Ok so here we are at the official start of summer in the US,hope you’re enjoying your holiday weekend. I for one plan to grill and catch up on a couple of books.

I am currently reading “The Importance of Living” which was suggested to me by Dr. Mark Skousen who is on Kudlow & Co. with me once in awhile and he also invited me to speak at his conference in Las Vegas this July “Freedom Fest”.

Ok so all this weekend keep checking back to the blog as I will be answering many questions from my RTA and OI subscribers. I get hundreds of great email questions a week and we often can’t answer even 1/10th of those.

SO look for more answers to more questions here each week from now on. Also, I always post some of my recent appearances on TV so scroll down to the last few days and you can see me on CNN, BNN, Fox and my interview with the Wall Street Journal. Enjoy!

By the way, have you picked up your FREE copy of my 2008 Agriculture Trading report? You can get your copy on the front page of our website. Enjoy

Now let’s get to some of those questions. I am in my hammock with a cool drink watching my 16 month old daughter run around the yard.

I do some of my best trading and thinking right here in the summer.

So let’s jump in to my readers questions.

Reader Mail from around the World….

Q.

Hi Kevin,
Thank you for your answer to my question earlier this week.
I sold the spread for 39 cents (I only had one contract) but now I’m cashed up and ready to have my money work some more. That is one thing that I’ve not seen money management folk address … one of the advantages of options, like you’ve said, is knowing exactly, up front, what your losses could be, and therefore … (sez me) there is no reason not to be 100% invested and have ALL your money working for you (as long as you don’t put it all on one play … red 17!?!)
BTW you have more than doubled my account, and we’re not through the year yet! Granted, the pockets were not that deep before (oh and they also had dust and spiders due to lack of activity). But the pockets are deeper now !! (and clean)
Thank you,
Lu

A.

Well most of all I am glad to hear you are doing well and keep your head down and 2008 could really be great for you. I like starting new traders with options just for that reason, limited risk and a little bit slower movement then futures. One step at a time, slow and steady wins the race. Best, Kevin
——————–

Q.

In six months I have increased my trading account by about 50%. Thanks for all your guidance and discipline in trading…Mike

A.

Congratulations! Expect some losses this year too though, hopefully more wins than losses but always protect equity. Take some of those profits and set them aside, always use risk management, that’s smart trading. Good Luck, KK

——————–

Q.

Hi Kevin,

I am new member of RTA . I have not placed any trades till date.(account just got ready)
Please advice if there are some good entries that I can make now ( from the previous Alerts that you have given , and still valid) , so that I can call up my broker and say ” Please place this order “

Thanking you,
Sam

A.

Well I still like all of our trades except maybe sugar. I think OJ is a sleeper, even thoguh the options are way down and the market has been very weak. The only thing that worries me is the shrinking volume of the exchange, mainly due to ICE taking over and basically destroying the exchange. Very unfortunate. We will have many more new trades soon too. Good luck. Kevin

——————–

Q.

Hi Kevin.

I appreciate your explanation of a bull spread in your mailbag but I still have a question… I understand the premium received when you sell the higher priced call is supposed to help reduce the cost of the lower priced call. However, doesn’t the value of the higher call go up alongside the lower call? If so, doesn’t its premium rise as well? What confuses me is that if, when you buy it back, the premium is higher than it was when you sold it, how is this really reducing cost? Or are you supposed to let the higher call expire worthless? I am still confused about the exit side of these spreads. Thanks and take care! CZ

A.

Spreads do have maximum profit due to that, that’s why many people don’t like them, they also have twice the brokerage, so brokers love them. Typically the lower strike will appreciate much faster and the maximum for the buyer comes at expiration, rarely would we hold a spread that long, we would instead take profits much earlier. Take care, KK

———————

Q.

Only had 1 contract so decided to take it. Got filled at 35.75 for 81% Figured 81% is a good profit for a few months. Can’t go wrong there!

Bob

A.

81% in a few months, let me check….Yes, yes that is a good profit….lol Tell me where else you can make 81% in a few months, congrats! KK

——————–

Q.

Hi Kevin,

Your advice is excellent and your service is great, thank you.

However, I guess I must be rather thick headed. I will not trade spreads in future because they are too difficult for me to enter electronically and TradeStation representatives don’t seem to understand what you are asking them to do when I read them your instructions.

Kind Regards,

Jim

A.

