Several months ago I mentioned that I thought a major bottom in commodities was about six months away. Well, I think it's partly here now, and I am trading it. This morning I bought crude oil.
First off, I think it's cheap. I have a ten-year price model that says it's undervalued. Not only is the spot price cheap, but it's cheap all the way out the curve. Additionally, options are cheap as well. So I bought a bunch of long dated slightly out of the money calls. This is a big trade.
Soybeans are also getting into my buying zone, although not as clear at this point.
One more trade: I covered my short long dated SPY calls. I really don't know where the stock market is going short-term, but I sense there is the possibility of a fierce rally here. So I don't want the gamma to blow up on me. I still think we will not get back to the old highs for a long time, but discretion is the better part of valor.
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