Roland Junck – What the approaching will be? April 22, 2009

Filed under: Commodity Future Videos

Roland Junck – Transforming a commodities business in tough times – 4th part: What the future will be – Cercle Munster April 22, 2009

http://www.youtube.com/watch?v=iPvkPwN5adE&hl=en

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Dividend.com – Commodity Watchlist – Jun 11, 2008

Filed under: Commodities Future Videos

The market futures had looked good early, but the markets fooled some traders and turned down almost immediately out of the gate. The oil inventory number caused another spike in crude oil prices, and the market took the knee early. The close will be the key for the following plays we are watching closely: Oil (USO), Gold (GLD), Silver (SLV), Oil Service ETF (OIH) and the ultrashort Oil & Gas (DUG). www.dividend.com

http://www.youtube.com/watch?v=Vu5wtx918Gc&hl=en

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Branches of Accounting, Uses of Accounting and Limitations of Financial Accounting

Filed under: Commodity Future Articles

Accounting vs. Book-keepingBook-keeping concerns itself with the recording (correctly and in a set of books) of those transactions that result in the transfer of money or money’s worth. Whereas accounting is comprehensive in perspective. It extends to classifying, summarizing, presenting and even analyzing accounting information .

Accounting vs. Accountancy

Body of knowledge (consisting of principles, postulates, assumptions, conventions, concepts and rules) governing the science of recording classifying and analyzing financial transactions is accounting. Whereas the practice and art of the science of accounting is termed as accountancy.To meet the ever increasing demands made on accounting by different interested parties (such as owners, management, creditors, taxation authorities etc.) the various branches have come into existence. Financial AccountingThe object of financial accounting is to ascertain the result (profit or loss) of business operations during the particular period and to state the financial position (Balance Sheet) as on a date at the end of the period.

Cost Accounting

The object of cost accounting is to find out the cost of goods produced or services rendered by a business. It also helps the business in controlling the costs by indicating avoidable losses and wastes.Management AccountingThe object of management accounting is to supply relevant information at appropriate time to the management to enable it to take decision and effect control.In this web primer, we are concerned only with financial accounting. The objects of financial accounting as stated above can be achieved only by recording the financial transactions in a systematic manner according to a set of principles. The recorded information has to be classified, analyzed and presented in a manner in which business results and financial position can be ascertained.

Uses of Accounting

Accounting plays important and useful role by developing the information for providing answers to many questions faced by the users of accounting information.

(1) How good or bad is the financial condition of the business?

(2) Has the business activity resulted in a profit or loss?

(3) How well the different departments of the business have performed in the past?

(4) Which activities or products have been profitable?

(5) Out of the existing products which should be discontinued and the production of which commodities should be increased.

(6) Whether to buy a component from the market or to manufacture the same?

(7) Whether the cost of production is reasonable or excessive?

(8) What has been the impact of existing policies on the profitability of the business?

(9) What are the likely results of new policy decisions on future earning capacity of the business?

(10) In the light of past performance of the business how it should plan for future to ensure desired results ?

Above mentioned are few examples of the types of questions faced by the users of accounting information. These can be satisfactorily answered with the help of suitable and necessary information provided by accounting.

Besides, accounting is also useful in the following respects :-

(1) Increased volume of business results in large number of transactions and no businessman can remember everything. Accounting records obviate the necessity of remembering various transactions.

(2) Accounting record, prepared on the basis of uniform practices, will enable a business to compare results of one period with another period.

(3) Taxation authorities (both income tax and sales tax) are likely to believe the facts contained in the set of accounting books if maintained according to generally accepted accounting principles.

(4) Cocooning records, backed up by proper and authenticated vouchers are good evidence in a court of law.

(5) If a business is to be sold as a going concern then the values of different assets as shown by the balance sheet helps in bargaining proper price for the business.

Limitations of Financial Accounting

Advantages of accounting discussed in this section do not suggest that accounting is free from limitations.

