Looking at nat gas again

Looks like it's heading south pretty hard. I'm not sure if this is just trying to run stops or will come down further. Ideally, I'd like to sell 3.25 puts for $1000+.

NG trade recap - daily P/L

As usual, as soon as I got in, it started going against me and I didn't really see profits unlit the final day. When you sell options, you see a lot of premiums evaporate in the last few days.

Offset Dec NG 3.5 put

I sold 1 Dec NG futures contract at 3.462. If the price was around 3.5, I would have let ride and see where it's settled, but since I'm well within 3.5, I just sold 1 futures lot to offset my assignment. I didn't buy any Jan contract because there's a spread of 0.15 between Dec and Jan (carrying cost etc). The Jan contract is currently being traded at 3.6 or so. So I'll wait to sell 3.5 put if it drops. Since I didn't buy the Jan contract, we all know markets will just shot from here. If I was at loss, I would have rolled over without any choice.

All in all, my break-even point was 3.416, so my profit was $460 less commissions over 2 weeks. Not bad, but not so great either. Actually I was lucky that today's NG storage report came shorter than expected, but at one point NG was at 3.8, so I tried to exit my option at 0.3 or so to get $500+ profit, but usually floor traders make the options spread very wide on the expiration date to screw some dumb people, so I couldn't do it.

For some reason, many people are scared of getting assigned and brokers are so careful about it. I'll post again once I have a final settlement. As a matter of fact, I'm not 100% happy with ThinkOrSwim due to the following:

-You have to pay commissions to get assigned for futures. I understand for equities, it's a PIA process, but futures, there shouldn't be any assignment fee like RJO or tradestation.

-They don't let me trade on an expiration date. There are times I don't know if I get assigned or not, so I want to wait until the next day of an options expiration day, which is a futures expiration day for NG. I have no choice but to trade overnight while bid/ask is widen to offset my position.

Dec NG options expiration day plan

It seems I will likely get assigned on my Natural Gas Dec 3.5 put. Normally, futures contracts expire the day after options expiration, but due to Thanksgiving holidays, the Dec contract expires on Mon, 11/28.

I have a few options.

-If the futures contract closes above 3.5, I don't have to do anything (the least likely case considering where markets are traded at right now).

-If the futures contract closes around 3.5 (not likely happen either), but not sure if I get assigned or not. In this case, I need to see a settlement price and if I get assigned, I'll sell the Dec futures and buy Jan futures outright.

-If it closes below 3.5, I'll sell the Dec futures and buy the Jan as quickly as possible.

Since markets are still open after the pit session closes (1:30 pm CT), I can wait to roll over later. Furthermore since electronic markets open during Thanksgiving holidays, I don't have to roll over today, or even wait until Mon 11/28, the futures expiration day. However ThinkOrSwim says any assigned contract gets liquidated 'any time' during the expiration day, so I want to make sure I don't get liquidated by someone else except me because if I do and markets shoot up until I roll over, I might miss any move.

My break-even point based on Dec contract is 3.416 (3.5 - 0.084 (the premium I sold for) = 3.416). If I have a few hundreds dollars of profit, I may simply exit the trade (meaning offset the Dec NG, but not buying Jan) and I start over by selling Jan put.

Now the twist of this whole thing is due to Thanksgiving, we have Nat gas report coming out today (usually Thursday), so it might be good or bad for me. Shortage usually makes NG go higher but not necessary. The weather has been pretty mild so far, but I'm betting on an old saying the hotter the summer gets, the colder the winter gets. It was one of the hottest in the last 10 years.

I'll update regardless what happens.

Personality

I've been trading for a few years, but I don't think my mindset is set right to be a good trader. Every time I enter, 'Ok, just trade my plan and don't get emotional about tick-by-tick action.' Yet, I still suck at managing my emotion.

I sold NG put a few days ago. As soon as I entered it started going against me. First day, no big deal, I have a plan if it goes down or up. But what I really wanted to happen was that NG goes up and my put goes worthless immediately to get the full premium. The 2nd day, it kept going down and I didn't like it. I started checking NG quote like every 30 mins even if this is a long term trade like a novice trader.

Fast forward to yesterday, NG news came out with smaller storage than expected, so it shot up. I got excited, but shortly after it started going down again. I'm thinking now, I get so excited and discouraged on tick by tick action.

I know I'm not overtrading for sure, so I just really need to sit back and relax IF I really want to be a good trader.

Sold 1 Dec NG 3.5 Put for 0.84 ($840)

I've been waiting for this level. I finally pull the trigger on the following:

Sold 1 Dec NG 3.5 Put for 0.84 ($840) less commissions

About 9 days till expiration, it's currently slightly in the money. I like the fact that NG is beaten down a lot with no sign of any support (isn't it contrary to selling puts??). I plan on selling if it gets to 3.25 and 3 level as well. Margin on full size NG is pretty low compared to a few years ago, so that helps.

I'm willing to get assigned and if so, I'll try to roll over to the next month and sell calls right away (covered call). I'm not trying to make a fortune here. I'll try to make about $1-2K.

