c06 JWBT016-Busby October 10, 2008 20:38 Printer: TBD
82 STRATEGIES TO WIN
As with other futures contracts a margin account is required. The
money deposited into the trading account is a “good-faith” deposit or per-
formance bond. The amount of funds required is established by the ex-
change based on their risk assessment. The web site for the NYMEX ex-
plains the danger of trading with margin with an example of gold futures.
Per the exchange, you can trade a gold futures contract for a “good-faith”
deposit between $2500 and $3375 per contract. However, the value of the
gold controlled by that contract is around $90,000. To me, that means that
there can be big risk and big reward associated with this product.
Each day after trading comes to a close, the exchange marks-to-market
the contract. The exchange determines whether the day’s trading has re-
sulted in a gain or loss. If there is a loss such that additional funds are
needed, a margin call will be issued.
I make the “Squeaky Wheel” trade on Wednesdays. I do so because
each Wednesday at 9:30AMcentral time the Energy Information Adminis-
tration (EIA), a statistical arm of the Department of Energy, releases its
weekly petroleum status report. A few years back I never paid any atten-
tion to this weekly bit of news. However, with the onset of the war in Iraq,
tribal fighting in Nigeria, industrialization in China, and other major world
factors including the dropping price of the dollar on the world market, fuel
supplies are sometimes stressed and prices go wild. Therefore, I always
listen intently to the weekly status report. The EIA monitors our nation’s
petroleum inventories. These inventories consist of both domestic and for-
eign products.PEARL 8
Every Wednesday a crude oil report is released at 9:30AM. There are premarket
trading opportunities in the crude sector the morning of the announcement. Go
to http://www.dtitrader.com to view this trade in action.Following the report, I generally trade. Because I often trade crude
oil, I chart prices. I track the yearly opening price, the monthly opens, and
each weekly open. In that way, it is easy to see in a glance the direction the
market is moving. At the time of this writing, there has been no question as
to direction—prices have been going up.
I note the price just before the news airs. I look for a 0.50-point move-
ment. I trade in that direction. As a rule, this tends to be a fast-paced trade
that is over quickly. Only traders who have the ability to execute trades
rapidly should attempt this trade. The symbol for mini light sweet crude
is QM. Many of my students made this trade on May 1, 2008. Figure 6.11
depicts the fall of crude when news was reported.