Following are the limitations:

Financial accounting permits alternative treatmentsAccounting is based on concepts and it follows ” generally accepted principles” but there exist more than one principle for the treatment of any one item. This permits alternative treatments with in the framework of generally accepted principles. For example, the closing stock of a business may be valued by anyone of the following methods: FIFO (First-in- First-out), LIFO (Last-in-First-out), Average Price, Standard Price etc., but the results are not comparable.

Financial accounting does not provide timely information

It is not a limitation when high powered software application like HiTech Financial Accenting are used to keep online and concurrent accounts where the balance sheet is made available almost instantaneously. However, manual accounting does have this shortcoming.

Financial accounting is designed to supply information in the form of statements (Balance Sheet and Profit and Loss Account) for a period normally one year. So the information is, at best, of historical interest and only ‘post-mortem’ analysis of the past can be conducted. The business requires timely information at frequent intervals to enable the management to plan and take corrective action. For example, if a business has budgeted that during the current year sales should be $ 12,00,000 then it requires information whether the sales in the first month of the year amounted to $ 10,00,000 or less or more?

Traditionally, financial accounting is not supposed to supply information at shorter interval less than one year. With the advent of computerized accounting now a software like HiTech Financial Accounting displays monthly profit and loss account and balance sheet to overcome this limitation. Financial accounting is influenced by personal judgments’Convention of objectivity’ is respected in accounting but to record certain events estimates have to be made which requires personal judgment. It is very difficult to expect accuracy in future estimates and objectivity suffers. For example, in order to determine the amount of depreciation to be charged every year for the use of fixed asset it is required estimation and the income disclosed by accounting is not authoritative but ‘approximation’.

Financial accounting ignores important non-monetary information

Financial accounting does not consider those transactions of non- monetary in nature. For example, extent of competition faced by the business, technical innovations possessed by the business, loyalty and efficiency of the employees; changes in the value of money etc. are the important matters in which management of the business is highly interested but accounting is not tailored to take note of such matters. Thus any user of financial information is, naturally, deprived of vital information which is of non-monetary character. In modern times a good accounting software with MIS and CRM can be most useful to overcome this limitation partially.

Financial Accounting does not provide detailed analysis

The information supplied by the financial accounting is in reality aggregates of the financial transactions during the course of the year. Of course, it enables to study the overall results of the business the information is required regarding the cost, revenue and profit of each product but financial accounting does not provide such detailed information product- wise. For example, if business has earned a total profit of say, $ 5,00,000 during the accounting year and it sells three products namely petrol. diesel and mobile oil and wants to know profit earned by each product Financial accounting is not likely to help him unless he uses a computerized accounting system capable of handling such complex queries. Many reports in a computer accounting software like HiTech Financial Accounting which are explained with graphs and customized reports as per need of the business overcome this limitation.

Financial Accounting does not disclose the present value of the business

In financial accounting the position of the business as on a particular date is shown by a statement known as ‘Balance Sheet’. In Balance Sheet the assets are shown on the basis of “Continuing Entity Concept. Thus it is presumed that business has relatively longer life and will continue to exist indefinitely, hence the asset values are ‘going concern values.’ The ‘realized value’ of each asset if sold to-day can’t be known by studying the balance sheet.

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Commodity Market Forecasts How Do I Trade Them? PART 2 Decrease Risk and Increase Staying Power

Filed under: Commodity Future Articles

Producing a high probability trade forecast is not easy. Just as difficult is determining the best trading strategy and vehicles to capitalize on the forecast. Read on to learn some of my favorites trading strategies.

Another method to trade a projected move is to write a commodity option and protect it with another one of a different time frame. The choice depends on the price of the options and their time curves.

Let’s take an example. I remember a time when sugar was selling for about 6 cents and you could cheaply a buy 7-cent call out for 12 months. There was barely any premium in them. At the time you could sell the close in 2 month sugar 6.5 calls for a reasonable premium and continue to repeat this until the 12 month call expired. This would permit about six hedged writes over a year’s time.

