Update

I still have 4.5 Jan NG put that I sold for $2000+. It's virtually worthless, so I'm basically flat.

I know I was not diligent enough to update my open positions, but I'll just cut it from Open Positions area and paste here for my record.

At the end, I made some money, but I was in a huge drawdown. I mean a big. I was close to getting a margin call, so imagine that. I really takes only one bad trade to wipe everything out in this business. Now that I think, I definitely over-traded for my account size.

I'm going to take some time off. As a matter of fact, I just bought a building lot to build a house. Back in March, there was a lot I really liked, it's still available, but had I bought the lot, I would haven gotten a margin call and lost a sizable amount of money.

While I was in a drawdown, I decided that I'm glad that I didn't buy that lot because I didn't need it. It's nice to show off, but I rather have some money in my bank than worrying about hugh utility bills, maintenance, rooms that I don't use etc...

Anyway, I found a better lot with a better view and the community that requires a lot less restrictions not to mention there's no home owners association fees.

I'm not sure what I'll do as far as trading goes. Day trading and / or swing trading with 'STOPS' are likely. Position trades are not my thing.

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2. Sold 1 Feb Nat Gas 5.00 Put for 0.213 or $2130 (1/14/09)

Sold 1 Feb NG at 4.471 to offset the 1 NG 5 put
Bought 1 Mar NG at 4.446 (1/26)

Sold 1 Mar NG at 4.418
Bought 1 April NG at 4.430 (2/13)

Sold 1 Apr NG 4 put for 0.310 or $3100 (2/19/09)

Sold 1 Apr NG at 4.297
Bought 1 Jun NG at 4.497 (3/23)

Sold 1 Apr NG at 3.941 (offset 1 Apr 4 put)
Bought 1 Jun NG at 4.161 (3/26)

Sold 1 May NG 3.5 put for 0.105 (4/16)

Sold 1 Jun NG 3.5 put for 0.305 (4/24/09)

Expired worthless (5/26/09)

Sold 1 May NG at 3.167 (offset 1 May 3.5 put)

Bought 1 June NG at 3.279 (4/27/09)

Sold 1 July NG 4.5 call for 0.158 or $1580 (covered call,5/4/09)

Expired worthless (6/25/09)

Sold 1 Jun NG 4.25 call for 0.111 or $1110 (covered call,5/6/09)

Expired worthless (5/26/09)

Sold 1 July NG 5 call for 0.207 or $2070 (covered call, 5/8/09)

Expired worthless (6/25/09)

Sold 3 Jun NG at 3.638

Bought 3 July NG at 3.763 (5/21/09)

Sold 1 July NG 3.5 put for 0.210 or $2100 (6/4/09)

Expired worthless (6/25/09)

Sold 3 July NG at 3.863

Bought 3 Aug NG at 3.988 (6/23/09)

Sold 1 Aug NG 4.25 Call for 0.255 or $2550 (6/26/09)

Sold 1 Aug NG 3.5 Put for 0.210 or $2100 (7/2/09)

Sold 1 Sep NG 4.25 Call for 0.204 or $2040 (7/21/09)

1. Sold Lumber Mar 240 put for 6.10 or $671 (1/4/08)

Sold Lumber Mar 220 Put for 7.10 or $781 (1/22/08)

Assigned to 2 March Lumber at 230, rolled over to 2 May Lumber at 230.50 (3/6/08)

Sold 2 May Lumber at 212.20
Bought 2 July Lumber at 239.90 (5/1/08)

Sold 2 July Lumber at 239.50
Bought 2 July Lumber at 254.20 (7/1/08)

Sold 2 Sept Lumber at 255.50
Bought 2 Nov Lumber at 241.50 (9/1/08)

Sold 1 Nov 210 Put Lumber at 5.70 or $627 (9/18/08)

Sold 3 Nov Lumber at 193.10
Bought 3 Jan Lumber at 204.70 (1/4/08)

12/5/08:Sold 1 Jan Lumber 170 Put for 5.5 or $605
Covered for +4.6 profit or +$506 (12/5/08)

Sold 3 Jan Lumber at 166.80
Bought 3 Mar Lumber at 183 (1/6/08)

Sold 1 Mar Lumber 170 Put for 6.1 or $671 (1/8/08)

Sold 4 Mar lumber at 142.5 (offset 170 put at expiration)
Bought 4 May lumber at 153.025 (2/25/09)

Bought 2 May LB at 171.4 (3/30/09)

Bought 2 May LB at 179.1 (4/13/09)

Sold 8 May Lumber at 152.1

Bought 8 Jul Lumber at 170.05

Sold 8 Jul LB at avg 190.925

Bought 6 Sep LB at avg 214.95

Bought 2 Nov LB at avg 204.75 (completed on 7/7/09)

Sold 1 Feb NG at 5.831

I sold 1 Feb NG at 5.831. This is my last position of NG. I really thought we would test this year's high, but I guess, we'll pull-back first.

Sold 1 Jan NG at 5.778

Nat gas report came good for my long. I sold 1 long today. I'm still holding 1 long. I might swap it to 4 QG instead of holding 1 NG.

Sold 1 Jan NG at 5.455

I sold one of my Jan futures longs at 5.455. I also placed an order to sell call options.

update

Yesterday, I got stopped out on my last lumber at 256.6. Today it's limit-down, so I guess it was a good thing. I still think I'm an amateur because after I existed, I kept going back and looking at what lumber is doing hoping 'since I'm out now, it should crash!'

Today I sold 1 Jan NG 4.5 put for 0.215. NG is making a multi-year low again (with regards to contract roll-over). There's a lot of bad news out there about NG especially with warm winter weather. I think one very cold week or two can change things very quickly and that's what I'm looking for. Since the only position I'm holding is NG, I'll probably add some more later.

Lumber limit up

Lumber is limit up again. I'm taking 1 off to this limit up move. I also raised the stop. What sucks is I'm trying to build a new house, so this high lumber price wouldn't help.

As for nat gas, it's down about $3K per contract. Today is a key day for nat gas, and it could go lower from here. I thought after the last week's move, we could see some upside.

Lumber

I sold 1 Jan and 1 Mar lumber into today's rally. I'm still holding 2 Mar long. For the remaining positions, I set 251.2 as stops. I'll take stops or keep trailing.

NG

I go to ino.com to look at futures price throughout the day. Occasionally there's this picture shown up as a sales banner. Every time I look at this guy, it reminds of me thinking about my nat gas / lumber.

Anyway, I think nat gas is going to make a multi-year low here. Pricewise, it's not the new low, but if you consider rolls and everything, this is the new low. I'm not sure if I want to add or just watch.

Other than that, I'll roll to Jan contract soon.

A bit of relief

I never thought a day like today would come. I've been holding lumber since Jan 2008. I was very close to marking 2 years. I rolled and added many times. I still don't understand why it's rallying because today I just heard mortgage delinquency doubled this month. Is it just speculation? Who knows.

I've been feeling very sorry to my family. We were going to build a house back in Mar when LB and NG were both rallying, but I was stupid enough not to sell any to lock in profits at that time. Because of my trades, we couldn't do that. It's been very stressful and I found a lot about myself as well.

I'm still holding 5 lots. I'm not sure how I would exit this.

Order execution mistake

March lumber closed at 248.9 yesterday with a limit up. So I meant to place an order to sell at 258.9 in case of another limit up day. I just opened up and found that I sold at 249.9. Lumber is not being traded at 256.2. What the heck. To add that, I sold not just 1 contract, I sold 2. Stupid me.

Will it hold?

ES is at 52 week high above 1100. The chart pattern looks higher, but we certainly don't want to go back below 1100 today, and then it'll change the whole sentiment.

S&P

S&P really needs to close above 1100 if it wants to go higher. Double-top is probably the last thing that index wants to see. This week we poked thru, but quickly formed a reversal pattern. Yesterday we followed through to the downside. If we close above the reversal candle, that'll bring some buyers.

