How to Satisfy a Sweet Tooth Without Sugar
The energy complex took a thumping since our last issue, and some of your positions along with it. We strongly believe this is only a short-term weakness.
Powerful forces are lining up that should send oil stocks and heating oil much higher. While you're waiting for crude to rebound, you can console yourself with your recent back-to-back gains -- 50% on orange juice and 304% on gold!
Now, we have another hot trade for you: Sugar. You already bagged one round of gains on sugar -- up to nearly 47% (before commissions) back in August. Now, it's time to back up the truck and load up with sugar call options again.
What's driving sugar? A number of factors...
Supply/demand squeeze -- The International Sugar Organization recently forecast world sugar output for 2005-2006 at 149.6 million metric tons. That's a record -- but it's short of projected consumption of 150.6 million metric tons.
Hurricane hangover -- No, not Katrina or Rita, but Hurricane Stan. It slammed into Guatemala, flooding sugarcane-growing areas. Many sugarcane farms are now inaccessible because of mud and water. As the saying goes, "you can't get there from here." Crops will be lost, and other harvests delayed.
Fuel of the future -- High gas prices affect everything it seems, and that includes sugar cane. Sugar cane is being used successfully to make ethanol in Brazil -- in fact, it's more efficient than making ethanol from corn. This has sparked a lot of interest in sugar.
Here's what to do...
We recommend you buy May sugar calls with a strike price of 13 (SBK06C 13.00). Sugar calls cost $11.20 per point and you should be able to enter this position for 60 points or $672 per contract.
To make this trade, call your futures options broker and say: "I want to buy the May 2006 Sugar call option with a strike of 13.00 (SBK06C 13.00) for 60 points, or better. This order is good till canceled."
Now, let's look at the rest of your portfolio...
GRT portfolio update
Equities and equity options
| Company | Entry | Current | Status | Change |
| Chesapeake Energy CHK, | 36.95 on 9/28/05 | 34.57 | HOLD | -6% |
| Superior Energy Services SPN, | 19.45 on 7/13/05 | 19.50 | HOLD | 0% |
| drdgold Ltd DROOY (formerly Durban Deep) | 0.91 on 7/6/05 | 1.38 | HOLD | +51.6% |
| Newmont Mining. NEM, | 38.65 on 8/3/05 | 47.07 | HOLD | +21.7% |
| Western Canadian Coal (WTN) | 4.19 on 8/18/05 | 4.55 | HOLD | +8.6% |
| Grey Wolf GW | 7.75 | 7.59 | HOLD | -2% |
Current prices are closing prices for Tuesday. Entry and exit prices are established when price objectives are filled. Your performance may vary.
Futures and options on futures
| Commodity | Entry | Current | Status | Change/ Profits/Loss |
| May sugar 13.00 calls at .60 or better | -- | -- | BUY | -- |
| February 2006 215/225 Heating Oil call spread @ 350 points ($1,470 or better) | 287 | 301 | HOLD | 4.8% |
| Corn December 2005 250 calls @ 4 or better | 3 on 8/24/05 | 0.25 | HOLD | -90% |
Current prices are closing prices for Tuesday. Entry and exit prices are established when price objectives are filled. Your performance may vary.
There's no sugarcoating it -- the three oil and gas stocks in your portfolio took a drubbing along with oil prices. Chesapeake Energy, Superior Natural Resources and Grey Wolf all pulled back. The good news is we really believe this is short-term. In fact, if you don't have these in your portfolio now for any reason, consider adding them today at discount prices. Oil and gas will go higher again, and these stocks will too. HOLD.
Meanwhile, Western Canadian Coal is doing very well. It's buoyed by news that China is closing down a number of coal mines, due to unsafe working conditions, after a string of horrendous fatal accidents that have embarrassed Beijing. Authorities in China are determined to close 8,648 (40%) of the country's mines. Many of these mines are operating illegally, and some are just small pits. But China will have to get coal from somewhere. Western Canadian Coal is looking better every day. HOLD
And your gold mines, drdgold and Newmont, are rising as gold hits its highest levels in 18 years. Owning these gold mines allows you to still play the rally in gold even though you grabbed big fat gains on your gold calls. And if we see a good entry point on gold calls down the road, we won't hesitate to recommend them again. HOLD
Meanwhile, continue to hold those corn calls. Your new heating oil call spread is already up slightly in the past week, and we're very bullish on heating oil. HOLD
And you have your new May sugar calls to add.
GRT primer
This week: Selling something you don't own
In the futures market, you can initiate a new position by buying a contract -- but you can just as easily initiate a new position by selling something, even if it's something you don't own. In fact, one big advantage of the futures market is that there are no special requirements for shorting the market. Therefore, if you think the market is going down, all you need to do is sell.
Eventually, even if the market drops all you need to do is buy back the contract to close the position. It's as simple as that.
Back in the saddle
Thank you, readers, for your best wishes by email while I was on the mend for the last few weeks. Special thanks to my editors at MarketWatch and my co-writer Sean Brodrick for his writing and research help during this time. Sean's excellent work and commentary can always be found at www.sovereignsociety.com.
Closed positions
Equities and equity options
| Company | Entry | Current | Status | Change |
| Foundation Coal Holdings FCL, | $ 28.31 on 7/19/05 | Sold | SOLD at 33.75 on 8/10/05 | +19.2% |
| Arch Coal ACI, | $ 55.40 on 7/19/05 | Sold | SOLD at 60.56 on 8/10/05 | +9.3% |
Futures and options on futures
| Commodity | Entry | Current | Status | Change/ Profits/Loss |
| Gold February 2006 475 calls @ 4.50 points ($450 or better) | 4.20 on 8/15/05 | Sold | Sold at 17 on 9/29/05 | +304.7% |
| Orange Juice January 2006 $1 calls @ 2.80 or better | 2.80 on 8/24/05 | Sold | Sold at 4.20 on 9/21/05 | +50% |
| Sugar May 2006 10 cent calls (SBK610C) | 43 on 7/6/05 | Sold | SOLD at 63 on 8/3/05 | +46.5% |
| Soybeans November 2005 (SX5) | 715 on 7/13/05 | Sold | SOLD at 648 on 8/10/05 | -9.4% |
| Cocoa December 2005 (CCZ5) | 1435 on 7/19/05 | Sold | SOLD at 1474 on 7/27/05 | +2.7 % |
| Cocoa December 2005 (CCZ516c) 16.00 calls | 48 on 8/1/05 | Sold | SOLD at 65 on 8/3/05 | +35.4% |
Entry and exit prices are established when price objectives are filled. Your performance may vary.
How to Satisfy a Sweet Tooth Without Sugar
Source: https://www.marketwatch.com/story/a-sweet-tooth-for-profits