offtheglass' trading blog

NG roll over

2012-01-26T11:02:00.004-06:00

I rolled over my NG holding:

Sold 1 Feb NG at 2.563

Bought 1 Mar NG at 2.60

(-$3.5*2 + -$3.5 = -$10.5 futures execution and options assignment commissions.)

The Feb sell will offset the 3 put. The spread at the time of execution was 0.037, so my new break-even based on Mar contract is 2.815 (after commissions).

I'll put an order to sell a call and a put option soon. To sell a call, I need a bit of bounce and to sell a put, I need a further drop. Until then, looks like I'm going to be in the wait mode again.

I'm wondering if history repeats itself between Feb and June like boogster says.

NG report

2012-01-26T09:46:00.003-06:00

The following is NG report:

The U.S. Energy Information Administration report showed total domestic gas inventories fell last week by 192 billion cubic feet to 3.098 trillion cubic feet. Traders and analysts polled by Reuters had expected a 168-bcf decline.

So, the inventory dropped more than expected, a normal guy would think NG should rally. 24bcf is a lot! But it's not, actually we're well of its high. Outlook still looks warmer than normal. Still well above 5 year average inventory. Heck, on the weekend, I saw lots of birds migrating to north in the middle of January!

Anyway, I stopped rationalize markets because it just doesn't work for me. What works is a plan and an ability to execute the plan.

Plan on NG

2012-01-26T08:48:00.002-06:00

Today, Feb NG options expire. I have two puts: 3 and 2.4. The 2.4 puts will be likely to expire worthless. The 3 puts is well in the money. My break-even is about 2.775. I've been scratching my head quite a bit because I expected NG to stay below 2.4 so that my break-even would be 2.58.

Instead, I'm close to be break-even. Actually overnight, it went as high as 2.8. The dilemma is this.

Say, I want to get out at break even now, so I'd place an order to exit my 3 puts. As you know, if options go well in the money, the spread of bid and ask get widen. The spread of futures' options are a lot wider than stocks'. By the time I get filled, I'll be a victim of market maker, who tend to do this on purpose on expiration day even more.

So, the next option is to short Feb futures outright. Sounds great. The twist is there's nat gas inventory report coming out today. For whatever reason, if it shoots above 3, I need to exit the short because at that time, 3 puts will get worthless and I don't want to hold on to a short on news day. What if it goes above and below 3 back and forth. I should keep buying and selling like day traders, which can't be quite costly. This is quite unlikely and as of this writing, because NG is -0.040, so this option is long gone.

I thought about buying puts too to protect from the downside move, but believe it or not, even if today is options expiration day, there's still a lot of premium on so far out-of-money options. Sure, NG became volatile, but I'm not paying for $500 to offset 0.050 out of money.

What do I do? When things go against you a lot and come back, you're so attempted to get out at break-even. Yes, the murphy's law says, if I get out at break-even, as soon as you get out, it'll go in your favor. If you don't get out, it'll worse than before. Nonetheless, I'm not going to do anything until news come out.

If it's above 2.775, I might offset by selling futures and place an order to sell puts to fresh start at a lower break-even. If it's below, I'll hold and I'll roll over to March contract. I'll place an order to sell calls at the same time. Strike and price need to be determined.

NG bounced a lot in the last 3 days, so it may be due for a pull back (if not another leg down). Something interesting is Feb options has twice more puts than calls. Wouldn't it be a good money to get a lot of inflated puts expire worthless from institutions' standpoint?

Short squeeze

2012-01-23T10:53:00.003-06:00

A classic short squeeze. We had lots of initiated (new) short last week, which increased the open interest on Feb contract on Nat gas. As we're approaching to the contract expiration this week, people tightened their stops.

Overnight on Sunday the contract was down a lot not to mention gapped down scaring people away, which is when institutions start taking profits, which in turn makes it drift higher and higher. It then triggered buy stops (exit shorts), which makes NG shoots to +0.25ish in a matter of mins. (Isn't it always very easy to explain after the the fact??)

I say this is a short squeeze because this makes the open interest go down, but also it came off the high shortly after quickly dying every min. Another thing to look at is the spread between contracts.

What's more important is that longer term contracts have gained than near term ones. News shows that the biggest nat gas driller decided to cut down production immediately and the last week's baker hughes report reads the rig count went down again.

