Covered 1 Jan 40 CT at 0.48

Cotton is rallying today and my exit order was filled at 0.48. I sold it for 2.15 ($1075) and exited at 0.48, which gave me 1.7 or +$835 (before commissions). The good thing about wiring options is when markets start moving, time value evaporate quickly which boosts my profit.

Only 24 days till expiration, my max profit was $240, whereas risk was unlimted, so even if I'm willing to get assigned, I decided to exit. I'll sell a put if markets drop again.

Sold 1 Jan Cotton put for 2.15 ($1075)

I sold 1 Jan Cotton Put for 2.15 (or $1075 less commissions). The strategy I'll be using is exactly the same as my lumber trade. Either I'll get assigned or keep all the premium I wrote.

I traded Cotton in 2006 and at that time I bought futures contract outright around 55. This time, since I'm holding Lumber, I got a bit more conservative and waited patiently. My plan is to sell another put at 30 and 2 more at 20. If Cotton somehow keeps dropping and gets to 20, I'll be holding 4 lots with the avg of 27.5. At that time, the drawdown will be $25000 (yikes). The lowest Cotton price I've seen is around $50 and I think $40 is a really solid level evn if I do get assigned.

The Jan Cotton options expire on Dec 19, so I'll keep you posted or you can click here.

Still watching

Markets are down today. We've been in the range for quite some time. I don't plan on doing anything until we break above 1000 or below 825 on ES. I'll take either buy or sell a pullback to that level.

I placed two orders (sell puts): Natural Gas and Cotton. They both need to be beaten down a bit more until my puts get filled. I can hold them until they both go to zero. (Will it be possible?)

I honestly don't know where markets are going to go, but everybody seems very skeptical about economy. Most of people think it'll get worse. Everybody I know thinks markets will go one way, yet they are still holding their longs. I guess that's why markets don't go anywhere.

As for day trading, I'm still working on my strategy. I and Jack have been working together for a while and we think we have one solid setup. Just one setup. The problem really boils down to psychology and time. I just can't watch markets during the day because of the full time job, but I can't just quit just in case.

What I'll do is to use vacation days and trade a few days here and there. I'll also record my real time trades to show you why I get in, why I take profits and how I trail stops. I'll post the result here and you guys (if there's any) can tell me what I'm doing right or wrong.

Scare people away?

Markets are really trying hard to scare people away now. People, who have been holding, got some relief from the election rally. Yesterday and toady, we have been going down pretty hard. If I were those people who are hoping for more rally are very confused now, thinking 'If this thing goes below the recent low, it'll probably go way below. I will sell and buy at lower price.'

The question is markets have to convince people enough that this will go further down. I don't think it has happened yet.

I'm thinking about selling Jan CL 30 Puts. I never thought about this situation when oil was close to 150, but no one just never know!

I exited the remaining AAPL at 101 (from 93 entry) this morning. I was using $10 trail stop and got hit. I'll monitor AAPL and GS closely to get positioned in my Roth IRA. Other than this, I'm still watching NG, but every time I place an order, it just moves away. The Lumber had some dead cat bounce in the last 3 days, which was good, but today started diving again. This was a minimum of 2 year trade, but man, maybe longer than that.

Lumber roll over

I rolled over my lumber positions:

11/4/08
Sold 3 Nov Lumber at 193.10
Bought 3 Jan Lumber at 204.70

Note that I sold puts and got assigned, so I'm holding 3 lots total. My next level to add (in Jan contract) is if lumber gets to 170s.

Oct P/L

I updated my Oct P/L. Not a good month, but I think it could have been worse. I mainly have only one position, Lumber. While everybody was liquidating everything, Lumber was no exception. One big mistake I made was I didn't quite understand about inflation and deflation in terms of diversification. Lumber benefits from economy inflation and Soybean-meal spread (remember?) trade benefits from deflation. In other words, while losing money on Lumber , the bean spread would have offset it. I got positioned the bean spread while we were going through inflation, which was good, but I exited too early. Markets got deflated, and I didn't have any position to hedge Lumber deflation.

I'm overall about break-even year-to-date where most of my money is. I'm not sure if I should be happy about that result, but I guess I'm still surviving.