I read 2 statements in the curriculum, which I thought were opposites. I am definitely missing something here. The two statements:
“In periods of financial and economic distress, commodity prices tend to rise, potentially providing valuable diversification benefits in such times.”
“Commodity prices tend to decline during periods of weakness in the economy.”
In what context is #1? When there is hyperinflation, there could be distress in the financial system and the economy. Commodity prices usually tie to the USD. In this situation, investing in commodities tied to the USD can potentially provide diversification benefits (ie Turkey and Argentina now).
Commodity price peak when an economy is heading to recession but exactly downturn cycle has yet to start.
Commodity price is down when economy is down.
One should note that price of precious commodities like gold may rise even during depression (not just recession) because that might be considered as safe heavens.
In the event of a Mad Max apocalypse scenario, I’m pretty sure that not only gold and oil price would rise than even food commodities.
Aka, invest some part of portfolio into canned food and water bottles just in case of an apocalypse.
Thank you Flashback- really helpful!
Bbear- it was a standalone statement in the ‘introduction to commodities’ part of the curriculum.
Hi, I am a new trader I usually trade in intraday please let me know if there are any strategy or tips I can follow.
Yesterday I have taken a sell call in crude oil at 3904 and exited from call 7:30 pm at 3880
Total Profit: 26
here’s a tip: don’t trade and if you trade, don’t trade intraday.
The yield curve inverted. Whooptie doo. SPX at all all time highs a quarter later. I feel like a lot of these indicators or historical patterns are getting thrown out the window. You could have depressed commodity prices during a recession (e.g. oil prices fall due to low global demand), or high oil prices could factor in a recession (costs of production go up). Similarly, during recession you could have high inflation (stagflation), and we learnt in the curriculum that high inflation is good for real estate, but if recession is caused by low demand, then real estate could tank as well.
You should use a coin. Flip it and if its heads you should buy and tails you should sell.
Here’s my steps:
It inverted for like a week because of yield chasers at the long end of the curve. Really not even worth noting.
Today I have taken a buy call in crude oil at 3882 and exited from the call 4:30 pm at 3860 Total Profit: 22
You’re pro
<!–td {border: 1px solid #ccc;}br {mso-data-placement:same-cell;}–> <!–td {border: 1px solid #ccc;}br {mso-data-placement:same-cell;}–> Yesterday I have taken a sell call in crude oil at 3873 and exited from the call Today 8:10 pm at 3849 Total Profit: 24
That’s a good strategy. Profit lies in a tax loss harvesting (and maybe a bit in a money-laundering).
Yesterday I have taken a buy call in crude oil at 3884 and exited from the call Today 9:10 am at 3935 Total Profit: 51
I believe you are missing important details from both your statements. However, different commodities react differently during periods of distress. For example commodities such as gold and silver will rise in periods of economic distress due to flight to quality. While other commodities that are directly related to economic activity such as oil and copper will fall during periods of weakness due to a demand shock.
As a high aggregate inventory ratio is a leading indicator for an upcoming economical downturn so does the price peak of storable commodities on which you refer. See my first post above.
Today I have taken a sell call in crude oil at 4011 and exited from the call 2:20 pm at 3987 Total Profit: 24
Today I have returned 400 bottles with a return fee for packaging waste of $0.08 per bottle. Total Profit $32.26.