These were low risk commodity option trades because the risk was only $625 a trade, being protected by the long call. Finding a long term “insurance policy” option like this and using it to keep rolling over short term options writes is a great technique.

This technique will not work if the market is real active and running, but if you catch a market that is asleep, buy the cheap, far-out in time hedge. If the commodity futures market then comes to life and option premiums expand, you will do even better to cover the option writes and hold the original call for the rally.

The opposite of this method can sometimes be the right choice also. Let’s say you expect soybeans to trend higher over time. If we write a close in strike put option with lots of time, we will collect a hefty premium. If the market is destined to trend higher, then the biggest risk is probably within the first month or two. If we can make it through the first two months, perhaps the underlying futures market will have gone far in our favor.

Buying a cheap put that has only a month or two until expiration will give us the needed protective hedge. After two months, if the market makes a favorable rally, we will be out of immediate danger as the short-term put option expires.

By doing this we pay a small premium for insurance, but get to keep the majority of the initial write premium in the following months, assuming the market holds firm or continues to rally.

Bear in mind that simply writing commodity options without predicting direction is a wash over the long term. Generally, the commodity market will not pay you simply to sell options in a range. You need to be useful by taking on risk. If simply selling options in a range worked profitably for the long term, everyone would be doing it and eventually the premiums would erode to the point of being minuscule.

There are other commodity option trading methods such as buying a call and selling a higher call to help pay for the first. And there’s a high-risk method of buying a call and selling two puts to fully pay for the call – but this is like holding two naked long futures and is not achieving our goal of reducing risk.

I find the best method for developing an option strategy is to first find a high probability, low risk futures trade. You MUST forecast direction to get an option edge, even when writing them. This forecast can even be a chopping market to write options or trending market for option position trades or spreads. Then use option analysis software to scan for the best option combinations to do the job.

Some traders make the mistake of relying entirely on the option analysis program to find undervalued or overvalued options, etc. But options are often that way for a reason and the market is reasonably efficient. You need to know direction.

Sometimes the forecast is questionable or the options are too expensive for buying or too cheap for selling, etc. It’s all a balancing act to finally come up with the optimum plan for a particular market.

More on this in later articles.

Part Three of Three Parts – Next

There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.

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ＣＦＤ取引　CMC Marketsのコマーシャル

Filed under: Commodities Future Videos

ハイリターン投資情報局www.ooparts-films.com www.futures-commodity.com www.cfd-info.biz 証券会社により、若干違いは、ありますが、CMC Markets Japanを例に挙げますと、新興国の個別株は、香港に上場している中国株、資源人気に沸いたオーストラリア、政策金利が高いためfxや債券で人気の南アフリカ、bricsの一角を占めるブラジルの企業もアメリカの株式市場に上場している企業やエジプトの株もイギリスに上場しているのでしたら取引は可能です。

http://www.youtube.com/watch?v=ntTrwRb35OY&hl=en

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Strong alpha for bolt helped by algid weather

Filed under: Commodities Future Videos

Energy and agricultural futures have started the year well, continuing the rising trend from December but helped by the cold snap in the Northern hemisphere. Saxo Bank’s Senior Manager for cfds and Listed Products Ole Hansen talks to Trading Floor Editor Andrew Arnold about the commodities market this week

http://www.youtube.com/watch?v=lm_4fzebmek&hl=en

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04/16/08 S&P, Emini and Futures Recommendations

Filed under: Commodity Future Videos

www.livewithoscar.com

http://www.youtube.com/watch?v=K47BazODT9k&hl=en

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The Futures Pick of 2008 – Oil Future Prices vs Corn Future Prices

Filed under: Commodities Future Articles

The year 2008 should be an interesting one on the futures market, as usual. Oil future prices are at an all time high and corn future prices are equally pumped up. The big question is, “will oil future prices stay this high and go even higher?” “Will the demand for corn continue and the corn future prices escalate exponentially over 2008?” Let’s take a look at both and then draw our analysis and conclusion.

