Hello TZP members.

As 2009 winds down, I want to send off one more update on our current positions. Since the last few weeks in December are typically slow, I don’t expect any new trades until January 2010 gets rolling.

Crude Oil

We’re currently holding a neutral/bullish trade in the crude oil options market. We’ve sold the March 2010 crude oil $71.50/$72.00 put option credit spread for a price of 15 cents (15 points) per spread. Currently, the spread is worth about 10 cents, so that gives us a “paper profit” for now. We’ll look to unwind this trade in the near future if the spread gets down to low single digits.

March 2010 crude oil futures is the underlying security for our trade and is currently trading at $79.50 per barrel.

In our last update, the futures were at $75.50 per barrel and went to a low of $72.50. Now with the market back up to its current price of $79.50, we’re encountering some good volatility. Once again, we’ll need the March 2010 crude oil futures to remain above $72.00 per barrel by option expiration to see full profitability on the trade.

Continue to hold the trade. Click here for the chart.

Sugar

The sugar market continues its unrelenting drive higher, which is not helping our bearish option spread. Although this position does not expire until February, we are losing value due to the “time decay” feature of our spread. For each day that the sugar market doesn’t move enough in our favor, the option spread gets cheaper and cheaper, moving us closer to the potential maximum loss on the spread.

We’re currently holding the March 2010 $20.50-cent/$22.50-cent put option debit spread that we bought for 107 points. And as the market moves higher, the spread loses value. It is currently worth about 22 points.

We’re going to hold the trade for now and wait to see how the market reacts as the new year gets going. If the sugar market doesn’t start to drop from its dizzying heights early in January, we’ll look to unwind the trade and recoup some of our cash. Continue to hold for now.

March 2010 sugar futures is the underlying security in our trade. Click here to see a chart.

Natural Gas

Natural gas futures continue to move higher off the lows it hit on December 3, and have since gained a whopping 1500 points from that level.

We hold a long-standing bullish position in the United States Natural Gas ETF -UNG. This exchange-traded-fund tracks the movements of the natural gas futures market that trades on the NYMEX.

UNG is currently trading at $10.70, a level last seen at the end of October 2009. It hit a low of $8.50 when the natural gas futures made their lows earlier this month. We continue to believe that this may the start of the long awaited uptrend.

Continue to hold the trade. Click here for a chart.

I want to wish everyone a happy & healthy new year and look forward to a profitable 2010 for all TZP members.

Regards,

Lee Lowell