Commodities are not doing well overall because dollar is at a critical level. Looks like a lot of people are watching for dollars. I still see a lot of nervous buyers and top pickers. As long as we continue to see those, I think we'll keep moving higher. When those who have been saying V type recovery is not possible turn into bulls, that's when we should go short.

NG at a multi year low level. Hopefully this forms a double bottom, or I'll be a painful waiting game. LB is doing ok.

Bond / note

I don't understand why bonds and notes are not declining. With indexes up this much, you'd think bonds and notes are down. I looked at the charts and looks like they are right on the neck line of head and shoulder. I still think there are mixed feeling of safe haven v.s. risks. As long as we keep this way, I think stocks keep rallying.

One of things I pay attention is money flow to mutual funds. To recent rallies, what people have been doing was to, in fact, take money out of mutual funds. People who bought at the market top in 2007 made up some of their losses. People who bought in 2008 are break-even, so they are cashing in.

As for gold, I have no idea. JC at TTM has been a gold bug for years. His 'buy gold' every night was pretty annoying, but now I wish I would have bought some and this is the difference between pros like him and idiots like me.

Despite broad commodity rallies, lumber is down quite a bit and nat gas is close to the multi year low (not the price wise, but after roll-overs, this is the contract low). I'm attempted to buy dec call options, but that'll probably add more headaches. I guess since I didn't buy markets go up from here. Who knows if i can ever exit these positions.

Job#

It seems non-farm # ruined all the party. We're still at the point where we keep losing. What we've had since early this year was simply a decrease of the degree of losing jobs. So unless jobs were added, the unemployment rate will not get better.

Nat gas resumed its trend to downside. It'll probably challenge the low again and probably dip lower. I'm glad I covered 1 before it tanked. I was just so close to cover all of them. All I needed was 1 day of staying at the high. Then my options would have been offset.

Lumber has moved to upside slightly. I think that's because of the extended home buyer's tax credit. I don't know how much it'll be helpful. Normally it'd take 6 months for experienced builders to build a house, so if they start building in 1 month (considering getting permits / getting bids etc), they only have 4 months until April. If they find a buyer before the end of April, good for them, but theses days new houses don't get sold before they are done.

Existing home sales are not much different. If you have a family, you probably don't move until your kids schools are done in mid to end of May, so what good is April deadline?

A little guy like me, unfortunately, have to just hope economy gets better. Everything started from housing market collapse. It then went to less consumer spending, company cost cut, job loss, foreclosure / short sales and it continues.

NG roll over

NG couldn't sustain the recent rally. I rolled over 3 contracts from Nov to Dec. Note that I still have 3 call options sell. Nov options expire on Tuesday. If somehow NG rally and close above 5 or 5.25 before options expire, I have to sell Dec and buy Nov again to offset. What a pain in the butt.

Sold 3 Nov NG at 4.811

Bought 3 Dec NG at 5.508

Once options expire, I'll try to sell Dec options. The wait game starts again...

Thursday

Looks as if my fate is dependent on NG inventory report.

The market is expecting an increase of +22B compared to +58B last week. Although we had two cold weeks, I'm not sure if it can beat (lower increase than +22) the expectation.

How people are going to react is always another story as well. Markets always have something better or worse than expected as well as some strange thing called 'whisper'.

What I'm really not comfortable about the current situation is yesterday's move. We had a big topping candle. The 6.2 level in Dec contract is really big. Big guys who have been shorting seem to be defending that level.

I was hoping to buy some puts yesterday. Nov 5 put came as low as 0.07 which was still higher than what I would pay (0.05 or $500), so here I am sitting.

It seems stocks want to take a break too, which will probably strengthen dollar, weaken gold / oil / other commodities. I do like grains especially wheat. I wanted to buy pullback to 480 level, but it just shot higher yesterday.

NG update

I'm in a dilemma.

Currently I have 3 long NG outright, two 5.25 call sell and one 5 call sell.

The Nov options expire next Tue (10/27). I would normally leave this alone, but I have a few personal reasons to reduce market exposure. Still with 5 trading days to go, a lot of things can happen considering how volatile NG can be. What's worse (or better) is NG inventory report is on Thursday, which can easily bring NG down. So here are a few options. If you never sold options this might be educational.

1) Leave it alone.

Ideally, NG closes above 5.25 and my 3 options will get offset and I'll be flat. In other words, I keep all the premium I wrote, I'll get assigned 1 short from 5 and 2 short from 5.25. Since I'm holding 3 long, they'll get offset. This is the best covered-call scenario could happen.

The risk is I may have to roll-over again and wait for the next options expiration day!

2) Buy puts.

One option is to buy puts. The problem, however, is even with only 1 week to go, there's just so much premium (mainly due to volatility of NG). With covered-calls, my profit is limited whereas risk is unlimited (or until NG gets to zero).

I think NG will push over 6.2 on Dec contract to clearly run stops above. When that happens, I think 5.25 Nov call should be less than 0.05 (or $500), which is pretty cheap. (Since when $500 options are considered cheap???) I can then think about buying put options that time.

If NG doesn't rally and just die from here, I may be stuck with NG for another month.

3) Cover 3 options sell and exit 3 futures long

This is probably not a good idea. The whole reason behind writing calls was to take advantage of inflated panic / premium in NG markets. FYI, 5.25 call still has 0.15 or $1500 while NG is traded at 5.2. The out-of-money options with 5 days left still has $1500, and I don't think I want to give up on that. Good news is I can cover all the NG right away freeing up $25000 margin.

4) Buy 5.5 calls and exit 3 longs at the same time.

This is probably the least likely because it's just a lot of if(s).

a. NG closes above 5.5: I'll be flat because I'll get assigned 3 shorts from sell options and 3 longs from call options.

b. NG closes between 5.25 and 5.5: All call options become worthless, and I'll get three shorts assigned, so exit asap.

c. NG closes between 5 and 5.25: All call options become worthless as well as 5.25 call sell. I'll get 1 short assigned from 5 call, so exit asap.

d. NG closes below 5: All call options buys and sells become worthless. Do nothing.

I would like to see where NG is traded before the inventory news and take actions from there. There could be still a lot of catch-up for NG to do with respect to CL.

Sold 1 Nov NG at 5.156

I exited 1 NG long at 5.156.

I'm still holding 2 of 5.25 call sell and 1 of 5 call sell.

If you were a market-maker...

The above is Natural gas chart. As you can see, the Dec contract is testing 5.8 level. We tried that level in late Sept, but quickly got rejected, tried again and got rejected twice. Sure it looks like a strong resistance.

Now if you were a market maker what would you do? Think about how many stops are there above 5.8 level. I do like the fact that we came down to 5.2 level a few days ago before we got to 5.8 level to suck more sellers. NG markets got pretty quite at this 5.8 level right now and I'm pretty sure it'll test above 5.8 to see if it'll not only run stops but also to see if it brings new buyers.

What's more interesting is 6.2 level. If you've been shorting / trailing NG, where would your stops have been? Aggressive stops should be around 5.8-5.9, but you'd be definitely out if NG goes above 6.2.

Sure it'll just test and come right back and NG tends to do that many times. My plan is to cover all of my NG positions onto this type of move.

Note that the front month (Nov) contract acts slightly differently as spread widens and tightens. Since the Nov contract expires next week, I just wrote about Dec contract.

I'm still holding 1 Nov 5.0 call and 2 Nov 5.25 Call.

NG update

After missing 4.75 call sell at 0.6 within a few ticks, the value dropped to 0.2 or so, which means I could have made $4K. Not only that, NG just couldn't close above 5, so today it's tanking now with a nice head and shoulder top. I'm somewhat hedged with 5 call and 5.25 call, but this definitely tastes sour.

I was looking to get out all NG by this month's options expiration, but looks like the wait game starts again.

Great depression #2

Whenever people talked about the similarity about Great Depression, I thought it was non-sense. The problem is different, the reaction is different and the solution is different. Furthermore, if people are so smart about it, why didn't people prevent it from happening in the first place?

