WGB Alert-Line®

I'll tell you all about what happened today, but first let me remind you of what is about to happen: Remember our "Let's Talk Trading" Chat tomorrow night, Tuesday, 6:pm, Pacific Time, at www.kenroberts.com. See you there!

Now, here's what just happened: May Copper broke and closed above its contract high today. The previous high was established on March 8 at 152.10, and today this market closed at 152.50. Based on the "Hi-Lo Breakout" Strategy, this triggers a possible entry with call options.

I've included a daily chart of this market below. Since prices closed at 152.50 this provides me with a reference point for shopping call options. I decided to search for options that have at least 90 days remaining before expiration, and a strike price as close to today's settle as I can afford.

Daily Copper

I then visited US Charts Online to see what the going price was for options that were both at-the-money (the 152 call) and slightly out-of-the-money (the 155 call). I even looked a bit farther out-of-the-money and checked on the 160 call. By the way, I chose to look at opportunities in the September contract month because these options don't expire until August 25 - providing well over 90 days until expiration.

Checking the option quotes on U.S. Charts Online, I found I could purchase the September 152 call for $2,075, while the 155 call was going for $1,787.50 and the 160 call settled at $1,326.

Because of the difference in price, I've decided I will focus on the less expensive September 160 call and will begin paper trading this option tomorrow.

My first upside target for this paper trade is the all-time high on the monthly chart at 164.75 (made December 1988). If prices get above this level the next target is truly unknown (because it would be a new all-time high), so I would trail a "mental stop" below any support points that are made along the way.

Monthly Copper

See you at tomorrow's chat!

NOTE: The information contained in our E-mail Updates is for educational purposes. Market conditions and commodity prices constantly change.

These futures charts are presented for informational purposes only. They are intended to show how investing in options can depend on the underlying futures prices; specifically, whether or not an option is in-the-money, at-the-money, or out-of-the-money. The futures charts are not intended to imply that option prices move in tandem with futures prices. In fact, option prices may only move a fraction of the price move in the underlying futures. In some cases, the option may not move at all or even move in the opposite direction of the underlying futures contract.
Trading in commodity futures or options involves substantial risk of loss. According to many experts, most individual investors who trade commodity futures or options lose money.
Being a successful PAPER TRADER during one time period does not mean that you will make money when you actually invest during a later period. Past Results are not necessarily indicative of Future Results. Investment in commodity options for potential profit is accompanied by the risk of loss of the entire investment. Your trading decisions should be based on your own particular financial circumstances and trading objectives. WARNING: OPTIONS TRADING INVOLVES HIGH RISKS AND YOU CAN LOSE A LOT OF MONEY.
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