Oil Future Prices: As of the writing of this article crude oil has meandered between $90 – $100. Is it really reasonable to assume that this can continue to go higher? Will Americans pay this much for it? Or will the government step in and use controls (IE: oil reserves, boycott, stiff armed approaches to OPEC countries) to stabilize and perhaps reduce the cost of crude? These are valid questions and just the start of inquiry if we are to determine if oil future prices will head up over 2008. I strongly believe that oil has peaked and I think we will stabilize at the $80 range. This is a range so it is not exact but for several reasons I do not believe oil is a buy for the 2008. My best advice is to stay away. Now let’s look at corn future prices.

Corn Future Prices: Don’t listen to what the so-called experts are saying about Ethanol, it is alive and well and the demand will dramatically increase over 2008. Corn future prices are going way up in 2008. Buy, buy buy. It is interesting how the correlation between oil future prices and corn future prices are diametrically opposed. As oil future prices increase the general population becomes increasingly aware of the need for crude oil alternatives and as a result Ethanol gets a public opinion boost. This of course translates into demand as the corn future prices rise, just as they are going to do in 2008.

This has been my opinion, I recommend that you search professional advice and perform due diligence before trading on the futures market.

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My Experiences Trading Euros and Currency Commodity Futures Contracts and Options

Filed under: Commodity Future Articles

The Euro has taken over the currency trading arena! Here’s some valuable hints and kinks taken from actual trading experiences.

The Euro is the new European currency. It’s easy to confuse the Euro with the “Eurodollar,” which measures interest rates for funds held in European banks. The Euro has become the primary source of foreign exchange globally. It’s competing with the US Dollar as the primary store of value. It’s the most liquid and active currency futures contract traded and is well suited for day trading as well as longer-term positions.

An account margin of $3000 will control a $150,000 Euro futures contract. (at today’s market) Each full-point move in the Euro equates to a $1250 profit or loss. There is also a mini-contract that is one-half the full-size Euro.

More and more countries are becoming members of the Euro confederation. The Euro will probably become even more popular and liquid in the future. Euro futures trade 24 hours electronically on the Globex, stopping Friday evening and starting again on Sunday night. Euro options are pit traded and trade within specific hours.

The full-size Euro futures contract is perfect for seasoned traders. Novices have the choice of trading mini-contracts, which are also available on many of the other currencies. Since the trading hours are extensive, traders must be vigilant to a multiplicity of reports. Many of these will occur in the dead of night when most traders are sleeping in the U.S. This is one major reason why you need to use protective techniques for futures or short option positions.

Euro futures trade like the Swiss Franc. Their price charts look very much alike. The British Pound will look a little different but has a similar chart as well. The Japanese Yen will look much different but the turning points are usually the same. Currency traders are constantly looking for disparities and advantages that can be traded due to interest rate and political changes. The US Dollar Index also trades but is relatively illiquid compared to the Euro or Yen.

The other currencies that lend themselves to trading aggressively would be the Canadian Dollar and the Australian Dollar. The Canadian Dollar trades well and sometimes trades like the U.S Dollar, though other times it trades counter. The Australian Dollar is sometimes in synchronization with other Asian currencies. There are times when it trades more in rhythm with the Euro. In other words, these relationships are always changing and we need to study what is happening right now.

There are methods to trade other currencies against each other. For example, there is a Euro-Yen contract. The Euro-Yen contract maintains the relationship between the Euro-Yen without involving the US Dollar. You will still have to convert back to dollars after the trade is finished. Some of these currency contract combinations are quite liquid while others are not. Check the open interest and volume to see if you can enter and exit without getting a haircut.