Yesterday Aussie raised their key interest rate, which is the 1st among G20 countries. Everybody thinks US and other countries will follow. Was that a good decision? I do not think so. Shortly after the great depression, in fact markets did rally quite a bit, but then people started worrying about dollar and started tightening the money supply. In my opinion, that's actually the reason for the Great Depression not the initial reason.

We are facing the exact same problem right now. The initial problem was sub-prime / credit crisis / real estate bubble etc, but we're at the exact same place where we're asking ourselves 'too much money flowing'?

I'm a big fan of Ben Bernanke, the fed chairman. He's an expert on how we could have avoided the Great Depression. So far he's done a great job. It could have been better, but I'm sure everybody agrees we could have been a lot worse than now. I hated Alan Greenspan, the former fed chairman. I think he caused all the problems to bypass dot-com bubble.

If Bernanke is smart enough he shouldn't raise the rate so soon. We're at a record high deficit, but for example, 1 million dollar in savings now probably is 1/10 of the purchasing power in 30 years, so it may not be as bad as it sounds in terms of the deficit.

In addition, real-estate markets haven't been improved at all. People keep asking what they should do between short-sale and foreclosures, loan default, getting rid of 2nd home, credit card settlement etc. Sure stocks lead 6 month ahead of economy. If that's the case, why people still face the record high foreclosure? Why did Chase bank cut my credit card line from $30K to $1500 without any reason.

I understand why people buy gold. But what I keep my eyes on is bonds. With all the inflation worries, why bonds is around 120? I hope policy makers get clues from there.

Bummer

NG rallied to 5.12 level this morning and my 4.75 call sell order was close to get filled but no luck. Then NG tanked. In any options, the best liquidity exists at the money. The bid/ask on 4.75 call options was at least $400 apart! Considering YM is only $5 apart, that's quite a bit. I'll leave my order alone for now.

5

NG just can't get over 5. It went as high as 5.008 to run very minor stops, but who would put stops within 10 ticks above 5 considering how volatile NG is. To see a solid stop run, I'd say it has to trade at least above 5.05.

There's obviously a lot of battle going around 5. I do like the inverted Head and Shoulder pattern, and the neck line coincides with 5, which is really critical in my opinion. I plan on selling 4.75 call for 0.6ish. To get there futures needs to be traded around 5.2 I think.

For lumber, as usually, nothing.

Update

NG just couldn't break 5 level. I thought it'd at least go over 5 to run stops. It tried a few days, and today it finally gave up. From what I've seen if things go down like this before the NG inventory report, either slight pop-up and die or die with a lot of blood.

I have 3 calls written, so it's helping. I tried to sell 4.75 call which would have helped a lot, but it just dropped before a fill.

Lumber is hanging around the new low. Even if price is at 170ish, and seems higher than 140 back in Spring, it's because of roll-overs.

A lot of news have been released. The theme now is up before the news and sell after the news. All the data is not better than expected, so just sell. There are no more buyers left and those who bought have been ready to exit. Sellers are slightly coming back but not yet.

Sold Nov NG 5.00 Call for 0.335

Today I sold 1 Nov NG 5 Call for 0.335 or $3350. I also rolled-over all of Oct NG to Nov.

Sold Nov NG 5.25 Call for 0.211

Today I rolled 1 NG contract to Nov from Oct and also wrote 1 Nove NG 5.25 Call for 0.211 or $2110 less commissions. Oct options expire this Friday. The value of my Oct 4.25 call is worthless right now. I hope NG stays at least at this level or higher, so that I can write another call tomorrow or Friday.

Sold 1 Nov 5.25 call for 0.231

I would have gotten at least $2500 premium, but I was impatient and got only $2310 less commissions.

Sold 1 Oct 4.25 Call options for 0.065

I just sold to bring some extra premium of $650 less commissions. This options expire in about 10 days.

Sold 1 Oct 3 Call options for 0.605

Today I sold Oct 3 call options for 0.605. I paid 0.16, so the profit on this trade is 0.445 or $4450 less commissions. I put orders to write Nov call options.

Getting prepared

Another NG news and another disappointment.

Today NG inventory report came out and it increases less than expected, but NG is -7%. Pretty much during whole Aug and on, without any any pull-back, it keeps going down along with my account size.

Accordingly, I'm getting prepared for the last day of my long term trades. I've been holding lumber since Jan 2008 and nat gas since Dec 2008. The reason for this failure is the fact that I over-traded. My initial plan was to prepare for less aggressive scale-in, but at one point I thought chart patterns look good, so I bought more.

Anyhow, I plan on taking some time off from trading and work once I get out of those two trades.

Bought 1 Oct NG 3 Call

Calls are definitely deflated right now. Instead of buying futures outright, I bought a 3 call for 0.16 or $1600. 3 Call is only 0.25 away, so I thought this was a good deal. Should we have a bounce to even 3, this call should cost about $3000 pretty quickly.

Some interesting things about NG

As I've been holding NG for a while, I found something interesting.

1. Spread.

I see more and more of this. The front month gets sold off quicker and bought slower than the next month. Last month, the spread between Aug and Sept started about 0.3 and by the time the Sep expired, the spread became 0.4. If I rolled over in early Aug, I would have saved $1000 per contract compared to the last week of Aug (Sept NG futures expiration).

Just today, I watch the spread between Oct and Nov NG contracts. Currently, Oct NG is +0.010, but the Nov is +0.072. The Oct is lagging by 0.072 or $720 per contract.

The solution I found was to roll-over either early or do not trade the front moth contract. Of course, if the markets take off, usually it starts from the front month, but it gets sold off a lot quicker as well.

2. # of rigs

I also keep an eye on the # of Nat gas rigs. You would think if NG price goes down, they should slash the number of rigs, but interestingly the # of rigs keep going up. No wonder NG price keeps going down. While we're at multi-year history in NG storage, they keep producing more and more!

Unless.... since the price of Dec contract is close to 5, there's no reason to sell now, so just produce and store until December. Or it could be that things are getting better, so they keep producing more. I don't why honestly. All I know is NG price keeps going down. As a matter of fact, we went down almost $2 in the last month or so with so many days of consecutive losses, which I've never seen any markets especially in futures.

Who's right

Believe it or not, I'm still holding lumber and natural gas. To be honest, I'm really stressed out. At one point, I just want to get out and take some time off from markets.

I believe there's really something going on with natural gas compared to crude. These days if crude goes up, people think economy is going, so that's a sign of recovery. But then what's going on with nat gas? Nat gas is needed more in industrial area. The reason why nat gas price keeps falling is simply there's no demand. Where is the recovery if factories are not rolling?

I think nat gas traders who've been shorting know something that I don't know or crude traders are dead-wrong. Normally if price of commodity keeps falling, producers cut production pretty quickly and don't sell until price goes back up. But this time, nat gas producers kept producing yet hedging by selling futures contracts very aggressively. Maybe nat gas companies are in a survival mode. They don't think they can last to wait until nag gas price goes up, so they rather sell and lock in even at a lower price as soon as possible. Either way I'm really confused. Stocks do rally as well as oil, but yet nat gas is going to the exact opposite way.

What about lumber. Existing / new home sales yadayada. Yet lumber's making a multi-year low again. Lumber started diving way earlier than housing top. From what I see housing markets are nowhere near bottom. Too bad I'm holding lumber.

Over the last month or two, I lost more than 50% of my portfolio. It's very painful. I know nat gas or lumber will not go zero, but I'm not sure if I have enough money to hang onto my positions.

Sooner or later, stocks will pull-back significantly as well as oil, i bet nat gas and lumber will drop more than anything else since they can't even rally when others are rallying.

Golf and trading

I heard a lot about analogies between golf and trading. I had some general ideas, but since I never played, I didn't know.

I also heard people get hooked and go crazy about it. My father used to go fishing almost every weekend. But one day, he stopped going because he started playing golf. Since I've always like to hang out with my father, I watched him play at driving range. I also picked up golf balls for his putting practices. Now that I think about it, he's been totally 'hooked' ever since.

