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Hello Everyone! It appears that it has been quite a while since I have posted an article on the blog. I hope to change that in the next couple of weeks. The last time I posted an article was in February, and has been around 3 months. The last time I was posting articles, the articles were mainly about futures products. Some of the article that I wrote down included Cottong Futures, Dow Futures, and S&P Futures. Besides futures products articles, I also wrote articles on various valuation methods used by companies to estimate the cost of capital, these include the Weighted Average Cost of Capital (WACC) or Capital Asset Pricing Model. I hope to expand on these valuation methods, and other valuation methods that I have learned including the Adjusted Present Value (APV), and Flow to Equity (FTE) method. Hopefully, I can present you guys with some detailed examples on how to calculate the cost of capital using these methods. ]]>I am also considering the possiblity of having Youtube videos explaining these methods, I think quite a few of you would prefer having videos explaining these concepts. I have learned in a past few weeks that I pick up things faster while watching someone do it rather than learning things by myself. I was always of the opinion that I learned things best by teaching myself. This was the model I practiced throughout my Undegraduate, and paid little attention to the lectures given by professors. That opinion has changed significantly in the past 6 months, and nowadays I prefer to listen to lectures. Nonetheless, I believe I have a very short attention span and if I do post videos they are going to be quite short and to the point, so as to not bore you guys as well. Prior to me abandoning the blog due to the busy nature of my education, I wrote a few examples on WACC, I hope to finish those articles and have them published in the next few days. So, if you are an old time visitor to the site, I would strongly urge to you check back frequently as I will be adding new content to the site.
With Natural Gas, Copper, and Cattle out of the way, we are now off to writing an article on Cotton Futures. There was an Indian movie called Guru that was released a few years ago, and in the movie the protagonist was interested in trading Cottons, and who ended up making big money out of it, and in the end only to lose it because of the government intervention regarding the trading of commodities. It had something to do socialist policies that the Indian government was implementing and I guess trading cotton and other commodities were deemed as playing with the lives of the farmers. I am not sure what really happened regarding commodities trading or trading of cotton futures, and I don't think I want to research into it either. So, I will just be talking about cotton futures product that is traded on CME Exchange and information that will help us understand cotton futures product. ]]> Cotton FuturesCotton futures fall under the category "soft commodity" - and I think you can realize why the commodity is called "soft". Besides cotton, cocoa, coffee, and sugar are also considered soft commodities. I am not sure what makes these commodities "soft" as well, but if you compare these commodities to metals and energy products, I guess you can consider them relatively "soft". It could also be that these "soft" commodities can be consumed, as you can eat cocoa, sugar, etc. but that wouldn't explain cotton - which cannot be consumed but is truly "soft". The cotton futures contract has a size of 50,000 pounds, similar to feeder a cattle future which also has 50,000 pounds for contract size. The contract also has a minimum fluctuation of $.0001 per pound. So, a $.0001 fluctuation per pound will lead to a fluctuation of $5 per contract. Futures contract for cotton are traded on CME GLOBEX, and you have to remember that NYMEX which cotton futures used to trade on was acquired by the CME Group in 2008. Other Commodity Futures As I mentioned earlier, I have written articles for Natural Gas, Copper, and Cattle prior to writing Cotton Futures article. If possible, I would suggest you have a look at my Natural Gas Futures article, and the two index articles I wrote. The two index articles covered futures products based off of the popular Dow Jones Industrial Average and S&P 500. The article Dow futures talks about some of the major futures products based of the Dow Jones Industrial Average, including the Big Dow and the $5 E-Mini Dow. The S&P futures talks about numerous futures products based on the index S&P 500, and many other indices bearing S&P