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Noel Campbell It’s been no secret that I have been talking about Sugar price movements as being one of the great trading opportunities of the past couple of years. Well, at least since the run in the Soybean market back in 2004. The Soybeans ran up late on a 30-year cycle, but the run did come. Sugar is testing our patience, in just the same way, with the culmination of its own 30-year cycle.
There have been big runs in the Euro (which is faltering), in Gold, in Oil and the list goes on. That’s the thing with the futures market, opportunities abound. One could say that is where part of the problem lies. There is too much opportunity, which leads to greed, a sense of not being sure just how much is enough. But that sounds more like a topic best left to Sinan to cover.
It can pay, at times, to just find a market where the conditions seem right and there is an opportunity worth following, then devoting a great deal more focus to this opportunity. That’s where we are at now with Sugar. The first article I wrote for the Trading Tutors Newsletter about Sugar was back when it was around 6 cents/pound; it is now near double that. But there could be a lot more left in this run - a lot more.
Chart 1 - Sugar Weekly Chart
click chart for more detailPerhaps a few readers have read the stories on Sugar, but thought, that’s something I don’t know about, so therefore while interesting, I don’t see how that is going to make a profit for me.
Give me an hour and a half at a Trading Tactics Seminar with any reader and we will be 9 steps out of 10 along the way toward getting you ready to take a Sugar trade amongst other futures markets.
The first thing you need to know is that it trades on the New York Board of Trade (www.nybot.com). Secondly, it is quoted in cents per pound, but trades to a smallest price movement (tick) of 0.01cent/pound and each tick is worth US$11.20 per contract. Chart 1 is the weekly bar chart for Sugar (#11) where you can see the scale represented as cents per pound. The key contracts to trade are March, May, July and October. Right now we are focussing on trading the March contract. Now Sugar (#11) is deliverable so we need to be sure to trade our way out of any positions before expiry.
The expiry day for the contract is the last business day of the prior month. This means the March contract will expire at the end of February, so you’ve been warned! The risk on an average daily chart ABC trade is around US$150 to US$300 and on a weekly chart trade between US$600 to US$800 per contract. Many are surprised just how low the risk is trading a daily chart. Are you thinking futures trading is to be only undertaken and learnt by the big guys? Wrong, futures trading is very accessible to all who have the desire to learn and Sugar is a very reasonable contract to get started on.
I will be following up on Sugar over the coming months and discussing just whether this run eventuated.
Until next week......
Noel Campbell
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