TIB: Today I Bought (and Sold) - An Investors Journal #181 - Agriculture, Grains, Italian Banks, Bitcoin

More work on the farm. Panic goes out of stock markets and crypto markets as South Korean Finance Minister allays fears about closing exchanges. Regulation is coming as a priority. State of the Union says all the right things for markets.

Portfolio News

Melt-up - Downdraft: Markets went back to what they prefer to do and focused on data from earnings and words from the Federal Reserve. Janet Yellen chaired her last Federal Reserve meeting with a unanimous vote to leave rates unchanged. There were small changes in the wording used which could be interpreted to be a bit more positive than last time.

https://www.bloomberg.com/news/articles/2018-01-31/asia-stocks-face-mixed-february-start-after-fed-markets-wrap

Bitcoin in Korea Meanwhile there was concrete action in Korea to eliminate anonymous crypto trading in South Korea. The Finance Minister, Kim Dong-yeon, did go on record to say that the government was prioritising the regulation of exchanges and would not be taking action to close down exchanges.

https://www.coindesk.com/south-korea-doesnt-intend-to-ban-crypto-trading-says-finance-minister/

Bought

ETFS Grains ETC (AIGG.L): Agriculture. I posted this chart yesterday which shows the laggards in the agriculture sector. Both corn (green) and wheat (yellow) are showing signs of life with a break up from the lows.

I added shares in an ETF that track grains. The portfolio is a synthetic portfolio that uses swaps to replicate a grains portfolio made up of corn, wheat and soya beans. I was happy to include soya beans as these are already performing better than the overall agriculture index. I chose this ETF as it is listed in London and I could trade while market was open. US investors could use Ipath Bloomberg Grains ETF (JJG). The charts look the same. The long term view on the chart is simple - 12 month cycles with a very steep run up and more gradual decline. The longer term decline of progressively lower highs reminds me why I am not a farmer.

The risk in the trade is there is a repeat of the down run we see from 2012 for two years (I am going to guess this was drought or flooding problem - a bit of Google work shows that to be true)

http://www.abc.net.au/news/rural/2014-06-19/us-wheat-crops/5535024

PowerShares DB Agriculture ETF (DBA): Agriculture. I wrote yesterday that I was a little unhappy with the required bid premium for the January 2020 strike 19 options. I was also concerned that I might not have time to reach the breakeven under one price scenario. I made a plan B to address both problems. I bought a small parcel of stock. If time is the problem with the trade, holding the stock takes away the time value problem with the options. It does involve opportunity costs as these commodity ETF's do not pay dividends.

It also allowed me to buy a bull call spread. I bought a 19/24 bull call spread for $1.75 net premium. [Means: Bought strike 19 call options and sold strike 24 call options with the same expiry]. This brings premium below 10% to 9.2%. Breakeven comes to $20.75 and maximum profit is 185% if price reaches 24 by January 2020 expiry. I have updated yesterday's breakeven chart by showing the new call (19) and the sold call (red ray). This looks more comfortable with the pink arrow going above breakeven now and the 100% profit level is below the last highs.

Good summer crops and the maximum profit will be hit.

Banco BPM Società per Azioni (BAMI.MI): Italian Bank. I wrote about BAMI in TIB176 when I bought the stock. At the time I put in a bid on December 2019 3.2/4.8 bull call spread. That bid for a 0.37 net premium was taken up overnight. That gives a premium percentage of 11.6% to strike which is a little higher than I like. How does it look on a chart?

The chart shows the bought call (3.2), and 100% profit as blue rays and the sold call (4.8) as a red ray with the expiry date the dotted green line on the right margin. It is tricky to choose a past pattern because there has not really been a similar period of consolidation or a slow run up. Price has moved hard when it decides to move - pick a blue arrow or a pink arrow and start it anytime in the next year and the maximum profit of 332% will be made.

Cryptocurency

Bitcoin (BTCUSD): Price range for the day was $810 (7.8% of the high) which is more normal though price did test well below the $9,700 making a low of $9,514. I closed out one contract on Bitmex for $132 per contract profit (1.3%). Adding the new trade of $9758, I did reduce my average entry price a little for the 8 contracts I am holding (Bitmex says $10,847).

If past patterns are anything to go by - 4 higher highs on a 1 hour chart we could see price moving to around the $11,500 level.

Currency Trades

Forex Robot did not close any trades and is trading at a negative equity level of 8.6% (lower than prior day's 9.5%).

Cautions: This is not financial advice. You need to consider your own financial position and take your own advice before you follow any of my ideas

Images: I own the rights to use and edit the Buy Sell image. News headlines come from Bloomberg.com. Wheat news comes from ABC.com.au. All other images are created using my various trading and charting platforms. They are all my own work

Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers

Charts: http://mymark.mx/TradingView - this is a free charting package. I have a Pro subscription to get access to real time forex prices

Crypto Trading: get 6 months free trades with Bitmex for leveraged crypto trading. http://mymark.mx/Bitmex

Bitcoin: Get started with Bitcoin for as little as €50 (in Bitcoin) and earn Bitcoin at a rate way better than your bank will offer - think weeks instead of months. Now available again in US or Canada http://mymark.mx/Mark

January 31, 2018