Copper

PieterSteidelmayer

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I have been short copper for some weeks now based on primarily fundamental factors such as upcoming surge in supply over the next few months based on production schedules and on-going decreases in demand.Falls in recent days have not had the expected impact on synthetics' volatility or premium so I added those to my overall short holdings feeling like I've got a bargain.Buyers remorse set in as I relaized those boys don't normally get it wrong or misprice so I am extremely wary that I may have misjudged the situation and am ready to dump the lot at the first sign of trouble.


If spot hasn't cracked the 3.00 barrier coming into the Friday open I will give serious consideration to liquidating my entire position at market.
 
For the avoidance of any confusion my view on copper is primarily based on fundamentals. There is a speculative interest which bears regarding around trade management, but it isn't a primary decision factor in assessing and preparing the trade. Most tangible underlying have a primarily fundamental basis.

Contrast this with spot FX for instance where the predominant short term interest is primarily, and for intraday almost entirely, speculative - somewhere in the the region of 85% from memory. On those markets technicals drive the minute to minute movement which ride on and occasionally counter the longer term interest. Weighing macro-economic factors in these markets is useful for context but largely irrelevant.
 
I started this thread in order to outline the fact that even pro traders can doubt the validity of their positions under certain circumstances, but even then they have a game plan in place if things are not panning out as they would expect. My initial post indicated my delight at getting what I considered to be underpriced derivative on copper and then considering the very real likelihood the guys selling me those lots know more than me and that I had bought their lemons at top price.

With the breakdown through the 3.00 level that I calculated would set the medium term term tone the premiums came back to book and my good fortune in picking up cheap volatility ha spaid dividends.

Even though spot is still only slightly below the 3.00 level the synthetic side of my aggregate copper position now has profits locked in and my overall situation is risk covered by a factor of 3,5.

I say this not to crow, but to underline the fact that even pros sweat it, but rather than hoping and praying they have a game plan for both the upside and the downside and nothing is left to chance and we keep our eye on the ball and the game plan gets modified constantly to reflect changing market conditions. There is no fire and forget in trading.
 
Copper testing for resistance today. I'm positioned to close out not too far away so if it closes through the key level I'll be out. The synthetic side is now flat for a very reasonable profit that was due more to my good fortune in getting cheap premium than any trading related skill on my part. Never look a gift horse in the mouth, but beware of white elephants.
 
Copper formed a key reversal bottom yesterday and has given most of that back today. It has been consolidating on the daily chart and a rally would be great.


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but in all seriousness, long term copper is in a downtrend. The next potential support is down at 275.00. The current pounding down has to hit 250.00 on the monthly chart.
 
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