While I was in college, my friend asked me if I wanted to go to a golf range, but I just never did. From what I remember, many experts say, for tennis or golf 'before doing anything, take lessons first.' I didn't want to pick up any bad habits from learning on my own, so I said no to my friend.

Anyhow, about a month ago, I went to K-State gym where I usually play basketball. I often play pick-up games, but since I don't play as often, I just practiced dribble, shooting and stuff. At one moment, I all of suddent realized, regardless how much I like basketball (my fav sports is basketball), this is something I can't play forever. I can still be as competitive as college kids, but I don't think I should push myself that much anymore.

So I came home and found a few information about golf private lessons. Knowing how lazy I am, I chose the closest one offered and registered 'golf getting started' 4 day lesson. I enjoy watching any kinds of sports including golf, but I just don't know if I like golf or not and this was indeed a great chance.

Time has come, there were 3 people registered for the lesson including me. I was the only one who didn't have golf clubs. Day 1 was for putting. My coach asked if anyone has experienced golf. A dude was a former high school golf team member, but hasn't played for a while. An old woman registered because her husband loves playing golf. I told everyone that I have 2 year experience..... with Nintendo Wii as a joke.

My trading buddy Jack, who loves golf and has a few records in local golf courses, has always told me putting and pitching is two most important basics. When I watch golf on TV, putting seems so easy.

It was easy up until I started goof-around. I made a few long putts, but overall I had no idea how fast I had to hit the ball or how to read slopes. But regardless I miss putts, it was really fun. Above all, unlike usual triple digit July temperature in KS, the weather was perfect around low 80 to be outside. I just loved the feeling of standing on green with a nice breeze.

Day 2 came and we practiced some putts and went to pitching wedge. I made a lot of bad shots, but one shot just went right into the hole. If you play golf, I'm sure how that feels.

Day 3 was for irons including SW and drivers. It looked easy, but it was absolutely not. Most of balls I hit tend to go to right (I'm right handed). However there were a few nice straight shots. This is very interesting and I suddenly realized, 'man this is just like trading. ' Just starting out, I didn't expect to make a few straight shots at all, but I did. When I first started trading, I didn't know what I was doing but I made money here and there. Then again, just like trading, I couldn't consistently swing straight!

I consider myself pretty athletic with any kind of ball-related sports, but golf seems to be completely different. There's a fine difference between good and bad shots, just like trading! When I was hitting good shots, I felt like I'm ready to go to 18 holes. I soon realized it was not a good idea because I remember how badly I wanted to trade live after simulating one strategy only for a short period time and lost a lot of money.

The last day of the lesson was a short game. After practicing irons and drivers, we went to a par 5 hole. I made it with 9 shots. While I did better than the 2 other players, I went through rough, bunker, creek and so on. If it was not putting, it would have been easily +10 on that one hole.

I know how bad I am, but it was really fund that I decided to order golf clubs asap.

After the lessen, about 2 weeks ago, I visited my trading buddy's place to trade together. He's got golf net in his basement, so while markets get choppy I practiced my swing. He even made his basement ceiling high enough on purpose so that I can swing there. I swung a few times in front of him and he told me immediately I need to keep my head down. I didn't quite understand what that meant.

One night we went to a driving range and wow he swings like a video game although he claims that he had better days when he was younger (he's 25 years older than I am). I asked him again what he meant by my head doesn't stay down. He's a kind of person who's very modest and since I'm taking lessons, he doesn't want to say much.

Basically, what I was doing was, I swung as if I was dying to see where my ball goes. Thus my head turns left quicker as well as my left shoulder. So I told myself, 'Ok, I don't care where my ball goes. Let's keep looking at the ball.' Surprisingly, the very next shot was probably the straightest shot I ever hit.

My friend then says, it was a great shot, but don't just get frustrated if your next shot doesn't go straight. Just like he said, my shot went like a 6-4-3 textbook double play ball. I didn't get frustrated, but I exactly know what he meant and I thought it's going to take some time to be at the level I want to be.

I apologize if I go back and forth between trading and golf, but in trading, nowadays I simulate for a very long time and I know that's what should be done. In golf, I need to practice a lot even before thinking about going to a real field.

I hope my trading experience will help golf and golf will help my trading. Hopefully I suck at neither????

On the last day of golf lesson, I asked my coach, 'Why do people go crazy about golf?' He replied, 'if a guy makes terrible shots in all 17 holes, but plays good in one hole, that's enough to make him come back.'

Position updates

I haven't updated for a while because I was pretty busy with work and travel. Here's what I'm holding:

3 Sept NG futures long

1 Sept NG 3.5 Put short at 0.2555

1 Sept NG 4.25 Call short at 0.204

1 Sept NG 4.5 Call short at 0.126

I also added some more in lumber when it went down to 190 level. Lumber is very thin, but margin is very very low. 5 Lumber contracts are equal to 1 Emini ES.

To be honest, I pretend to be patient on this long term trade, but I think it's my stubbornness to hold onto these positions. I'm about break-even for the year. I'm looking to get out of everything with some profits. It'd probably go higher as soon as I get out, but I have to rethink if this strategy suits me well.

In the meantime, I've been working with my trading buddy about new trading setups for the past few months. We really like what we see. I think I'm at the place where I can consider quitting my day-job. I plan on opening a new account pretty soon and I'll post results.

On a side, I've been long GG from 36 all 100% with my Roth IRA. It's a tiny account, but the purpose is to hedge. If gold goes up that's great because I'm making money. If gold goes down, dollar should go up, so I'm making money there.

sold 1 Sep NG 4.25 Call for 0.204 or $2040

Today I sold 1 Sep NG 4.25 Call for 0.204 or $2040 to offset the carrying cost.

I'm holding 3 outrights right now, so I like to exit 1 at least. My break even is a little over 4. I plan on selling another call at 4.5 and probably hold onto the last until 5.5-6 level.

NG and LB update

A bit late updates here. I did the following trades:

Sold 1 Aug NG 3.5 Put for 0.210 or $2100

Sold 8 Jul LB at avg 190.925

Bought 6 Sep LB at avg 214.95

Bought 2 Nov LB at avg 204.75

Sold 1 Aug NG 4.25 Call for 0.255 or $2550

I sold 1 Aug NG 4.25 Call for 0.255 or $2550 (covered call).

The more I trade my new day trading strategy the more I like. As said earlier, I'm going to try to exit most of my long term positions pretty aggressively.

NG Update

The following June NG options all expired worthless profiting $5750 (less commissions)

Sold 1 July NG 4.5 call for 0.158 or $1580 (covered call,5/4/09)

Sold 1 July NG 5 call for 0.207 or $2070 (covered call, 5/8/09)

Sold 1 July NG 3.5 put for 0.210 or $2100 (6/4/09)

I'm looking to sell Aug options now. I'll be pretty aggressive selling because I like to start going back to day-trading that I've been practicing on.

NG roll over

Today, I rolled over NG from July to Aug.

Sold 3 July NG at 3.863

Bought 3 Aug NG at 3.988

I'm still holding 1 July 4.5 Call, 1 July 5 Call and 3.5 July put. Tradestation wants me to roll over out right contracts today, or they will be liquidated even though they are covered call positions, which is very stupid. If for some reason, NG skyrockets, and I get assigned on those calls, I have to sell it again and pay additional commissions instead of simply letting them offset by futures long.

I'm not happy with them for sure. What's more interesting is, their clearing firm is RJ O'Brien, but RJO lets you hold it until expiration day instead of 3 trading days prior. Often times, the very next month value goes down significantly in the last three days of the front month expiration, which I could have benefited if TS let me hold.

Anyway, I'm looking for selling calls if we do have any bounce. NG chart pattern looks good, but price just doesn't follow. Too many people are long UNG (nat gas ETF) and maybe that's why we can't rally.

Patience

I really need to be patient. After big drawdowns, it's attempted to get out at break-even or small profit, but I'll never make a good trade if I do so. I must be patient.