Gold - platinum spread recap

It was an interesting trade. The last trade I did before this one was probably in early 2010. I completely stopped trading once I started building my house.

About 1.5-year after, I almost forgot what it's like to trade. The first problem I had was that I had a very very hard time pulling the trigger. Even if my brain tells me there'll be drawdowns, stopouts, risks etc, but I was still afraid to lose money. Am I overtrading? No, I don't think so. When I was trading nat gas, I was okay with 10K swing under 150K portfolio.

I figured I think I just have to pull the trigger. Setups were good. When the spread was +20, it was a good price, but I thought I should wait longer until it becomes 0 and I waited very patiently. I knew I'd likely get profits when gold starts heading down, and lose money if gold keeps going higher and the spread gets wider in inverse. I was prepared to add more if the spread becomes -50 (-$5000) although I wanted to work this trading out as soon as possible. Don't we all traders want markets to come to get filled in, but as soon as we're filled, we want it to turn and goes into our favor? Wait, a few seconds ago, you want it to come one way, but now you suddenly want it to go to a completely different direction? We, traders, are so demanding. ha

The very first day, I was -$1000. Oh great, it's going to be another natural gas trade, which took about 11 months. But the next day, gold tanked as I was hoping, which gave me, at one point, $2K profit. On that day, I was just checking a delayed quote since this is a long term trade, but I thought I should hold it until $5-10K profit, where greed kicked in. I should have realized that was the first exit sign.

The next day, all the profits were wiped out and I'm sitting at about b/e. I was kicking myself thinking 'What have I done'. 2K is good money. You probably guessed what's coming. Gold started rallying and the spread went into -20 which means I'm -$2000 instead of +$2000. I really started thinking shoulda, coulda, woulda....

What was interesting was gold did make a new high, but quickly turned around. At this point, I was thinking, hmmm this maybe a typical top pattern (invereted V). It runs stops and let's head down until all the novice bull traders give up, so I thought I'd have a good chance still and it indeed started heading down. However what was frustrating was even if gold went down, the spread didn't go down as much as I expected (platinum was going down as much as gold instead of holding the value), which probably means there are still a lot of people buying gold, but not platinum.

The spread came back to break even around 9/12, and I was just so attempted to exit everything. We've all felt that if trades go against us and come back to break-even, we want to exit! Now if gold starts heading to 2000, it won't be pretty. At this point, I decided to change my plan a bit. I didn't exit because I keep telling myself, I just risked this much money and I'm not here to exit at b/e. Anyway, the new plan is I'm going to take out profits at about +10 ($1000) and enter again if it goes to -20 or so. I figured if I can do this a few times, it'd be a lot better than trying to catch a big move.

On 9/15, Gold went below a recent swing low, which triggered some stops and it started bouncing off the low, so I figured that was my exit signal.

All in all, after all the commissions, it was $885.18 trade, but it taught a lot about trading again. In my next blog, I'll talk about what I'm looking at.

Exited Gold - Platinum spread

Today I exited the gold-platinum spread as follows:

Sold 2 platinum at 1791.1
Bought 1 gold at 1783.3
with a spread of 7.8

This gave me a profit of the spread of 9.3 or $930 (less commissions)

I'll write separately about how this turned out.

Gold / platinum spread trade

Sold 1 gold at 1881
Bought 2 platinum at 1879.5

This is a spread trading and I will likely make money when gold goes down. There's no stop for this and I'll add if it gets to -50, -100 pts etc...

Give another day

I'm looking to sell Nat gas puts. I was looking at 3.75 puts for $1530 a few days ago. I think it got to $1400ish and NG went up. Today NG tanked, but 3.75 puts was no where like a few days ago because when NG went up, the premium evaporated very quickly if this makes sense. Over lunch our, I placed an order to sell $4 put for $2030, but then with the sharp up and down in 2 days, I decided to wait out. I think what will likely happen is to test the low or even lower, consolidate before it goes up. I might get 3.75 puts above $1500.

On the other hand, I'm so close to sell Gold and buy Platinum at the same time as a spread. I think Gold might test the high just to see if they can run any stops and scare people away. I'll take advantage of this move and create liquidity for them. It maybe when Gold goes between 1950 and 2050. After that I think it'll crash as a typical inverted V format followed by a looong stagnation.

I'm also looking to sell Corn and buy Wheat at the same time. I think the current level is good, but I think there's still more upside to go for corn. I'd like to execute this trade when corn is likely to go down.

As far as indexes go, I think it'll test the low, but what do I know.

Back in trading

I opened an account at RJO. I used to trade through TradeStation, but their clearing firm was RJO anyway. TS offered a platform called TS4.0 for pit trading contracts, which is essentially the same as RJO Vantage with minus a few nice features, so I thought I should go with RJO directly. The commissions are not as cheap as tradestation, but I'm ok with $5 for futures options as I'm not doing lots of trades anyway.

I placed an order for nat gas. It needs to come down a bit more though. I'm also looking at gold / platinum and corn / wheat as well.

It's good to be back.

I wouldn't touch.