name. For those who are interested in looking at what Dow Jones has been up to today, I would suggest the article Dow Jones Today. ]]>Until now, I have written two articles on Index Futures, one being Dow Futures and the other S&P Futures. Since then, my interest in trading Index Futures especially Dow Futures has increased. I am strongly considering the possibility of trading $5 E-Mini Dow Futures Contracts. I am well aware that there are quite a few risks involved while trading futures contracts, but I think after thorough research regarding volatility and other risk factors, I might understand the art of trading index futures. At the moment, I have decided to have a 3 month learning period where I will study the movements of index futures, including what moves them and numerous variables that affect pricing of Dow futures or specifically $5 E-Mini Dow futures since they are also the most liquid index futures based on DJIA. For those of you who are following the market will know that the Dow Jones Industrial Average has been in positive territory for the past 4 days. I am going to go over the price trend of $10 DJIA futures product, as I wasn't able to find a satisfactory $5 E-Mini Dow Futures chart. ]]> $10 DJIA FuturesFor February 19, the DJIA Opened at 10,332 and closed for the day at 10,378 - a rise of 46 points. So, if I had 1 futures contract of $10 DJIA I would have earned $460 for buying and selling the contract at the mentioned selling prices. The DJIA's high for the day was 10,420 - which was 42 points higher than the closing price of the day, a difference of .4%, but in dollar amounts $420 difference for holding the contract and selling it at its high of the day. The low of the day for DJIA futures was 10,280. So, if you bought Dow futures at 10,332 and were worried that the DJIA was going to hit even lower, and sold the futures at 10,280 you would have lost $520 by holding 1 contract of DJIA. Obviously in real life, you are not going to sell at the high of the day or the low, in fact you are not even going to get close those - but they make good examples in demonstrating the significant risks and rewards that futures products bring with them. Some Thoughts On DOW Futures and Trading I will be looking for some books on trading index options, and as I track the index futures I will be able to (hopefully) learn some quirks of Dow Jones and see what makes it tick. For now, I am going to make an Microsoft Access Database tracking my assumptions regarding the trend of Dow Futures and various other notes that I have observed while following the Dow. If you are an investor who has been trading Dow futures for a while, I would definitely appreciate a few inputs regarding its future contracts or any other index futures. Since I am going to be following the Dow, I will be posting articles regarding Dow and its futures product. I don't think I am going to publish my assumptions regarding its trend, as I don't think it would be wise. But, I will post any relevant information here that I believe would enhance my understanding of the Dow and the futures products based on it. While you are reading my article on futures contract, I would also suggest you guys to read my Natural Gas Futures article - the article might interest you. ]]>As part of my commodity articles, the third commodity that I will be covering on my block is the livestock cattle. My first 2 commodity articles were on Natural Gas and Copper. Articles I wrote for Natural Gas included Natural Gas Futures and Natural Gas Prices. For Copper, I wrote 2 articles as well, Copper Prices and Copper Consumption. In the article Natural Gas Futures, I talked about Natural Gas as a product and futures product available for trade, while article Copper Consumption discussed demand of Copper within US and the rest of the world. For those who are interested in trading cattle, some of the futures that you can trade are Feeder Cattle and Live Cattle. Feeder Cattle are calves that have weaned away to be sent to feedlots, while live cattle are cattle that have attained a certain weight before they are sent to packers. I am not going to discuss what packers do, but lets just say that the final product ends up in your restaurant and grocery stores. Both of these futures products are available for investors to trade on Chicago Mercantile Exchange (CME). Live Cattle Futures The Live Cattle futures product has a contract size of 40,000 pounds or 18 Metric tons. So, if you buy 1 Live Cattle Futures Contract, you own 40,000 pounds of live cattle.The contract has a Tick Size of $.00025 per pound - .00025 * 40,000 pounds = $10 per contract. ]]> Feeder