What do producers do when price go down and they don't make money? They cut supplies. Supply goes down and price goes higher. And that's what I'm here for. Granted, it'll take a very long time and I don't think we'll see $10+ gas, but certainly higher than where we're now. Markets are very very efficient about what's likely happen in the future.

Today, NG shot up with the continuation of the yesterday's move, but quickly faded. It'll keep going down to see if there's any buyer. Hopefully a higher low or a double bottom. I can't do anything until the Feb Options expire on Thursday. I hope we have a thrust move to upside, so that I can utilize more options. I'll talk more about this later.

Sold Feb NG 2.4 Put

2012-01-19T09:57:00.002-06:00

While I was writing my previous blog, NG came down, so I sold Feb 2.4 put for 0.105 (or $1050 - $3 commissions). I was initially thinking about selling 2.5 put, but price was dropping too fast, so I waited. A bit better, but I don't see any sign of a bottom yet. I don't want to be out of bullets.

2012-01-19T09:51:00.002-06:00

NG report came out short. It's not only well below average draw for this time of the year, but also shorter than expectation too. With 9 daily red bars, what can I say! In the mean time, I'm trying to sell 2.4 put with 0.1 or above to scale in or offset. I'm attempted to just buy futures outright, but I probably shouldn't do that.

A dead cat bounce

2012-01-18T09:43:00.002-06:00

The last time I saw a green ticker on NG was about 8 days ago. It had 7 red candles (daily) in a row shaving close to 20% of its value. Well, that's usually what happens when one tries to catch a falling knife.

I placed an order to sell Feb 2.5 put for 0.153. Yesterday NG dropped to 2.43 and the puts was about 0.13-0.14. Of course, what happened was that it got very close and bounced since. Today, NG reached as high as 2.54, which would have been a nice $1000 to lower my break-even.

I don't see today's uptick as a real bounce. It's a mild profit taking. It might go up a bit more, but usually it'll have another move down, at which it can form a lower low, higher low or double-bottom. The latter twos are the best scenarios for me, but even with those, NG will likely stay at this level very very long time.

I'm hoping it bounces about 0.1 to 0.2 so that I can sell calls to lower my break-even. Otherwise, I'll need a lot of patience.

A chosen one

2012-01-13T13:36:00.003-06:00

Have you felt that you have so many things to choose from, but it happens so that you chose something that doesn't work out? I was looking at Corn-Wheat spread, Gold-Platinum spread and Nat gas. It looks like Corn-Wheat would have yielded about $1200 and Gold-Platinum would have yielded about $2600 whereas I'm about -$2200 with Nat gas. I guess we'd all become a good trader in hindsight anyway.

Here's my plan. My break-even on NG is 2.875. NG is currently being traded at 2.655. If it closes around this price at options expiration, I'll roll over and I'll place an order for at or slighly out of the money options for a covered call. To do this I need a bit of bounce. If NG keeps going down like the last 5 days, this can't work.

For example, my roll-over price is at 2.7 and my break even is 2.9 (after the spread between Feb and Mar NG factored in), I'd like to sell 2.8 Calls for 0.2 ($2000), to ultimately make about $1000. Once I have 2.8 calls sold, I'm in a sold position because if it drops again, my break is lowered (2.9-0.2 = 2.7).

On the other hand, if it doesn't give me a chance to sell the call, I'm looking to sell another puts at 2.5 to cost-average. In this case, I can try to sell 2.7 calls for $2000 or so.

There's been lots of talks on NG: hedge fund getting hit, the shortest winter, abundance, new technology to drill etc... I'm simply trying to trade my plan with lots of patience.

I hope for a bounce since the 5-day in a row down day has not been fun.

NG trade update

2012-01-10T11:01:00.002-06:00

Looks like NG is being beaten down, making a fresh low by every moment. Two days ago, it was rallying, so I was thinking about getting out with $500+ profits, but I figured that's not why I got in, in the first place, so decided to hold.

With about a little over 2 weeks left, I can't do anything other than just sitting on my hands. Nat gas report comes out every Thursday, but being how warm it has been, I only expect a further down. Technically, volume spikes up when there's a peak, so I thought that's what I saw, but I guess not. It's usually pretty hard when you try to go against the trend.

My break-even is 2.875, so I think I'm in a good position still. I just need to chill and let it play out.

TOS option analysis tool

2012-01-06T13:56:00.004-06:00

I don't know if you can see the above image well or not, but the above is a screenshot of ThinkOrSwim option analysis tool. It basically shows how my option is designed to work and where I'm at.