Gold, silver, oil etc are dropping. It sure looks like a bargain compared to where it was a few days ago or based on the trends. However, I do not think this is time to get back in. When markets are trending up, the down move should be slow even if by nature it's faster to go down than up.

NG is coming down again, probably due to the inventory report and more, but I'll wait as well.

All 20/20

It's been a long time since my last post due to family issues. I'm even not sure if anyone stills visits here.

I made an important decision in the mean time. I don't think day-trading fits my personality. I think I can make it work eventually, but is it worth it? I spent way too much time. For some people, yes, but not for me. I have a full time job with a family to support. With health-insurance, house payment and too much uncertainty, I don't think I can gamble. If I were a single, I'd do it in a heart beat.

I finally rolled my construction loan for the new house to a permanent loan. I was so attempted to 5-year or 7 year adjustable mortgage because I know I'll probably move, but at the last minute, just in case, I might still stay, so I decided to go with 30 year fixed.

The whole refinance was a joke. Since my property is something you'd see in West coast, certainly not in Midwest, banks considered this as an unusual property. It has lots of green and modern building features and everybody said, 'oh great', but when it comes to property value, 'oh, we just can't find any matching house, so we can't give you value.'

The first appraiser's value was $170K cheaper than the second appraiser. The second appraiser's value is about $75K cheaper than what I spent, which was still fine. But I question about the frist appraiser's work. Sure radiant heated floor on both upper and lower levels, solar panels, insulated concrete forms, R-9 windows with krypton etc are not popular, but I was thinking if no one starts appraising the value of the house correctly about green building, no one would build that way.

Since I put a lot of cash down during construction, I wanted to a cash-out up to 80% of the value, but with so much frustration with banks, I was glad to be able to refinance and get some cash out. Hopefully, a few months later, I'll do a HELOC for more cash after my credit score goes back up. There are still a lot to be done around the house, but man, I'm exhausted, so I'm not going to worry about it for now.

Anyway, by the time the little cash-out arrived to my bank, Nat gas price was around $3.8. I was actually eying on NG for a while. I saw it dipped around $3.75, and it sure seemed like a bargain to me, which was why I was trying so hard to take a good cash out. The risk was greater since my account was not big as before, I didn't have a lot of room to work with. I could start selling $4 puts and maybe $3.5 puts, but not more than that due to the size of account.

This time, instead of using RJO as a broker, I just put everything to ThinkOrSwim. The ACH took 3 days and boy, during that time NG shot up to already 4.25. The April contract's premium was diminishing so fast, so if I wanted, I had to go in for May contract. In 20/20, if my money was clear a day earlier, it would have been an easy $2K trade. But all 20/20, isn't it. I was then looking at May 4.25 put, but I decided to wait. When I don't get in, markets go in my favor, right? As NG went up, the inflated value of puts got deflated, so puts were no longer attractive. Again, it would have been a nice $1K trade. 4.5 puts are too risky, so I moved on.

I then looked at AAPL. I wanted to use ThinkOrSwim (TOS), so that I can trade both futures and stocks. I love Apple products. I keep an eye on how iPhone buyers turn into Mac, iPads etc. I know how hard it was to buy iPad2. Fundamentally a very strong company in my opinion. The last time I traded AAPL, it was around $150. I made good money, but certainly I didn't hold until $350.

Chart was actually pretty good too. It was drifting down towards to earnings and it even dipped below a strong support level. To me, it's not a new leg down. It's more for stop-runs. Everybody knows stops were sitting there below a support. Even I'd try to see if I can run some sell stops because I can always keep selling and dump everything to buy them back.

This was a perfect candidate for earnings options play. Premiums for calls were low because it was heading down for a period of time. In the worst case, if I bought an $1K option, based on AAPL's volatility, my max risk was about $500 whereas my gain was about $1500 per contract. But at the end, I just chickened out because of bad memories on earnings. Again all 20/20.

I have one more. The last week, I started looking at Silver (SI). Not on buying side, but to sell side. I saw SI reached around 50 and it started doing topping patterns I saw before. I had a few options. Buy puts or sell calls. I especially like selling call side because of premium inflation on call side. Out of money calls were going for some crazy amount! SI didn't necessary had to go down, if it just hung around, I would have made good money.

Of course, I didn't want to sell calls naked due to crazy risk in SI. My strategy was to sell 50 calls and buy 51 calls. That way, if SI kept going up, my max loss would have been $1 whereas premium I could have collected was $3500. Its reward:risk was not as good as AAPL, but with options' spread, it's always the case. So I went to TOS, and placed an order. For some reason it kept rejecting my order saying I couldn't sell 50 calls. I do have permissions to sell and I have enough funds for margin. I never traded futures options through TOS, so there must be wrong with settings. However, jinks or not, I just decided not to bother this trade. SI was around 49-50 at that time. Today, sure enough, it's being traded at 39.

This only money I made during the last month was about $1K playing my retirement account. I've been betting on real estate securities. Everybody is so pessimistic about real estate. I'm pessimistic too, but I'll do the opposite. I'm not risking too much anyway.

There goes all my 20/20 stories. I'm not sure what my next plan is, but I'll report back.