Nathan Invest 리트윗함
SUGAR: LONG-TERM BULL CASE, SHORT-TERM UNCERTAINTY
While sugar is currently trading below its long-term trend and should be supported by the fertilizer and supply issues from the Middle East, its monthly MACD remains negative, with no sign of a momentum reversal for the moment.
Even if not fundamentally expensive here, sugar tends to bottom lower, at up to 1.4 standard deviation (σ) below trend.
LONG-TERM VS SHORT-TERM
Will it reach that extreme this time? No one knows for sure.
We have a classic split: fundamentally inexpensive (good long-term risk-reward) but short-term pressures weighing in, giving an ambiguous near-term picture.
DOWNSIDE PROTECTION
This is a typical case where you may want to go long but wish to have downside protection, even if it costs a bit of performance.
POTENTIAL PAYOFFS
This cost should then be regarded in light of the below potentials payoffs, under different scenarios (returns to the below levels):
• -1.4σ: -45%
• -1σ: -27%
• Trend: +20%
• +1σ: +70%
• +2σ: +114%
• +3σ: +106%
• +4σ: +143%
MY APPROACH
I now hold a small, covered sugar position, as I want to be long, but am aware of the downside risk. Should it go lower, at the -1σ to -1.4σ level, I would increase my exposure given the highly asymmetric payoff it would then offer, maybe without protection this time.
$SB1! $CANE
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