Natural gas lagger

I read a lot of Natural gas news about how good it is to buy now. It sounds great since I'm holding, right? In all honesty, I don't like it at all. I actually think that's exactly why Nat gas can't rally. I don't know how many people got on the recent crude rally, but most of people I know are just watching the markets lately. They want to buy energies, but they feel that crude is overly extended. Also, if stock markets drop, chances are commodities will drop as well.

I'm a big believer of leader and lagger in the markets. There are stocks (or markets) that don't go down as much as others in a bear market. Those usually start rallying faster and more than those got beaten down. I think crude is definitely is the leader and nat gas is the lagger. When crude goes higher, nat gas either stays or up a bit. When crude goes down, nat gas goes down even further. While nat gas can rally while crude goes down, I don't see this happen just yet. I don't know when it'll come. I'm just afraid, the market correction starts and before nat gas starts seeing any rally, it would drop. 

Yesterday, I placed a day order to add lumber at 196.50. I thought I was filled since it settled at 196.3. However, when I checked this morning, I didn't get filled. Not to mention, today Lumber went limit-up to 206.3. It was a good buy because Lumber recently went up crazy and has pulled back consolidating around 195-200 level for a few days. It looked like a textbook bull-flag to me. 

Anyway, too much whining here. I hope everybody has a great weekend.

Outlook

I haven't written about the markets for a long time. I'm not sure how much to talk about.

I stopped day-trading for now. It has been profitable, but with a full time job and trying to force something during lunch hour or day off(s) here and there are jut not working well. Besides, the more I trade, the more I think swing and position trades are where big money can be made. 

Accordingly, I closed all of day trading accounts and simply moved all the money to an out-dated TradeStation Future's 4.0 platform. This platform is probably what you saw sometime in 2002 where you have to manually type the price. No bracket or DOM. Charting doesn't have zoom in/out not to mention with no real time update. But I keep this because I can trade pit-traded contracts. Besides, RJO (TS' clearing firm), knows futures options trading very very well. 

I tried to change to Interactive Brokers and move all of my positions. RJO has been around for a long time, so they know what they are doing. What RJO told me was when futures transfer happens, options would go out first and the next business day cash will go out. When they receive, they receive futures positions first and receive cash next day. What IB told me was, they can't accept my position without cash transferred first. I do understand just in case of market collapse. But as they requested, I sent them my statement proving I have 10x more money sitting at RJO, which will be transferred. So screw it, and I'm going to just stay with Futures 4.0. 

Ironically, this helps me not trade something I didn't plan. Day-trading with this platform is impossible. I may move to IB in the future, but probably not until I get out of NG or LB. 

-NG-

Speaking of NG, I'm still holding 3 long futures, 1 put and 2 call options. Before, I didn't make up my mind between inflation and deflation, but now I'm convinced on the inflation side. I should really hold on to NG. Risk is big, but so is the reward. If this stays volatile, I can keep bringing more premiums from options. Downside is limited to 0 and upside is more likely. At this point, I'm not sure if I will get assigned on 3.5 July put, but I'm okay either way. If I do, 4.5 and 5 calls will be worthless keeping all the premium. I'll wait for a bounce to write Aug calls. I like to see above 5 and I ultimately like to have a runner with a break even stop.

-LB-

I've been holding Lumber for about a year and half. That's absolutely crazy. It's been moving up except today being almost limit-down. It went up too fast too much recently, so this kind of pull-back is necessary. As for targets, I'm not sure. I'm really attempted to get everything out at 230-240, but that shouldn't be the way I'm supposed to trade. 350 price level is likely even without inflation, but I don't know if I am that patient. I still have this bad habit of taking profits too soon, while take big stops. I must admit I'm still more patient on losers.

-Stocks-

I'm surprised to hear many miss the recent move up since March. I thought I was the only overly cautious person thinking we'll quickly turn and test the bottom with no time. What's more surprising is many people think we'll test the bottom soon. What are the markets doing? The exact opposite thing. If I didn't know anything about the markets, I just have to listen to so called gurus, but I'm still not an expert, but I'm not a newbie either, so I'm confused between. 

I like to see stocks go up, but it'll probably just range-bound during the whole summer. If stocks sustain in the range, commodities will shoot to the upside. However, if stocks do get sold, commodities will be de-leveraged again just like before.

I finally bought some gold stock on my Roth IRA. This account is so small that, I care less about it. If gold goes, chances are dollars go down, but I'm hedged. 

Sold 1 July NG 3.5 put for 0.210 or $2100

Today, after NG report, NG dropped, so I sold 1 July 3.5 for 0.210 or $2100.

NG Update

The following June options I wrote expired worthless:

3.5 Put for 0.305 ($3050)

4.25 Call for 0.111 ($1110)

The profit was $4160.

NG rollover

Sold 3 Jun NG at 3.638

Bought 3 Jul NG at 3.763 

Sold 1 NG 5 Jul Call for 0.207 or $2070

Nat gas kept on going, which almost seems too straight. I was expecting some sort of pullback or consolidation, but wow, simply amazing. Accordingly, I sold 1 Jul 5 call for 0.207 or $2070 creating yet another covered call. This will be my final leg, so My max gain is now locked. But I think we might see some pullbacks, so it could be a good time to sell calls. 

My 3.5 June put (sold for $3050) is getting close to worthless. Calls are really becoming inflated. You can sell 6 july call for $700 ish with only 6 weeks to go. I think that's simply crazy. But wait and see. If NG keeps going, you can do the same with probably 7-8 calls. I'm almost attempted to sell a naked call, but that's something I never do especially with nat gas. It can move 10-20K in a matter of few days. 

As for Jun 4.25 calls, if it goes in the money too deep, then I'll probably just get out of both underlying and options to free some margin.

LB rollover

I rolled over from May to July contract

Sold 1 NG 4.25 June Call for 0.111

NG pulled back yesterday but rallying again today. I sold 1 June 4.25 Call for 0.111 or $1110 creating yet another covered call. The strategy is the same. If it goes above 4.25 by 5/26, I'll get offset with 1 long futures. If not, it'll help me on carrying cost. 

So far I have 2 covered call positions. I still have 1 more available. I'll probably let this one ride a bit more or I can sell 4.75-5 Call for $2000+. 

Sold 1 NG 4.5 Jul Call for 0.158

NG is moving higher, so I sold 1 July 4.5 Call for 0.158 or $1580 creating a covered call.  The fun part of my position trading strategy starts when I can sell call options. 

I'm currently holding 3 long futures outright, 1 Jun 3.5 put option and 1 Jul 4.5 call. If NG keeps moving higher, I can exit the Jun 3.5 early (currently +1900). I also plan on selling more calls at either higher premium or higher strike price. If NG turns around and drop, then the $1580 premium I brought will offset the carrying cost bringing the break-even point. 

The July options have still about 50 days to go, so I have to sit on it for quite some time. 

Swine flu

I forgot to mention about the swing flu. Thanks for that.

Because of that, travel industry is getting hurt a lot. Airlines require oil to fly their planes, so oil goes down and what's nat gas going to do. Since it's the weakest in the oil industry even though there's no nat gas plane, it gets sold off first. 

Lumber is not only related to residential building but more importantly a lot of travel related buildings, for example, hotels and vacation homes. People are very fearful about doing it and lumber took a big plunge yesterday....... and today.

FOMC announcement is coming out at 2:15PM ET tomorrow as usual, so be cautious. I'm looking for markets to move higher generating a blow-out top. We're really close to the top. 

Lessons

Simply amazing. I'm learning a lot of lessons from the markets I'm in. In nat gas, I'm trying to catch the bottom and there's a basement now. Maybe there's an atomic shelter under the basement if I continue to try to catch the bottom. There are lots of argument about inflation v.s. deflation. As far as I can see, there's only deflation. I think nat gas' price is back to 1980's. Nat gas companies started to shut down, but this is going to take at least a year to kick in. I hope I don't get a margin call. 