Cattle FuturesLive Cattle futures had a contract size of 40,000 pounds, Feeder Cattle futures product on the other hand have a contract size of 50,000 pounds or 23 Metric tons, and also priced at cents per pound, and the same Tick Size as the Live Cattle futures product. Since the feeder cattle futures product has 50,000 pounds in its contract instead of 40,000 pounds, a rise of .00001 in price per pound would translate to a rise of $.50 per contract. Besides the 3 above written commodity articles, I have also written 2 articles on futures product based on indices. The futures product I have written based on Indices are Dow Futures and S&P Futures. In a follow up article, I will discuss prices trend of cattle futures products. ]]>I think I mentioned this before, but I will state it again that I am working on a fan site on Age of Empires 4. Age of Empires has been one of my favored pc games, which I have also stated in my earlier post about Civilization 5. Most of the PC games that I play are strategy games, and are usually the type of games that I play and enjoy. I am not really a fan of first person shooting or similar genre games. I can play racing games here and there, but not as regularly as strategy games. ]]> My first Age of Empires game was Age of Empires 2 Conquerors Expansion, and I loved the New World Civilizations like the Aztecs and Mayans, which I thought were so refreshing compared to the same old "Old World" civilizations and their units. My favorite military units in the Conquerors expansion were the Eagle Warrior and the Jaguar Warrior. I particular loved the Eagle Warrior and the feel of the game. The same couldn't be said about the stand-alone Age of Empires though. Nonetheless, Age of Empires was a strategy game that I loved very much.I also created a fan website for a similar game of Age of Mythologies, but I didn't end up enjoying the game and decided to close the website as well. For some reason, I never made a website for Age of Empires II or Age of Empires III, but have decided to build a fan site for a possible Age of Empires IV. At the moment, there is really nothing on the website, except news and info about the site itself, but if there is any news on Age of Empires IV, it will be added to the site. ]]>]]> My Civilization 5 website already sports 2 new screenshots of the new new game, and a new header layout as well. Earlier, it sported a grey and gold header layout, and now it sports a much darker layout. So, for those of you who maybe interested in strategy games like Civilization, I would suggest you guys to check out the site, and even play some of the older games in the series. In fact, it was Civilization 3 that got me addicted to this franchise, and I have written numerous times on how I spent my entire 11th grade playing Civilization 3. Those were the good times, and hopefully I can play Civilization 5 when it is released in a controlled way, and not lose myself in the game and the addiction. Along with Dow Jones Industrial Average, the S&P 500 is another popular index and is also regarded as the "market". Similar to DOW, which has Dow futures, or futures products based on the Dow Jones Industrial Average, so does the S&P 500. In fact, there are numerous indices bearing the S&P mark, with the S&P 500 being one. Standard & Poor's As you may have figured out from the heading above, the S&P acronym stands for Standard & Poor's. Prior to knowing the history behind the naming of the Standard & Poor, I thought it was probably named on the basis of Standard of quality of life and poverty, or "standard" companies - which are "good and healthy" companies and poor companies - which are in financial distress. I was also unsatisfied with these two explanations, as it didn't really make any sense to call them Standard & Poor's, when there are be so many better alternatives for healthy and sick companies or quality of life. After digging around, I came to know that that the Poor in S&P is actually the last name of the individual named Henry Varnum Poor, who was a financial analyst. ]]> Standard & Poor's IndicesAs said in the opening paragraph, there are numerous indices bearing Standard & Poor's name, with S&P 500 being the most popular. There are S&P indices for equity, fixed income, commodities, real estate, thematic, and strategy sectors. One of the most popular S&P equity index that almost everyone in the financial industry is aware is the S&P 500. The S&P indices for equity can be based on geographical basis. For example, there is S&P Japan Midcap 100, which comprises of 100 companies from the mid cap area of Japan. The S&P 500 as you all know covers large