The red line shows the P/L at the expiration. I sold NG Feb 3 put for 0.125 so my break-even is about 2.875 and my max profit is +$1250 taking all the premium. The white line shows the relationship between options and my P/L TODAY. For example, if the options drops to 2.95ish, I'm about b/e. If it drops to 2.875 today (I hope not), then I'm -$522. If the market doesn't move until the expiration, the while line should shift to right everyday.

Now I put an order to buy back this option in case it just shoots up since the profit is limited. What's nice about TOS is it shows what the underlying price will be in regards to options price. In other words, if I place to buy back the 3 put at 0.5, this graph will show that the price of the underlying futures has to go up to 3.1 or something like that.

You can do this in your head, but it's certainly a very nice tool.

2011 Totals

2012-01-06T13:33:00.005-06:00

2011 was a pretty quite year in that I didn't start trading until Sept. My portfolio is $25K and I finished with +$1323.03. It's also +5.3%, but I think % is a bit misleading because if, for example, a guy with 1K portfolio comes out, trade forex and makes $1000. Sure, he made 100%, but is it the same as $100K portfolio doubled? I don't think so.

I still have a hard time pulling the trigger. When I didn't know anything, I had no problem getting in, but now I'm very very cautious ended up missing a lot. I still have old bad habits of watching markets tick-by-tick once I get in, which probably doesn't help at all. I hope to make an improvement on this.

I also realized that I didn't do any update on 2009/2010 P/L. At the beginning of 2009, I was down a lot, but made all back + some before I withdrew all to build a house.

Sold Feb NG 3.5 Put

2012-01-05T11:21:00.002-06:00

Today I entered Feb NG 3.5 put for 0.125 or $1250.

This winter has been nothing like previous ones. I don't think winter has never been this warm, which probably makes a lot of people think why betting a long on NG? Pricewise, it's already good. If weather starts turning even with a solid cold week, things can turn around quickly. NG is well below the cost of production, so I'm willing to sit on it for a while. $4 or $5 was about half and half, but I like it here.

Looking at nat gas again

2011-12-05T11:09:00.002-06:00

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

2011-12-02T16:08:00.004-06:00

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

2011-11-23T13:34:00.002-06:00

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

2011-11-23T08:22:00.004-06:00

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

2011-11-18T09:38:00.003-06:00

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)

2011-11-14T10:15:00.003-06:00

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

2011-09-22T09:52:00.004-05:00

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

2011-09-15T07:59:00.002-05:00

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

2011-09-05T07:53:00.002-05:00

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

2011-09-02T15:49:00.002-05:00

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

2011-08-26T13:58:00.003-05:00

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.

2011-05-05T10:55:00.002-05:00

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

2011-05-04T13:50:00.003-05:00

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.

A new portfolio

2010-12-02T15:19:00.003-06:00

I'm going to start either one or two new portfolio. One will be based on price action and technical analysis and the other one will be fact based. Both of them will have pretty small accounts, say $5K each.

I've been working with my good ole trading friend for a short term trade and it's about time to go live. He has just so much passion on trading and he's a kind of person who never gives up. He can sit in front of computer for hours and hours until he finds something profitable. He is constantly looking for a way to increase his probability.

While I built my house, he kept asking me when I'd be back to trading. He doesn't mind sharing what he's been doing and how he's been making good money consistently. He's always encouraging me saying 'we' can do this. Simply a nice person who can't say no if I ask any.

Even if I still have a lot of things to finish around the house, I did let him know, I'd like to come back on trading. Over the past few days, he shared everything he does and I spent a few nights with him with live charts.

What I'll trade is euro currency (6E). Euros simply move a lot compared to ES. If ES moves 10 points (or 40 ticks), it's probably a good day to trade. For euro, it's not hard to see 100 pips up and down, which is equal to about 400 ticks. This will work pretty well because I can get up early and trade while I have to miss US market hours to trade ES anyway. What I'm looking forward is about 3 small winners: 1 fixed target and 1 runner.

Another method is completely fact-based. I'm a big fan of fact based trading. Options selling was certainly one of fact based trading methods. If I didn't spend too much money on construction, I would have been still selling options just like Nat gas and Lumber. Nat gas would have been a killer altho it's 20/20 now. This method is pretty simple. Looking at different markets, I'm trying to see if a particular day has been positive or negative. For example, everybody knows Dec has been a positive month. There's a backtest data that especially first day of Dec is particularly bullish. Buying ES at close of 11/30 was a setup. The target was 15pts although it moved a lot more. This is usually a full day trade, but it sometimes takes 2-3 days if things are profitable, to let them run a bit more. Trading instrument would be ES, EURUSD, USDJPY and EURJPY. I probably have one position at a time.