In lumber, I tried to be smart. Instead of adding when it's going down, I waited for a higher high(s) / higher low(s) and then I added on a pull back. It worked nicely.... for about 3-4 days. As stated, it happened that I provided good liquidity to the markets for who wanted to short. Now it resumed its downtrend again. 

I honestly thought this kind of strategy would fit my trading style. But it's not for sure. Once trend is established in commodities, wow, it's just simply amazing.

What hurts more is, I talked about cotton and orange juice. I decided not to take those trades because I thought if they take off, chances are lumber and nat gas would too. I was completely wrong. Cotton and OJ took off their lows and I would say at least $5000 per contract per market. 

The beginning of April was great. I was very close to making up all the losses I had this year, but then it turned and started heading south now losing yet again a record loss per month basis. 

I'll let all of my positions alone at this moment. Fellow traders I know think deflation process will continue until the end of the year before inflation comes into play. Hopefully I will be still holding my positions at that time....

NG offset

May NG options expire today. My 3.5 put will likely get assigned, so I offset and roll-it over to June by selling 1 May NG outright and buying 1 June NG outright.

Sold 1 May NG at 3.167

Bought 1 June NG at 3.279

Sold 1 Jun NG 3.50 put for 0.305

Let's see how low this nat gas will go. 

My order to sell June NG 3.5 put was filled today for 0.305 or $3050.

Markets

Have you ever felt like you're never going to get out of a position that you're holding? I feel like it with my lumber and nat gas.

I added more on those. I tried to be smart by adding onto a rally, but in a big down trend, I guess that's where shorts would add their shorts and I kindly took those shorts. Bummer. As soon as I added, of course, lumber resumed its downtrend.

Nat gas continued to get hammered. It was 12 just a few months ago, and now it's 3.5. It lost over 70%! I have no execuse on this because I'm trying to catch the falling knife. On upcoming trades, I'll probably wait for a trend change and try to get the meat in the middle using 'stops'.

Well, it's been a good exercise and I think I'm much better off using stops instead of hoping to turn things around waiting for months and months. Besides, I don't have unlimited money.

I might add 1 more level or so, but other than that, I'll just let it run. I need to be prepared for further downmove. Carrying cost kills me, so even though, I'm adding essentially, I'm not making much money.

Sold 1 NG 3.5 May put for 0.105

I brought $1050 premium (less commissions ) for NG. There are 10 days until expiration. I have another order to sell June 3.5 put, but to get that one filled, I think NG has to drop another 0.3 or so. 

Corrected from 1.05 -> 0.105 (thanks boogster)

Bought 2 May LB at 179.1

I finally got the pullback I wanted. Accordingly, I lowered Jul call order.

Position trades

Lumber is forming a bull flag. It really needs to close above 188. I tried to add more pull back to 178, but it only came back to 180 and now at 185-6. The easy move was from 180 to 185, and now it needs to find its way out to go higher. Should it break above 188 and go to say 195ish, I'll add more somewhere around 188 which was previously resistance, becoming a support.

Oil report came out positive for crude, which I think helped nat gas. But I'm losing like $1K every day in the last three days and gain $1K in one day. It's a losing game. What gets harder is when commodities are approaching to zero, put premium goes down too. I'm trying to sell 3.5 May put, but it just doesn't come down enough and premium evaporates quickly. Jun contract has still close to 50 days to go, I don't want to sell June puts.

At the end, I have nothing to do but watching. I'm hoping to get $20K out of these two trades.

Cancelled

It came within a tick, so I cancelled it. 816.25 has been a key area today.

Looking to buy ES at 816.25

I'm looking to buy ES at 816.25

Jan and Feb totals

I was not going to post 2009 totals until I become profitable because it's embarrassing in all honesty. But all of sudden, I thought it's more embarrassing to try to hide what my current loss is. That's not why I started this blog. I'm not sure if this blog will last forever, but I should be honest about myself not only when I'm profitable but also I'm not.

Anyway, I lost about 30K for Jan and Feb and I'm not sure when I can get out of that drawdown, but it'll work out and I need to be patient.  

2009 Profit / Loss

I was not so diligent updating the totals. I was down a lot at the beginning of the year, but made all back plus some (a grand or two), but all in all, I think this was a scratch year. I withdrew all to build a house and hope to be back after the done is done.

Lumber close

Today's lumber close is very important. As some of you know, I added 2 outright at 170 (a simple pullback to 170 support after a nice break out) and today it's moving higher. It briefly went to limit-up but didn't stay long. This is normal because the previous resistance was at 178 and markets always want to test how much stops they can run and how much new market buys are there.

The logical move is to pullback around 175-177ish and test today's high area again. After that, it'd be nice to see it close above 178-179, but what do I know.

Nat gas is getting killed because of oil report today. I'm -$12000 on that trade alone holding 2 contracts. I'm looking to sell 3.5 May put, but because of time decay, it's not coming.

Bought 2 May LB at 171.4

I got filled. Hopefully, I picked the right direction. If it takes out the most recent high at 180, it should get to 200 pretty quickly.

By the way, other quote service shows the last trade on Lumber 170 put is at 10.2. Hmm, that was exact my entry, yet I didn't get filled. Oh actually I got filled and had to exercise a return policy that I didn't think I even had. I'm certain that someone on the floor took my 2 puts and keeping profit.

Floor traders

I just got a call from TradeStation saying 2 May 170 puts were not actually filled. He said, their floor trader 'mis-punched' thinking it was call options. (Note lumber options are floor only).

I was immediately thinking, this is completely BS. I, then, asked him, 'So, you're saying, if I make a mistake floors can take advantage of me, but when they (you) make a mistake, I can't do that?' He went silent and it was a mis-punch.

Lumber went up after I thought I got filled and I was making $600+ or so. Now it's gone. I asked my long time trading friend about this and as I expected, he doesn't think there's any little guys like us can do anything.

I hate pit-trading. In electronic trading, all sales are final. There's no return policy crap.

Monday

The chart pattern finally looks more attractive. We formed a double bottom, consolidated for a while, broke the range with a decent up move and now I think it's making a bull flag.

I must admit that up until now, the chart looked so bearish and that's why I was entering every 30-40 pts or so.

There is a resistance at 180 although the chart above doesn't show what actual front-month contracts. TS automatically add / subtracts when rolling-over.

I also have 2 outright futures buy order at 171.40 (it came so close, but now bouncing). I'll leave the order there at least for today. My order is based on 8EMA like JC uses. If it moves higher tomorrow, I'll revise my entry.

Friday

I'm not doing much other that watching nat gas dropping. Lumber's holding its level, but nat gas is dropping multi-year low and it's pretty fast. I put an order to sell 3.5 put back in case we get some panic selling. I'm holding 2 nat gas out right now.

I'm looking to build a house, but I kept telling myself I should wait until I get flat in case markets do go against me very badly. Maybe instead of losing money, I should just sell everything and build one. I've been holding lumber over an year, and I don't think it's because I'm patient, but because I'm stubborn.

Time should tell. I'm just a bit tired of living in a tiny apartment for a long time!

NG update

NG is -10% or so today. How unlucky I am! This was exactly what I was worried about, but I think I played odds. Only 15 mins to NG market close, Apr NG is being traded around 3.94. I don't think it'll close above 4, so I did offset it and bought 1 Jun NG.

Sold 1 Apr NG at 3.941
Bought 1 Jun NG at 4.16

So now, I'm holding 2 June contracts, so I'll place an order to sell 2 calls near 4.5 - 5. I'm not sure if I want to go all in or one here and there, but that won't be until NG has some move higher.

Just a side note, I sold 1 Apr 4 put for $3100, so by exiting 3.941, I made $2510 less commissions.

Nat gas report

The report came out and it must be something like 'huge jump in stock nat gas'. Nat gas dropped -8% or more instantly and my Apr 4 put option suddenly went in the money. I thought it could come down, but wow, I didn't expect this much.