cap publicly traded companies in US, and as the title suggests has 500 companies in the index. S&P indices for equity can also be based on the size of the companies; as such you can have S&P MidCap, SmallCap, and LargeCap industries. S&P Futures With so many indices, you can have numerous futures products based on these indices, that can be traded. Similar to Dow futures, which offers E-Mini Dow, S&P has similar futures products. The E-Mini S&P 500 futures product comes in 2 variants, the Dollar Variant which is priced in dollars, and the Euro variant - which is priced in euros. Unlike Dow Futures which has a $5 multiple, the S&P E-Mini has a $50 or 50€ symbol depending on version of the contract being traded. The S&P 500 futures contract unlike the E-Mini has a $250 multiple. So, every rise in 1 point equals a rise of $250 in value. Other S&P futures that can be traded include E-Mini S&P MidCap 400 futures, S&P SmallCap 600 futures, E-Mini S&P Asia 50 futures, and S&P Depository Receipts futures. Natural Gas Futures is another article I wrote on futures, and if you have the time, I would suggest you give it a read. ]]>The Dow Jones Industrial Average and DOW Futures Products The Dow Jones Industrial Average is a stock index comprising 30 corporations from a variety of industries. The current list of corporations that are part of the DOW are 3M, Alcoa, American Express, AT&T, Bank of America, Caterpillar, Boeing, Chevron, Coca-Cola, Cisco, Exxon Mobil, DuPont, Hewlett-Packard, General Electric, Home Depot, IBM, Intel, Johnson & Johnson, JPMorgan Chase, McDonald's, Kraft Foods, Merck, Microsoft, Pfizer, Procter & Gamble, United Technologies Corporation, Travelers, Verizon, Walt-Disney, and Wal-Mart. The industries these corporations are in range from Banking, Chemical, and Retail to Technology, Software, and Telecommunications industry. As stated earlier, Dow Jones Industrial Average comprises of 30 companies, and Dow futures contracts are based on this index. There are numerous futures products based on the Dow Jones Industrial Average. These products include the BIG DOW DJIA, E-Mini Dow, and DJIA. The Big Dow DJIA is a futures contract with a $25 multiple. So, if Dow Jones Industrial Average futures was at 10099, the contract size for the $25 version would be $25 * 10,099 = $252,475. So, you would be buying a DJIA futures contract worth $252,475. For example, if an investor bought 1 contract of Big Dow DJIA at 10,099 in early trade, and closed the trade when DOW futures was at 10,150, the investor assuming went long would have netted 51 * $25 = $1275 for that single trade. The $51 was the rise in Dow futures from 10,099 to 10,150 and the $25 was the multiple of Big Dow DJIA contract. DJIA is traded at Open outcry Monday through Thursday 8:30 AM to 3:30 PM CST, and can be trade electronically through CME GLOBEX Monday through Thursday 3:30 PM to 8:15 AM. The E-Mini Dow futures is $5 multiple contract, and as such Dow futures at 10099 would be worth $5 * 10,099, which would be $50,495. So, 1 contract for a $5 E-Mini Dow would be worth $50, 495. Similar to the earlier example, a rise of 51 points in E-Mini Dow futures would lead to a trader pocketing 51 * $5, which would be $255.The DJIA futures product on the other hand is a $10 multiple contract. So, at $10,099 a DJIA futures contract would be worth $100,099. If an investor bought the futures contract at 10,099 and sold it at 10,150, a rise of 51 points in Dow futures would give the investor a profit of $510 excluding any commissions and interest expenses. Other Dow Futures and Indexes The article covered futures products that were based on Dow Jones Industrial Average. Besides Dow Jones Industrial Average there are many other indexes, these include The Global Dow, Dow Jones BRIC 50 Index, Dow Jones Utility Average, Dow Jones Global Titans 50 Index, Dow Jones Corporate Bond, Dow Jones China Indexes, Dow Jones Precious Metals, Dow Jones Hedge Fund, and many more. All of these indexes cover various aspects of world market and industries. Indexes like The Global Dow cover blue-chip, large influential 150 corporations from around the world, while Dow Jones REIT (Real Estate Investment Trust Market) covers the performance of REIT industry. All of these indexes have various futures products that can be traded. I would also suggest you guys check out Natural Gas Prices and Copper Prices. ]]>As some of you may have noticed, I have been publishing articles related to commodities recently. My commodity articles until now have been on 1 metal and 1 energy product, namely copper and natural gas. The articles written for copper were Copper