Having etched out new lows a few months ago amid the worldwide financial crisis, many commodity sectors appear to be doing their best impression of planes hovering over a busy airport: In a holding pattern.

While history has shown us that there shouldn’t be much correlation between the stock and commodity markets, the current inter-connectedness between the two at the moment is still very evident. We’re still seeing large, intra-day and intra-week price swings, most of it coming on the heels of stock market moves. 

We’ve received some questions recently, asking for more details on one of the most effective and profitable investment strategies that you can use in a market like this. It’s called put option selling.

If you know how to play the volatile nature of the commodity sector, this article is not for you. Lee Lowell of the Smart Profits Report gives three reasons why commodity investing has changed for the better, and how to profit from them.

Never has there been a time where the stock market has influenced the commodities markets so much.

Last time I checked, the price of soybeans, cocoa or orange juice had absolutely no relationship to whether Microsoft (Nasdaq: MSFT), Disney (NYSE: DIS), or Google (Nasdaq: GOOG) declined in price.

But these days, we’ve got a serious blurring of the lines between global marketplaces. In addition, the prevalence and ease of electronic trading, coupled with well-capitalized hedge funds, means we’re seeing all kinds of different markets having an affect on one another.

Not so long ago, it used to be that money typically flowed from one asset class to another – for example, from stocks to commodities. But that isn’t happening now as most players have either bailed…

Put option buying has become a popular bearish investment strategy this year. But Lee Lowell says the market sell off also means some companies are trading at fire sale prices. He says put option selling is a great way to buy your favourite stocks at the best price. And the best part is you get paid to do so.

Is nowhere safe? Even physical assets – which are usually considered a safe-haven from stock market turmoil – have fallen sharply in the last month. Only gold and silver have held up against the tide…just. Commodities specialist Lee Lowell says there will be plenty more volatility in the weeks to come. But he says those who do not join the panic selling will win out in the end…

– Lehman Brothers is doomed opines Bloomberg’s Michael Lewis this morning. Ironically, Lewis says Lehman’s (NYSE:LEH) fate is sealed because, following the government’s bailout of rival Bear Stearns, those who do business with Lehman don’t care too much if it stands or falls. The belief is the government will step in to pick up the pieces should Lehman fall apart.

The Bear Stearns bailout was supposed to prevent the crisis from rippling through Wall Street. Obviously it hasn’t done that. It’s merely thrown the crisis into slow motion and prolonged the agony.

– If the stars of yesterday’s going were toxic mortgage twins Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE), Lehman Brothers (NYSE:LEH) put in a damned good supporting role. Traders pummeled the bank’s stock after a proposed investment deal with a Korean bank fell through. Lehman’s shares dropped 45%. Lehman wasn’t the only Wall Street bank to fare badly. Financial stocks overall tumbled more than 6%.

– This morning, the bad news continued for Lehman. It told Wall Street it will post a second straight quarterly loss but promised to slim down in the future, putting an end to a brief pre-market rally in its shares.

Lee Lowell at The Smart Profits Report says commodities are continuing their late summer swoon. Crude oil, natural gas, gold and silver have all taken heavy losses since mid-July, when the dollar began to rally. But like a lot of the contrarian investment experts we have published here on Contrarian Profits Lee says these commodities are oversold right now. A sharp rebound could be just around the corner…