Expanding Commodity Volatility = Good or Bad?

November 11, 2010 Attain Capital 1 Comment  Like
Markets

It has been an interesting past two days in commodity markets, with some sharp moves up/then down, before settling in a little today…. with Silver moving nearly 10% in a session and a half, Cotton falling from its highs, and grain markets moving: (Sugar has dropped about -7% in the hour or so since we started writing this)

11/09 High 11/10 Low % Move
Silver 2934 2648.5 -9.7%
Wheat 7606 6950 -8.6%
Cotton 157.23 145.81 -7.3%
Corn 605 565.25 -6.6%
Soybeans 1330.75 1269.5 -4.6%

This movement comes on the back of several markets hitting new all time (nominal) and or multi-year highs, while other markets remain well below their all time highs despite recent moves to the upside:

Aussie all time high Corn -37% below ’08 high
Canadian nearing all time high Crude -52% off ’08 high
coffee 13 yr highs S&P -23% off ’07 high
Cotton 9 yr high Soybeans -11% off ’08 high
Gold all time high Wheat -56% off ’08 high
Silver all time high
Sugar 29 year high

What does it all mean? Such volatility has been associated with tops and bottoms in the past, and it could be the commodity bulls are running out of steam a little. But seeing how far Wheat and Crude (for example) have to go to match the highs in other markets…. maybe the recent volatility is just signaling a breather and market consolidation before pushing higher.

We’ll have to wait and see where we go from here,  but the commodity volatility has caused short term losses for some managed futures managers.  Short option seller ACE Diversified has felt the brunt of the moves and is down significantly for the month. Meanwhile, shorter-term multi-market traders likeDominion Capital andFutures Truth SAM 101 have been whipsawed a few times of late, buying false breakouts lower. Finally, spread traderEmil van Essen is down about -2% in the past few days, as volatility usually shows up in the front month contracts more so than in back month contracts (the theory being that whatever today’s crisis is, can be worked out by the further out delivery date).

We had one client start Emil Van Essen on the pullback today, and applaud that contrarian view – as expanding volatility should be good for managed futures as a whole moving forward.

One comment

  1. Tony Montini (Attain Trading Desk Manager)
    November 12, 2010

    The broad based correction continued in most commodity sectors Friday with rumors of China considering another interest rate hike acting as the main catalyst. Sugar was down another -11.6%….Corn -5.3% and Soybeans -5.1% posted limit losses…the slide was also seen in industrial arena as Silver -4.6% and Crude Oil -3.1% led their respective sectors in the inflation purge.

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Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

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The Quintile Rankings and RCM Star Rankings shown here are provided for informational purposes only. RCM does not guarantee the accuracy, timeliness or completeness of this information. The ranking methodology is proprietary and the results have not been audited or verified by an independent third party. Some CTAs may employ trading programs or strategies that are riskier than others. CTAs may manage customer accounts differently than their model results shown or make different trades in actual customer accounts versus their own accounts. Different CTAs are subject to different market conditions and risks that can significantly impact actual results. RCM and its affiliates receive compensation from some of the rated CTAs. Investors should perform their own due diligence before investing with any CTA. This ranking information should not be the sole basis for any investment decision.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

The programs listed here are a sub-set of the full list of programs able to be accessed by subscribing to the database and reflect programs we currently work with and/or are more familiar with.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history. Individuals cannot invest in the index itself, and actual rates of return may be significantly different and more volatile than those of the index.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

Limitations on RCM Quintile + Star Rankings

The Quintile Rankings and RCM Star Rankings shown here are provided for informational purposes only. RCM does not guarantee the accuracy, timeliness or completeness of this information. The ranking methodology is proprietary and the results have not been audited or verified by an independent third party. Some CTAs may employ trading programs or strategies that are riskier than others. CTAs may manage customer accounts differently than their model results shown or make different trades in actual customer accounts versus their own accounts. Different CTAs are subject to different market conditions and risks that can significantly impact actual results. RCM and its affiliates receive compensation from some of the rated CTAs. Investors should perform their own due diligence before investing with any CTA. This ranking information should not be the sole basis for any investment decision.

See the full terms of use and risk disclaimer here.

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