheap and buy dear. It takes a lot of discipline not to be overrun with panic and sell sell sell, and that is indeed all I want to do at present. But so does everyone else, which is why odds are I’m better off being a buyer or waiting.

I have two months left on my December contracts, and those are the options which pose the largest threat. This little breakdown could weaken the market to where two months may not be enough time for buyers to regain their courage and pull prices back up to par. I need to be out at least another three to six months out at this point and will look to roll those Decembers further forward as soon as possible. Despite this stressful situation, I still have faith in power of market fundamentals to win out in the end, regardless of short term erratic behavior. And as we all know, low prices stimulate demand. Bring in the buyers!!!