Author Topic: First lumber, now coal? Anyone do commodity options?  (Read 479 times)

ChpBstrd

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First lumber, now coal? Anyone do commodity options?
« on: August 17, 2021, 09:23:17 AM »
Remember the boom in lumber prices? The bubble burst this summer. Prices are down over 70% from the peak. Now producers are reporting inventory surpluses. This was a classic bubble.
https://tradingeconomics.com/commodity/lumber

A number of other commodities blew up in price during the first half of 2021 and then started turning down in the past month or two as supply chain bottlenecks are being resolved: oil, natural gas, iron ore, copper, wheat, soybeans, etc. The outlier in this trend has been coal. In the span of 13 months, coal has gone from near its 10-year low (~$49) to a 10-year high that is well beyond prices we've seen before ($172.30). This could be the next lumber.
https://tradingeconomics.com/commodity/coal

I missed the lumber bubble due to not paying attention, but I'm tempted to *responsibly* speculate against the price of coal, which has risen 250% in 13 months and has a very bubbly looking chart amid an overall cooling in other commodities. Yet I'm not sure I want to use futures due to the infinite downside potential. Have any of you tried commodity options? I'm looking at a small enough bet to be justified on the basis of education.

bacchi

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Re: First lumber, now coal? Anyone do commodity options?
« Reply #1 on: August 17, 2021, 11:41:32 AM »
I had a long call on oil for years, in the expectation that it would rise to $70 by 2023. (It did, this year, but I had already sold.)

Just watch the multiplier.

TomTX

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Re: First lumber, now coal? Anyone do commodity options?
« Reply #2 on: August 17, 2021, 06:24:54 PM »
I don't see how that's a sustainable price for coal. It will just accelerate the shift to wind, solar and natural gas.

Imanuels

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Re: First lumber, now coal? Anyone do commodity options?
« Reply #3 on: August 20, 2021, 09:04:49 AM »
Apparently, China Is Planning to Build 43 New Coal-Fired Power Plants: https://time.com/6090732/china-coal-power-plants-emissions/
Still, the current price trend doesn't 'feel' sustainable.

TomTX

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Re: First lumber, now coal? Anyone do commodity options?
« Reply #4 on: August 20, 2021, 11:41:43 AM »
China's new coal plants are typically the highest efficiency supercritical (or ultra-supercritical) type which use noticeably less coal per kWH produced and thus have lower operating costs and emissions. Many older, inefficient plants are being shut down.

Not saying I'm a fan of any new coal plants! Just that they seem to be doing the least-bad approach to it.

https://energyeducation.ca/encyclopedia/Supercritical_coal_plant