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.