Technically, the currencies exhibit patterns and wave structures that can be traded effectively. Patience is the key to let the market come to you. Day-traders are attracted to the currency markets. The short term swings, quick fills and great liquidity make this ideal for the trader who can handle the heat of the moment. If you are a short-term trader, make sure you trade that way. If you are long-term trader and can handle the risk, stay that way. I have seen many traders lose in the long run when they jump back and forth between methods in the middle of trades.

Here’s how I look for opportunities in the currency markets: First I generate a TimeLine forecast that shows a strong move up or down in a particular currency. The TimeLine is based on time cycles and other preprogrammed patterns. I then determine if the move is expected to be choppy, trending, and for how long. This helps us focus on possible directional futures/option positions or writing options in a range, or even writing options with the trend.

Next I use automated option software to search for the best of 1600 strategies based on the expected market move. I compare these option to option combinations against futures to options combinations. At some point I will find a compromise between risk, profit and simplicity in one or two strategies. In hindsight there’s always a best strategy we could have used. Keep this is mind when narrowing down the choices. When finished, we want to have one or two potential trades to work with. We call the selected few, “high probability, low risk trades.”

Remember there is more to planning a trade than just coming up with a forecast. The market may move as predicted but we can still lose by choosing the wrong trading vehicles. Pick the right vehicles and strategies that will allow us to stay in the market without excessive fear, but still carrying calculated risk.

We NEED to take on calculated risk or the market will not pay us for our services. In addition, the vehicle has to move far enough to make a profit without letting the expense of protection eat us up. Excessive protection (risk avoidance) can come in the form of option premiums, too close-in stop loss orders – and overdone, complex spread strategies. Matching a forecast to a strategy is an important skill to succeed in commodity trading.

Good Trading!

There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.

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Managed Futures – How to Pick a Commodity Trading Advisor

Filed under: Commodity Future Articles

Over the last seven years the amount of money professionally managed in the commodity futures markets has more than quintupled! According to hedge fund tracking firm Barclays, assets under management rose from roughly 41 billion dollars in 2001 to more than 219 billion dollars today!

As worldwide demand for commodities continues to heat up and more and more investors (both institutional and individual) begin seeing commodities as a viable investment vehicle, this trend is likely to continue. This growth has also increased the need for effective ways to choose a commodity trading advisor. In this article we will outline what we feel are some of the best tools and methods available to the individual investor when choosing which managed futures product to invest in.

First things first, let’s define what managed futures are and what they are not. Managed futures are not stocks or ETF’s that simply invest in commodities. Managed futures accounts are investments in which funds are invested in mostly leveraged, future dated contracts for the actual physical commodities or financial instruments. Commodities can include sectors such as food, energy, raw materials and also financial instruments like interest rates and stock indices.

The leverage, risks and rewards can be (but are not always) substantially higher when investing in the futures markets vs. the stock market. Managed futures investments in the United States are regulated by both the National Futures Association and the Commodity Futures Trading Commission (unless the firm / fund have “exempt” status). Regulated firms are licensed as Commodity Trading Advisors (CTA’s) or Commodity Pool Operators (CPO’s). However, keep in mind that just because a firm is licensed or regulated, this is in no way an endorsement of potential performance. Futures trading can carry large potential risks and is not for everybody. Investors should fully familiarize themselves with all applicable risks and disclosures prior to making any investments.

Finding lists of potential managers to sort through is relatively easy if you know where to look. Firms such as Barclays Trading Group, Stark Research, Autumn Gold and Altegris Investments have databases of manager information available. One resource we particularly like is website of IASG .Institutional Advisory Services Group provides a free (with registration) online database of over 450 programs. In addition, the programs can be sorted by a wide range of parameters such as minimum account size, funds under management, various performance measurements etc.

The only problem we see with the online databases is that it can become somewhat overwhelming to try and narrow down your choices to just a handful of managers. In order to make the process a little easier we would like to share with you what we think are some of most important performance metrics to pay attention to.