Consumption and Copper Prices, while articles for Natural Gas were, Natural Gas Futures and Natural Gas Prices. Copper Consumption article talks about the demand of copper in United States and across the world. In addition copper consumption details copper consumption from year 1988 to 2007. Copper Consumption article also provides how much Copper recovered from scrap was utilized and how much copper was used from refined processes. Natural Gas Futures and Natural Gas Prices both talk about natural gas commodity and the general information about the commodity listing on exchange along with the price trend of the energy product. ]]> Commodity Prices - Moving forward, I will be writing a few more articles on Natural Gas and Copper. For Natural Gas, I will be writing 1 or 2 articles on Natural Gas Supply & Demand, and for Copper, I will be writing an article on Copper Production & Supply within United States and the World. Besides Natural Gas and Copper, other commodity and other futures articles that you can expect me to publish include Crude Oil, Grain, Silver, Corn, Wheat, Soybean, and Cotton.In the immediate future, I will be publishing a few articles on Dow Futures and S&P 500 futures contract. Although, the commodity articles I have published so far are very basic in nature, I hope to incorporate more advanced fundamental analysis and other relevant information as I get more used to writing articles on commodities. For now, I will stick to basic price trends and other general information about commodities as commodities as it stands is not a very strong suit of mine. ]]>Copper is the second commodity that I will be focusing on after Natural Gas. I have written 2 articles on Natural Gas, Natural Gas Prices and Natural Gas Futures. I will be writing 2 more articles on Natural Gas, one of them being Natural Gas Supply, and another one being Natural Gas Demand. This article will detail copper consumption in United States and the world. The article is the follow up of another copper article I wrote - Copper Prices. The timeline for the copper consumption data* that will be presented in the article will range from 1988 to 2009. I will briefly go over the recent price changes is copper including Copper price trend over the years. Copper Consumption: 1988 ]]> The total copper consumed in United States was 3,480 thousands of short tons. Of this, refined copper consumed consisted of 2432 thousands of short tons, while scrap copper consumed stood at 1,048 thousands short tons. Largest consumers of copper were Wire Rod Mills, who consumed about 1,838K Short Tons, with Brass Mills following at 1,190K Short Tons.Please look at the graph below for US Copper Consumption, Global Mine Production, US Mine Production, and Copper Recover from Scrap (US). I realize that Global Copper Demand data is missing, and I hope to add that data soon.
1988 Copper Consumption Break Down In Wide Rod Mills, refined copper consumption stood at 1,838 and scrap copper consumption stood at 24. The largest consumers of scrap copper were the Brass Mills whose consumption of the scrap copper stood at 647K Short tons, greater than the refined copper which stood 544K Short tons. As you can see, refined copper formed a greater part of wide rod mills usage, while copper recovered from scrap formed a greater part of usage in Brass Mills. Copper Consumption Peak & Decline Copper Consumption saw its highest usage peek in 2000, where copper consumption stood at 4,552. Copper demand rose from 1995 (3,863) to 2000 (4,552), and then declined from 2001 to 2003, and another decline from 2005 to 2008. Copper Consumption from 2003 - 2008 Copper consumption in 2003 stood at 3,514K Short Tons with Refined Copper contributing to a majority of copper consumption. Refined Copper consumed for 2003 stood at 2,524 while scrap copper consumed stood at 990. Going forward, copper consumption increased in the year 2004 to 3,678, and declined for the next 4 years. Copper consumption for 2005 was 3,512, 2,354 for 2006, and 3,069 for 2008. For the Year 2008, refined copper consumption stood at 2,170 and scrap copper stood at 899. As in 1988, the largest consumers of copper were wire rod mills whose total copper consumption for 2008 was 1,637. Following second to Wire Rod Mills were Mills whose copper consumption stood at 1,161. *Data taken from ICSG and CDA ]]>This article will detail the price trend of Copper over the years. I hope to give you a brief idea of how copper price has changed over the last few years. The overview of the price trend will be on the March Contract of Copper. ]]> The Chart Below features, Copper prices for the March 2010 Contract.