As for markets direction, I have no idea what's going to happen. I kind of hope markets would drop so that I can refinance, but what I hope has nothing to do with what's likely happen. As markets have been extended quite a bit, I don't want to buy a lot, but I've found a few stocks I'd like to accumulate over time due to strong fundamentals. Too many people are still worried about a double-dip, which means it's unlikely happen. All the crashes happened when no one (or 99% people didn't expect). Gov will keep pouring money because 1 million dollars in 2030 is nothing compared to one million in 2010.

Another thing is historically real estate has been always the key to wealth. Sure, real estate was killed in the last few years, but I still think many still believe once real estate takes off that will once again become a key to wealth. This will take a while to roll over, but if I slowly get positioned, it'll be paid off handsomely.

I'll not going to post trade-by-trade, but I'd like to update the end of balance each day until either I keep trading or blow up the account. It was nice to trade a big account, but it'll be interesting to make a new small account grow again.

Market

2010-10-06T11:19:00.002-05:00

It has been a while since my last post here. I've been just super-busy building a house. It's not done yet and I don't know if this will ever be done. There are so many times when I thought I should have just kept renting.

As the house is getting close to be done, I reactivated my trading account and slowly started getting used markets again. What I found very interesting lately is the relation between bonds and stocks. There's an old market wisdom saying, 'Bonds always know something...'

Stocks are rallying but if you look at Bonds, it's almost at all time high. If everyone's taking risk, Bonds shouldn't be at this level. Sure, Bonds can be wrong, but we've seen so many times markets would rally in a very thin volume or with no apparent reason. It goes up so slowly, but when it starts selling, it drops very very quickly.

Nat gas is at an attractive level regardless of fundamentals. I missed good trading opportunities in grains.

Break

2010-04-21T14:22:00.002-05:00

I have been pretty busy at work and, above all, home building. After I got out all of my long term trades, I've been taking a loooooong break from trading. I didn't mean to take this long, but boy, this home building is a very stressful task.

It takes just too much time, money, and effort. Everybody wants more money from me. At least in trading, you don't see opposite parties in front of your face, but these contractors keep coming back with troubles and ideas.

I, however, have been following markets somewhat. GS, APPL, commodities and markets in general. There are ups and downs everyday. When I first started trading, if I missed anything potential, I felt so bad that I wanted to participate in every market move as if I could have precisely caught everything. But then again as soon as I jump into the very news with my live account, markets did exactly the opposite of what I expected and I ended up losing.

This time at least I don't feel much. For example, I'm a big fan of Apple products. I own multiple products from computer to iPhone. I recommend Mac over PC in a heart beat. Was it Warren Buffet who said 'Invest in something you know'? If I have to pick one product that I know very well, that'd be from Apple. Last year, I traded AAPL quite a bit all to the long side. Unfortunately, I had to close that account because my lumber / nat gas positions were in danger. I think at once, AAPL dropped below $100. While my trading gut kept telling me I should buy at that price, I just chickened out. Anyhow, I missed this Apple's giant move yesterday, and I really felt they are doing really great. However I don't feel much about missing anything because there's always another opportunity.

Speaking of trading gut, I think that is a very important factor to become a successful trader. In theory you should trade by rules, but once you're experienced you know when to jump in. I'm still a wanna be trader, but I've seen good traders trade that way and make 10s-100sK quickly. If you played any kind of sports, and you practiced so much, what you need to do is embedded to your body. You don't have to think too much about everything. In trading, of course without money management, gut-trading will be quite costly.

I plan on coming back to trading with my own trading office at a new house. I'll start with a small account and I will record everything here with even videos. I'm hoping this Summer if not Fall.

TradeStation

2010-01-12T14:26:00.003-06:00

Ever since I closed all of my long term trades: nat gas and lumber, I haven't done much other than having so many issues with TradeStation Client services regarding withdrawal.

This is just a lot of BS, so if you have other things to do, please do so. This is more of broker experience / review.

As some of you know TS changed their relationship with RJO Brien, a futures clearing form over the new year day weekend, I waited to request a withdrawal hoping everything is settled.

