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