Copper has been on the decline for the year until February 5, where it hit the lowest price range for the year. On February 5th, Copper opened at $286.50, and reached a high of $290.35, and a low of $281.10 (which was also the low of the year), and finally settled at $285.75. The closing price of $285.75 was also the lowest closing price for the year 2010. Copper has been surging since the past 5 days, climbing $13.15 from $285.75 on February 5th to $298.9 on February 10 - a rise of 4.4%. Copper opened at $355 for the start of the year (Jan 4 2010), and settled at $340.60 for the close and reaching a high of $342.90 for the day. It reached a high for the year on January 7th, when copper hit a high of $354.40 before closing at $342.70 - a significant drop from its high, and the previous day's close which was at $349.5. For the month of December in 2009, copper prices ranged from $310.3 to $334.6. The commodity opened at $323.1 for the month, and closed at a high of $334.6, which was also the end of the month. Trading in copper peaked on 7th of December and was the lowest in the last week of the month. The Chart Below Details the Supply & Demand Graph of Copper
In an earlier article I wrote about Natural Gas, I talked about Natural Gas Prices. Upon writing that article, I have come to realize there are many different pricing spots for Natural Gas. The price of the Natural Gas varied depending on the "pricing points". Pricing points include the Henry Hub spot and the New York City Spot. The New York City Gate is one such pricing point which is used to price Natural Gas for North Eastern United States of America. In addition prices varied according to the months the contracts were sold in. ]]> A single Natural Gas Futures contract has a size of 10,000 MMBtu (or 1 Million British Thermal Units), and a minimum price charge of $10 per contract. So, 1 natural gas futures contract would be for 10,000 MMBtu and is quoted in US$ when traded on New York Mercantile Exchange (NYMEX). Each contract has an expiration date 3 business days prior to start of the "contract month". For example, you have a Natural Gas Futures Contract for the month of January 2010. This contract expires 3 business days prior to the start of January. January 1st begins on Friday, so the January Contract ends 3 business days earlier - Tuesday December 29, 2009. If you have Naturals Gas Futures contract for the month of March (next month), its contract will expire February 24th. March begins on a Monday, since the contract ends 3 business days earlier, we skip Saturday and Sunday, and instead count from Friday, which would give us Wednesday, 24th February. Natural Gas futures are highly volatile, and are definitely not for the faint-hearted.Majority of the Natural Gas is consumed by Industrial Users, followed by Residential / Commercial Users, and power generation being the 3rd largest consumer of Natural Gas. ]]>Natural Gas is a very important source of fuel, and I hear a lot about natural gas being a good alternative among fossil fuels for America's energy independence or battling climate change. Although Natural Gas is also a fossil fuel, it is considered cleaner in comparison to Oil and Coal and also produces less CO2 / Unit released. The earliest I heard (or followed) about Natural Gas was when India discovered large fields of Natural Gas in Krishna Godavari basin in South India. This was a big find for India as the nation relies on foreign imports to satisfy two-thirds of its energy needs. As such, large gas finds in Southern India were a welcome development as they would reduce India's dependence on foreign energy imports. Besides this, Natural Gas was in mind because of T. Boone Pickens - the billionaire oilman. He contended, I am paraphrasing here that Natural Gas is the only fuel that will reduce American reliance on Oil and is available in abundance in United States. ]]> Natural Gas Prices - Natural Gas Futures @ NYMENatural Gas March 2010 contract ended today at $5.44. Natural Gas opened at $5.436, then reached a high of $5.477, and then settled at $5.443 for the day. For the year, Natural Gas saw its price at 6.027 for the Year 2010 on January 7, and a low of $5.06 on January 28. The graph below details the progression of Natural Gas Prices for Last 3 months: Natural Gas Prices($/MMBtu) Natural Gas Prices as of February 1 are as follows: NYMEX Henry Hub Future stood at a price of $5.44, while Henry Hub Spot Prices stood at $5.29, and New York City Gate Spot stood at $6.02, which declined by 1.30 - a 17.76% decline. Natural Gas Prices* Paid By Residential Owners Natural Gas Prices paid by private residents including apartments for heating and other household applications stood at $11.25 for November 2009. This was a decline of $3.57 since last year of November 2008, when Natural Gas prices for residential purposes stood at $15.19. Natural Gas prices for residential activities have been on decline in the Year 2009 from January to April, and then saw an increase from May to August, rising to $15.12 from $12.51. *Natural Gas Prices are denoted in $ / Thousand Cubic Feet or ($/MMBtu) ]]>I normally don't do this and I don't really like doing this but sometimes I have to do some in-site advertising to let other people know about some of the projects Indews Gaming Network is up to. Indews Gaming Network has launched 2 fan sites for the yet to be announced Halo 4 and Age of Empires 4. One of the primary reasons I don't like doing in-site advertising here is due to the fact that this site is geared towards finance and other business related articles, and putting in press releases about gaming events seems a little off-topic. Nonetheless, I do post about non-financial topics here and there so I rationalize my internal postings of gaming events in my other websites. So, if you are interested in reading about some rumors about these games or any other information that is relevant to these games, out to Halo 4 and Age of Empires 4 websites launched by Indews Gaming Network. ]]> |
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