At this point, I don't know if this will expire worthless or I'll get assigned since Apr contract's futures price hubbering around 4. I have to offset tomorrow if I do get assigned, which my broker will not like because futures expire very next day. They are going to freeze my account so that I don't trade any more Apr contract and I have to call to unfreeze so that I can offset.

I don't know if this is good news or bad news, but if it expires worthless, I'll try to sell May 4 put around 0.3 or $3000. If I get an assignmenst, great my avg cost got lower, so I'll roll it over to Jun contract and modify my 5.25 call short limit order to 4.75 call.

All in all, I'd like to make about $10K on this whole trade. NG market closes at 2:30 PM ET, so I'll keep an eye on it.

Tuesday

I took two ES day-trades and both got stopped out.

-$450 less commissions.

Yesterday and today, I'm not syncing with markets.

Monday

I took a short trade and got stopped out.

-$225 less commissions

A lot of things went through while I was holding my position. Second-guessing, attempting to take 1-2 tick profit, moving stops etc, but at the end, I did exactly what I planned. It sucks to lose $225, but I'm proud of myself to trade my plan, which is a must to be successful in trading. I was taken out at the exact tick, so it hurts more, but I know this is not the last stoploss I'll take.

NG roll over

I rolled over nat gas as follows:

Sold 1 Apr NG at 4.297
Bought 1 Jun NG at 4.497

Remember this doesn't mean I lost money. It's just where the current bid/ask is. I also placed an order to sell 1 Jun 5.25 call for 3.1. It seems NG has to move at least 0.5 or so for my call to get filled, so it'll take a while.

In the mean time, last Thursday (3/19/09), Nat gas shot up, so my 4 Apr put is current out of money profiting about $3K. This expires coming Thursday (3/26/09). What's interesting is Nat gas report comes out on the same day. It's currently out of money by 0.27 which can easily go back in the money, so I'm not sure if I want to get out before that or not because options sellers' upside target is limited.

However, if it goes back in the money and I get assigned, my avg price of the outright position is lower, so I can probably sell 4.75 call for $5K on 2 lots or so instead of waiting 5.25 on 1 lot to get hit. As a matter of fact, this is what I'll do. I either let it expire worthless or get assigned.

As a side note, this blog helps me trade better because I can clear up my mind and look at how I trade from the 3rd person's view although not many people visit here.

Wednesday morning

I'm not doing much other than holding lumber and nat gas. Lumber is forming an triangle, but can't get out of there for about a month. Trends are down, so the path to the downside is highly likely. I have a few more orders to sell lumber options. From this point, instead of scaling-in at 1 ever 30 pts, I'll go in 1, 2, 4 lots ever 10 pts. I need to take advantage of this price, but markets need to go down first.

For nat gas, I have 1 long and 1 short put. The put option will likely get an assignment, so I'll prepare for that. This morning, I called TradeStation to ask about futures options assignment. One guy picked and I can tell he doesn't have much experience with futures options. He ended up hung up on me as I was putting him into the corner by asking him some questions. He said he's gotta go.

I've never had a guy from trading desk say he's gotta go... So, I called back and talked to a supervisor, and of course this guy knows what he's talking about. I told him I'll file a complaint.
Basically, TS doesn't want to deliver any positions and since there's only 1 day between options expiration and futures expiration, they are extra cautious. In addition, nat gas big contract requires $50K, so I guess I understand.

Anyway, I'm looking to sell 3.5 put May options if nat gas continues go down. I need to be very patient, but I don't think I need as much patient as lumber.

Today's FOMC day. I don't know what markets are going to do. Bulls and bears both have execuses to move either way at this point. Just don't get caught during annoucement time.

ES day trades

After I missed two long trades, but caught small two shorts.

+$100

Short 3 ES at 686.25

I scalped ES this morning.

+$350

Salmon trade

Why do I feel like the two trades that I'm holding will never work out? Eventually I can't scale in any more and I'm running out of money etc. Murphy's law says as soon as I got forced out due to margin calls, markets will rally way beyond my targets.I also feel as if I'm completely against the trend. Lumber's been downtrend of 3 years. If you ever looked at the chart, even monkey would have made money simply shorting every bounce. Nat gas is the same way, bu heading into multi-year low.

I also looked at monthly charts on commodities v.s. stock indexes and I didn't see much corelation. Commodities seem to be doing own things. I'm just really tired of holding onto positions this long. It requires more patience than I've ever imagined. I'd like to build a house, quit my job and day-trade, but feels like it'll never come true.

Maybe I just need to take a nap. zzzz...

Options

I was thinking about my natural gas trade today. As natural gas slowly move up, I started wondering when my call will get filled. Shortly after, I realized that I made a big mistake. Early Feb, it ran to 4.9 and at that time I was trying to sell 5.25 call for 0.3. That call got to 0.26ish and I barely missed that sell. What I should have done was instead of selling March 5.25, I would have sold Apr 5.25 for 0.45 ish. I was focusing only on near term (30 days or less) options.

The current price of nat gas is about 4.335 and Apr 5 call I'm trying to sell is only going for 0.068. There's no way I'm going to bring 0.3 before 3/26 expiration unless it goes in the money. On the other hand, May 5 call is going 0.183. Should nat gas rally another 0.5 or so, I should be able to bring 0.3. Remember once markets trend up, calls get inflated and I may be able to sell 5.25 call. The downside of this is, the May expiration is almost 50 days away and once I'm filled, there's nothing I can do.

By the way, the Apr 4 call I sold for $3100 is not worth $1300, so I'm +$1800. I'll let this one either expire worthless or get assigned. However if we rally in next 5-7 trading days, I'll look into exiting at 0.02.

Another lesson

Very interesting thing happened today. As you know, I'm long lumber for quite some time. Even though it's super-long term trade, I check quotes every second as if it's a day trade. I'm kidding on every second, but I do check open and close.

Lumber expires every two months, 15th of every two months to be exact. I usually don't wait until the final moment to roll over because I do not want to get caught on price manipulation from floor traders. They know who's 'stuck', so since I have no intention of taking delivery 100s of 2X4s... what do I need 2X4s, they know I have to cover. Better yet, my broker will 'kindly' cover for me and he'll push the price down artificially right before forcing my sell.

Anyway, when I rolled over in late Feb, the difference between Mar contract and May was about 15 pts. Rolling over to higher price doesn't mean you're losing money. It's just simply where it's being traded at.

The lumber's limit is 10 pts or $1100 per contract. Today, May lumber went limit up. Great for me since I'm long 4 lots. But then I looked at March contract and it's +16! How is this possible because Lumber's limit is 10! So, I did some research and it seems that the front month's contract doesn't have limit on limit move. If I didn't roll over and just wait until today or tomorrow, I would have made additional 16 points on 4 lots (calculated from the day I rolled over. the spread got smaller and smaller!), which is equivalent to $7040! What a bummer.

I know when markets try to turn, usually front month's contract takes off first and then the next month's contract follows and I think this is what happening with lumber. Sure housing markets are still bad. I don't know about other areas, but where I live, I talked to a builder yesterday to get a quote on a house plan, he said they are building 6 homes simultaneously right now. My co-worker, who's been thinking about buying a house in last 2 years, just bought a house to take advantage of $8K tax credit.

I'm not surprised if lumber limits down, but if we have some sort of up-move, I'll look to add some more on a pull back.

LB and NG update

Today I rolled over Mar Lumber to May contract. I've been using pit contracts even if CME launched electronic contract in late 2008. Pit trades really suck because I have no idea where the current bid/ask is and I don't know if someone (even my broker) is trying screw me.

During my last roll-over, I was holding Nov long and I sent 3 sell orders. After about a few mins later, it showed last price was at my sell, so I thought I got filled. In pit trading, usually the # of contracts doesn't really mean much because it's very liquid. I, then, went bought 3 Jan Lumber and I got filled because I saw last traded price was below mine, so someone also got filled below my price.

Another thing sucks about pit trading is you don't get confirmation immediately. It takes about 2-3 hours. Later I found that my sell didn't get filled, so I ended up holding 6 lots of lumber instead of 3. Furthermore, Lumber kept dropping and my on-going loss suddenly became -$3000+. Fortunately lumber came back up and filled my sell.