First recommendation, forget return! The least meaningful statistic often is a manager’s return. How can that be you ask? What matters is RISK ADJUSTED RETURN. Just because somebody bet the farm and got lucky does not mean it was a good idea. Sooner or later (most often sooner) the inevitable wipe out will occur with a manager betting too aggressively.

There are a number of traditional risk adjusted return measurements, the most popular of which being the Sharpe ratio. The Sharpe Ratio compares the return relative to the underlying volatility in the investment. While fundamentally we are in complete agreement with the Sharpe Ratio’s logic, we feel it has one serious flaw. The flaw is that the Sharpe Ratio only views past volatility and makes no attempt to try and predict future volatility. As a result, we feel the Sharpe ratio does not give an adequate view of the potential risks involved in a program.

A good example of this comes from the world of the “option writers” (those who sell options). Since most options expire worthless it’s not uncommon for managers that sell options (and have a good approach) to have excellent Sharpe Ratios. They can have very smooth looking equity curves that have produced for many years. However, just because an equity curve looks smooth and consistent does not mean it will stay that way. What happened in the past is meaningless if you don’t have the same results in the future. Unfortunately, option sellers with longer term excellent track records have been known to have very quick spectacular “blowups”. The problem, in our opinion, is that past volatility is not a good predictor of future volatility.

What is a good predictor you ask? In our opinion one of the best volatility predictors is called the “Margin to Equity Ratio” (MTE). The MTE tells you approximately how much of your investment would be used for margin purposes. This number will vary day-by-day for a given manager but you can get the average range. If for example a managers MTE was 10% this means that for every $100,000 invested the manager uses approximately $10,000 of that for margin at any given time. Keep this in mind; the exchanges set margin based on their approximations of risk. The higher their perceived risk in a contract the higher the margin they set. We encourage you to think just like the exchanges and raise your expectations for potential risk as the MTE goes higher. If we go back to the example of the option writers with good Sharpe ratios you will also often see that they have very high MTE ratios. We believe that these high MTE ratios could have been the tip off to have avoided many disastrous scenarios. Once again, just as the exchanges often raise margin requirements as their expectation of volatility rises, so too do we see the potential for volatility (risk) to be higher as the MTE rises.

Another important use of the MTE comes down to simple math. If you have two managers that both made a $30,000 return yet one used $30,000 in margin to do it and the other used $60,000 in margin to do it then the results are not the same. Based on margin usage one manager’s return was twice as high as the others. This is very important to keep in mind because often managers can appear to have very similar performances but when you dig down into their margin usage you see large differences.

What is an ideal MTE? In our opinion we don’t like to see margin to equity ratios much above 10%. This is on the low end of the spectrum for managed futures accounts and eliminates the vast majority of managers. While it is true that having a low MTE is no guarantee of lower risk (managers with low MTE’s can “blowup” too) we feel that at the minimum it is possibly a good indication of sound risk management. Once again, it is our belief that as the MTE rises so does the potential for risk. There is also a related risk measurement often referred to as “portfolio heat” that uses similar concepts.

In summary, what we suggest is that you compute returns not based on what the manager reported, but rather on what the return was based on margin (you should also compute the risk and drawdown the same way). This will level the playing field and allow you to compare apples-to-apples. Furthermore, we are in favor of being on the conservative side of the MTE spectrum, for us that means that we would likely reject any manager with a ratio above 10%. Using this method can help you narrow down your list of choices to a manageable number rather quickly. After you have done this then you can then look and compare all of the other risk adjusted performance measures and further refine your selection. (At this risk of this article being too long we will save the other risk adjusted performance measurement discussions for future installments).

We want to caution once again that ultimately no measure is a guarantee or assurance against risk or losses. Past performance is not necessarily indicative of future results. Futures’ trading involves high risks and is not for everybody. We are simply sharing with you what we feel is the best method by which to select a manager.

Sincerely,

Dean Hoffman

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