Tuesday:

I requested a check withdrawal on 1/2. The next day I checked my statement showing the requested amount was deducted correctly. So far so good! However, 2 days later, my phone started ringing showing it's from TS. I didn't answer because last time I requested a large amount, TS kept calling me to see if there's anything wrong etc. I didn't want to get bugged, so I ignored the calls.

But next day, my phone rang two more times while I was away. I was curious, so I called back. TS said the check withdrawal can't be completed because of issues with RJO. TS kindly offered a free (otherwise $25) wire transfer. Great! TS even said if I filled out the wire form by 10AM, I'd receive it in the same day. At this point, since it's treated as if it's a new withdrawal, I wanted to withdraw all of account. I made sure the amount I initially requested as well as what's remaining in my account would be wired. I filled out the form and rushed to the fax machine. Everything looked good.

Wednesday:

Now the disaster starts. I checked my TS statement and obviously the money didn't go out that night. So much for rushing. One day? Fine. I'll wait patiently.

Thursday:

Next day, I called TS and why money didn't go out. They said it'll go out that evening. After I got off the phone, I checked my withdrawal status online and found that only the remaining balance was approved. I called TS again. A rep told me don't worry. It's only showing on our front end program. You'll receive all the money. I trusted this, of course.

Friday:

Not to surprise, on Friday, I only received what was left in my account. On top of that, I was charged $25 for the wire fee. Why $25! Where is the money that was initially deducted for the check request? I called TS and I was able to talk to even a person from Cashiering department. She gave me her name and the money from the cancelled check would go out that day.

Close to 4pm, I suddenly realized that if the canceled money was deposited back to my account, all the money would have been sent find. Obviously whoever processed my wiring request, didn't see (or care about) notes on my account. Chances are it'll happen again, so I decided to have them the canceled amount back to my account asap. Instead of this ideal plan, I got a customer rep saying Cashiering depart is closed, so no one can do that right now. I even tried to talk to her supervisor, but she claims that no one's available, but she assured that the canceled money including the wire fee charged would be sent out today.

I hate when that kind of thing happens on Friday afternoon. There's nothing I can do until Monday morning. It's so annoying. Not to my surprise, on Friday night, I checked my statement, I found that the canceled money was credited back to my account. But there's no sign of wire-transfer. No sign of wire-transfer fee credit.

Monday:

I gave TS a call as soon as they opened. Every time I call TS, I had to explain the same thing over and over again. It was not an exception this time. A rep told me since it was requested on Friday, the wire should go out today. I made sure it better include the fee I was charged.

Of course, when I checked my statement, nothing happened. At this point, I have no plan going back to TS in the future at all. In addition, I'll discourage people to use TS as well.

Tuesday:

I called TS. A mono-tone lady answered a call as if this is some typical call. Instead of explaining the whole thing, I asked her to read my account notes since I had all the reps wrote down the conversation I had with them so far. She gave me an incident #, and again she will verify the transfer and call me.

I told her, 'I'm pretty sure the wire didn't go out and will not go out. Besides, I can't take a word from TS any more. I want the wire feel to be credited right now, send me a check for every penny I have with TS via overnight fedex delivery, of which fee is paid by TradeStation. She said first she'll verify the wire status and initiate a fedex delivery. Either way, she said she'd call.

Of course, no one called me other than one guy from TS asking 'why are you closing your account'. I explained what happened, so he was just reading his manual, 'if you come back... blah, blah, blah...' He didn't care about what caused the issue.

I know exactly what's going to happen. the check will not come tomorrow. It may come Thursday at best. Besides, I'm pretty sure it'll not include the wire fee I was charged. Sure the fee is not much, but it's just so annoying and I want it right.

The story doesn't end here. Maybe TS is not the only one fussing about withdrawal. When I wired money last week, I sent it to ThinkOrSwim. I tried their demo and I liked what I saw. But shortly after, I will probably leave only a portion of the money I wired in, so I initiated an ACH transfer on Friday. The requested amount was deducted right away, I mean , in real time. Since I wired, I thought the money was available asap.

Monday I checked my bank account, there's no sign of ACH from TOS. Tuesday, still no sign. Around lunch time, I receive 2 emails saying it can't be done because since the money is wired in, I have to wait for 10 business days. I got pretty upset because if that's the case why TOS even let me initiate the request. Why did they take the money right away and didn't want to find out what's wrong on that day or even Monday? They 'gladly' postponed my ACH request to 1/25, that is 13 days away while they are keeping my money not making it available. Of course, I called back and I want the money credited back to my account asap. Sucks, but I have no choice but waiting. I'm a software engineer, so it's not hard to write a program when someone wired the money and issue a flag in real time if they're trying to withdraw.