TradeStation is good but I highly suggest getting a broker you can talk to on the phone in order to place these trades. Look, you can trade both online (to save money and for ease) but also have a real live person to talk to. Very important. Good Luck and thanks for writing. Kevin
——————-

Q.

Filled the corn spread at 35.6 points. Filled the soybean spread at 39 points. Thanks for two great trades.
Ron

A.

You’re welcome and enjoy the profits, hopefully we will take even more on the second half of those trades, always good to lock in profits though. KK

——————-

Q.

Wondering if you can explain why sugar might follow oil down (if it ever corrects) when it hasn’t followed it up. Also, if the trade looks like it might not have enough time, is it not better for new subscribers to pass on adding to this position, or perhaps purchase an option farther out?
thanks

A.

Well 5 years ago if you had told me sugar would be tracking crude at all I would have been amazed. Truth be told is that we need to see a lifting of the tax on imported sugar based ethanol, that will be the catalyst, all the best, Kevin

——————

Q.

Good Morning Kevin.
Regarding the Soybean oil 65/70 dec call spread. I got in at 150.

Please explain something for me because you have me confused. Your alert for the 65/70 spread (BOZ8) referred to it as the Dec08 calls. Your briefing note on May 19th says that its the Nov 65/70 spread. When you send out the alert to sell I’ll be looking for the Dec spread not the Nov spread . Did I pick up the wrong spread .

Sincerely

Pell

A.

That was a typo and a mistake on my part, I apologize. It’s a good lesson though. Mistakes are easy to make especially when trading similar contracts. In this case though soybeans trade November and soybean oil trades December, not vice-versa. KK

Q.

Kevin;

Brief note on planting. I live 30 miles outside of Indianapolis in Anderson. My wife and I were out in the farmland twice this past weekend in different areas. It appeared to me that about 20% of the fields were still not planted and we are at the end of May. I been in the real estate busines for 42 years and I am very familiar with farm ground. Thought this might be interest.

Kendall

A.

Thanks for the update, keep em coming all season if you can. Best, Kevin

——————-

Q.

Dear Kevin,
I am new to RTA. Where can I get quotes so that I can follow prices
for commodities and options?
Regards,
Sheldon

A.

I use e-signal but many of the exchanges now offer quotes too. Depending on who your brokerage account is with they may offere them to you for free or for a discount, I would ask. It really depends if you want LIVE quotes or slightly delayed. For RTA purposes it’s not as important ot have 100% live quotes since we are trading options not futures. It will save you a lot of money or even be free if they are delayed. I would first check with your broker or one of thebrokers on our suggested list, you can find them at the link at the bottom of yesterdays update. Good Luck

——————

Q.

Kevin,

Can you possibly explain this when you get a chance? What does order busted mean? Are the floor traders playing games?

Thanks,

Jerry

A.

Well I’m not sure, you would have ask them. Busted can refer to a lot of things but it usually means there was something wrong with the order itself, (ie. Bad Price, month, etc.)
I would have them explain to you exactly what happened with this particular trade, if they can’t or won’t then find another broker immediately. best, Kevin

—————–

And our last one for today, but be sure to check back all through the weekend for more email and my outlook for the coming trading week.

Q.

Kevin,

Sorry to bother again! But wondering if you can comment on the following in your next mailbag. It is from a newsletter I subscribe to, written by a very respected market analyst (Bert Dohmen, The Wellington Letter):

“When central banks try to prevent recessions, it leads to higher and higher prices … Speculation in order to ‘beat inflation’ heats up. We are seeing this now, with hundreds of billions of dollars flowing into commodity investments …

All this money going into the commodity funds produces an artificial price boost for these. We are seeing inflation through speculation. When the bubble bursts, it will go down fast and furiously ….”

(I think he’s referring mainly to oil, coal and grains, since the same author is extremely bullish over the next 2-3 years on gold)

thanks, Mark

A,

Yes, funny enough I was just on TV with Burt the other day on Fox Biz with Stuart Varney…I will post a link here in a bit for that interview. The question isn’t whether many commodities will eventually correct, it’s when. Having said that, to jump on the short side of these markets right now expecting some huge plunge, well I wouldn’t suggest it. Look for the video here later.

Ok well that’s all the time I haver today, my lemonade is gone. Be sure to check back over the weekend for more answers to more questions. Enjoy the holiday.

This entry was posted on Saturday, May 24th, 2008 at 7:30 am and is filed under Maniac Trader Rants and Raves, Media Appearances. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.