Long story short, I'm now more comfortable trading lumber in electronic markets. The bid/ask spread is still wide, but at least I can time when the spread gets smaller to roll over.

Lumber continues to drop and it's at the point where I would aggressively buy. I plan on buying 2 lots at a time from this point. Margin is only $1100 per contract.

Sold 4 Mar lumber at 142.5 (1 will offset 170 put at expiration)
Bought 4 May lumber at 153.025

As for natural gas, I'm still holding 1 long outright and 1 short Apr 4 put. I have an order to sell Apr 5 call for 0.34 (or $3400).

To be honest, I'm down quite a bit and it gives me a lot of pressure / headache. I looked at monthly charts on all commodities during 80s stock market crash / 2001 dot com bubble burst, but commodities don't seem to be affected. The tricky thing about this market is, it seems when indexes go lower, it triggers margin calls, which in turn forces liquidate other commodities first. Besides, it usually takes a while for commodities to turn around. It could spend a few 'years' basing before shooting higher. Hope I have enough money to hold on to. This strategy is definitely not for someone who's not patient.

Sold 1 NG Apr 4 Put for 0.310 (or $3100)

Natural gas report came out pretty bad, so it tanked to $4 ish and I got filled on 1 NG 4 Apr put for 0.31 or $3100 premium. My break-even is now 4.236. NG can go below below 4, but I'd be very surprised if it'll drop below 3. I'll sell 2 more at 3 should we get there.

Apr contract has about 4 weeks to go, so still plenty of time to decide what calls I want to sell. I still keep 5.25 Apr call if we rally.

NG update

I rolled over my natural gas position:

Sold 1 Mar NG at 4.418
Bought 1 April NG at 4.430

I also placed the following orders:
Sell 1 Apr 5.250 Call for 0.340 (or $3400)
Sell 1 Apr 4 put for 0.310 (or $3100)

Markets

I'm not doing much. I keep an eye on markets, but there's simply no direction. Since stocks are not moving, all other commodities are not moving either. I'm still holding NG and LB. NG is hanging around break-even point. I'll roll over early and try to sell Apr puts. Lumber went as low as 139ish and had 3 limit up days. It then again went down, so now being traded around 155.

I'm not sure if markets are trying to bottom out here or test the low again. The best possible case is we have one extreme hammer day to run stops and close above the open.

Bull markets are usually very slow and small ,and bear market rallies are fast and big.

NG update

Sold 1 Feb NG at 4.471 to offset the 1 NG 5 put
Bought 1 Mar NG at 4.446

Since I'll get assigned the Feb 5 put, it'd be as if I'm long from 4.787 (5 - 0.213 premium). The sell at 4.471 will eixt the long trade and essentially I rolled over to Mar NG outright.

I'll place an order to sell 1 Mar NG 5.25 put for 3.5. I'll also put an order to sell 1 Mar NG 4 put for 3.1.

Outlook and update

-Indexes-

Everybody pretty much knows what to expect. 813 has been the key level in ES and today we finally closed below. I was hoping for an inverted head and shoulder, but closing below 813 unfortunately invalidated it. I hate giving tax money to those Wall St. greedy banks, but unfortunately they are the backbone of our economy. All the banks got killed today. I wouldn't be surprised if Citi or Bank of America go bankrupt. I expect markets will go through the low of 2008 to run stops. At that point, we might see actions on the both sides, but I think markets will really scare away people looking like it'll clearly break, but then it'll snap back. But what do I know about markets.

-Natural Gas-

As stocks sink, all the commodities get sold to meet margins. My put option is currently in the money with only 1 week to go. Since I brought about $2K, I'm about b/e or a bit down overall. Ideally, I want NG to close right below 5 before expiration, so I get assigned and I sell Mar calls right away. A bigger question is either I sell another put at 4.5 or 4. This NG trade can be the trade of the year for me, but I don't want to over-trade or get too greedy. In order to get more positions, I made additional deposits. Hopefully my broker deposits quickly.

-Lumber-

What can I say about this trade. Look at the chart above. Basically, I got involved with Lumber since Jan 2008. Carrying costs have been killing me. Usually I can offset carrying costs by utilizing options, but so far I did only once. You can tell Lumber's carrying cost by looking at the difference between March and May contract. I am honestly getting pretty upset and I really like to see how low it can go. I have enough capital, so I'll keep adding until it goes to zero. Even if I get out at break-even, I'll be up quite a bit on my portfolio at year end.

The real deal?

As stocks go down again, people are dying to raise cash again to prevent margin calls by selling commodities and buying dollars. I don't usually keep much money more than I need in my trading account, but since my loss is getting bigger in Lumber (limit down today, ouch!!) and I just established a new Nat gas, I need to transfer some from my bank.

The margin on NG is about 9K and I don't know who set 9K for that. Many brokers are making money by giving little or no interest for customers money that's just sitting. I bet exchange and brokers are feeding each other by forcing margin. (or how clever??)

I honestly have no idea about what will happen. People who have been holding their retirement funds or any during all this down move, got some relief in the past few weeks, but they might start thinking 'Should I cover all?'', 'It can't go lower!', or 'I'll buy some here.' I just don't know. All I want is my lumber to go to 300! In order to do that, I think we need to see stocks bottom out first. Still a long way...

Sold 1 Feb Nat Gas 5.00 Put for 2.13

I 1 Feb Nat Gas 5.00 Put for 2.13 (or $2130). I was initially looking to sell 5.25 for $3000ish, but I thought 5 would work even better even if it's less premium in terms of safety. I've seen NG moves $10K range in a day, so I don't know how safe it can be. Less than 2 weeks to go, I'll let his expire worthless or get assigned just like before.

Sold 1 Mar Lumber 170 Put for 6.1

I sold 1 Mar Lumber 170 Put for 6.1 or $671 this morning. This would be my 4th leg. Lumber is currently about 70 pts below appx cost of production. It's a great level, but it is also very slow too, so it'll take a while to recover for sure.

Natural gas is going down, so hopefully my Feb 5.25 Put gets filled soon.

Day trades

I took a few trades on ES.

1/5/08
#1: -$225
#2: +$100

1/6/08
#1: -$300

2008 wrap up

2008 started with a lot of hope. I implemented a new strategy, which utilize a long term trades. Just like any other trades, 2 positions immediately went against me. At one point my drawdown was close to -$20K under an excuse of 'long term trade'. I know I had to keep adding, but I simply got scared, so I didn't add. Sure, as soon as I decided not to add, markets went in my favor and gave me about $7K profit. Had I added and followed my initial plan, this trade would have been $40K trade.

After I exited 'early' on my first trade, I decided that I should really follow my plan and keep adding if this lumber long term trade keeps going down. Whatever number in Murphy's law says, as soon as I start adding more, markets started making new lows. I'm still holding my lumber trade since Jan 2008. I made quite a bit of money in different trading, but lumber is just sucking all the blood out of me. I begin to believe lumber might go to zero (or free). It sucks, but I keep telling myself to be patient. Because of this, I can't build my house, which has been planned for a year now just in case I need to add more.

Good news is I found a solid strategy in day-trading. I feel comfortable taking stops and it seems to work both in trending and choppy markets. I'd like to quit my job if I can get a home loan. Getting a home loan as self-employed is extremely difficult ever since sub-prime started.

Regardless, I managed to close 2008 with whopping 4K profit although I have open-losing positions. You can tell by looking at the difference between liquidating value v.s closed. Good news is I'm ahead of 95%, so called, fund managers. Furthermore, I didn't lose a dime in my 403b and I made 5% on my Roth IRA. Preserving money is good, but still, I should be able to make in both up and down markets, right?

Anyway, what's done is done and I'd like to move forward. Good luck to me and everybody who visits this blog.

Lumber rollover

Sold 3 Jan Lumber at 166.80

Bought 3 March Lumber at 183