As many of you know, brokers enjoy interest earning from clients deposits. This is from one of former TS salesmen I keep in touch with. I believe that's exactly what TS and TOS are doing by not releasing money easily. It may not be so much, but I bet it'll be quite a bit from dime here dime there.

Update

2009-12-18T14:03:00.002-06:00

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.

-------------------------------------------

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

2009-12-18T13:53:00.002-06:00

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

2009-12-17T10:10:00.001-06:00

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

2009-12-15T07:32:00.001-06:00

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

update

2009-12-02T12:09:00.003-06:00

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

2009-11-30T10:07:00.004-06:00

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

2009-11-24T15:58:00.003-06:00

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

2009-11-18T08:45:00.003-06:00

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

2009-11-17T09:22:00.004-06:00

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

2009-11-17T08:48:00.002-06:00

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?

2009-11-16T11:21:00.003-06:00

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

2009-11-13T11:28:00.003-06:00

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

2009-11-09T10:15:00.003-06:00

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#

2009-11-06T08:31:00.003-06:00

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

2009-10-23T13:04:00.003-05:00

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

2009-10-22T08:54:00.002-05:00

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

2009-10-20T13:50:00.002-05:00

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

2009-10-20T11:52:00.001-05:00

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...

2009-10-19T13:17:00.003-05:00

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

2009-10-13T08:52:00.002-05:00

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

2009-10-08T09:17:00.003-05:00

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

2009-10-06T08:57:00.002-05:00

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

2009-10-05T13:49:00.003-05:00

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

2009-10-01T09:20:00.003-05:00

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

2009-09-24T09:42:00.001-05:00

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

2009-09-23T08:14:00.002-05:00

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

2009-09-16T11:24:00.002-05:00

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

2009-09-15T11:07:00.003-05:00

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

2009-09-15T08:01:00.002-05:00

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

2009-09-03T10:20:00.002-05:00

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

2009-09-02T13:03:00.002-05:00

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

2009-09-02T10:05:00.002-05:00

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

2009-08-25T15:45:00.003-05:00

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

2009-08-11T14:03:00.002-05:00

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

2009-08-04T10:08:00.002-05:00

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

2009-07-21T12:28:00.004-05:00

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

2009-07-07T09:12:00.002-05:00

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

2009-06-26T13:28:00.003-05:00

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

2009-06-25T15:02:00.003-05:00

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

2009-06-23T12:34:00.004-05:00

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

2009-06-15T12:25:00.003-05:00

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

2009-06-12T13:27:00.002-05:00

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

2009-06-08T10:20:00.002-05:00

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

2009-06-04T09:35:00.002-05:00

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

NG Update

2009-05-28T15:38:00.002-05:00

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

2009-05-21T12:46:00.000-05:00

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

2009-05-08T11:06:00.002-05:00

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

2009-05-06T18:23:00.001-05:00

I rolled over from May to July contract

Sold 1 NG 4.25 June Call for 0.111

2009-05-06T12:42:00.003-05:00

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

2009-05-04T15:02:00.004-05:00

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

2009-04-28T09:26:00.002-05:00

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

2009-04-28T09:14:00.002-05:00

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

2009-04-27T08:17:00.003-05:00

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

2009-04-24T11:23:00.003-05:00

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

2009-04-21T09:59:00.002-05:00

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

2009-04-16T10:21:00.003-05:00

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

2009-04-13T13:13:00.002-05:00

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

Position trades

2009-04-08T15:02:00.003-05:00

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

2009-04-07T12:10:00.002-05:00

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

Looking to buy ES at 816.25

2009-04-07T09:35:00.000-05:00

I'm looking to buy ES at 816.25

Jan and Feb totals

2009-04-01T21:02:00.002-05:00

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

2009-04-01T20:50:00.005-05:00

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

2009-04-01T11:02:00.004-05:00

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

2009-03-30T15:57:00.003-05:00

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

2009-03-30T11:07:00.002-05:00

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

2009-03-30T10:05:00.007-05:00

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

2009-03-27T13:07:00.002-05:00

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

2009-03-26T13:14:00.005-05:00

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

2009-03-26T09:37:00.004-05:00

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

2009-03-24T13:04:00.001-05:00

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

-$450 less commissions.

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

Monday

2009-03-23T16:07:00.003-05:00

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.