This is a sample entry from Brian Cullen’s email newsletter, The Cullen Outlook, published on February 26, 2013.
MAY SUGAR: 3 WAYS!
I will be attempting to BUY the May SUGAR contract at this level. If you would like to get involved and follow along with me, below are 3 different ways with which to do so.
I am aware that different traders have different approaches and levels of comfort, so let’s cover all 3. Each type of trade has its own pros and cons and each will provide the possibility of different risks versus rewards. That being said, no matter which style you choose to go long this market, in my opinion, this set-up looks great in a market that has found some recent support at this level.
- An outright future contract:
BUYING the May contract at 17.90 (GTC) … last trade 17.96
- Risk will be the 17.50 level …($448.00)
- OBJ will be the 18.90 level …$1,120.00
Have a look:
- A futures spread:
BUYING the May contract
SELLING the October contract
Premium of -70 points to the SELL (GTC)
- Risk will be the -90 level …($224.00)
- OBJ will be the -20 level …$560.00
Initial margin for the spread is roughly $500.00 per
Have a look:
- CALL spread:
BUYING the May 18.00 CALL
SELLING the May 19.00 CALL
49 days until expiration
Premium of 34 points (or $380.80) to the BUY side (GTC)
- Risk will be the cost of the spread, $380.80 (plus all trading fees)
- Maximum profit possibility if we expire above 19.00 at expiration is $1,120.00 (minus all trading fees)
Have a look:
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
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