Sold Feb NG 2.4 Put

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.

Looking at nat gas again

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

NG trade recap - daily P/L

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

Offset Dec NG 3.5 put

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

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

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

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

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

Dec NG options expiration day plan

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

I have a few options.

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

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

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

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

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

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

I'll update regardless what happens.

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

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

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

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

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

Gold - platinum spread recap

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

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

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

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

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

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

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

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

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

Exited Gold - Platinum spread

Today I exited the gold-platinum spread as follows:

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

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

I'll write separately about how this turned out.

Gold / platinum spread trade

Sold 1 gold at 1881
Bought 2 platinum at 1879.5

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

Back in trading

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

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

It's good to be back.

Sold 1 Aug NG 4.25 Call for 0.255 or $2550

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

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

Sold 1 July NG 3.5 put for 0.210 or $2100

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

Sold 1 Jun NG 3.50 put for 0.305

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

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

Sold 1 Jan Lumber 170 Put for 5.5 ($605)

This is another cost-avg for my lumber trade. This option expries the end of this month (Dec 2008) and if I do get assigned, I'll be holding 4 lots. Lumber is definitely a free fall, especially with housing markets. I'll continue to trade my plan. I'm prepared even if Lumber goes to zero (free lumber for everybody).

Covered 1 Jan 40 CT at 0.48

Cotton is rallying today and my exit order was filled at 0.48. I sold it for 2.15 ($1075) and exited at 0.48, which gave me 1.7 or +$835 (before commissions). The good thing about wiring options is when markets start moving, time value evaporate quickly which boosts my profit.

Only 24 days till expiration, my max profit was $240, whereas risk was unlimted, so even if I'm willing to get assigned, I decided to exit. I'll sell a put if markets drop again.

Sold 1 July CL 150 calls

I sold it again for 0.55 (or $550). I didn't expect CL's +11 POINTS in a day. Now it's trading at 139 with the option value of about $1250 (or I'm losing -$700). With this pace, the CL can easily hit above 150 in a day or two. It expires in 10 days and the volatility is ridiculous. This is an absolute panic buying. I do not plan to exit the position. Either it gets expired worthless, or I get assigned.

If I do get assigned, I'll hold on to the short position for a possible profit of $500. If it does expire worthless, I'll make $550. Time is in my favor in this option or any option selling position. Each day it should lose its value about $100/day should CL doesn't move. If it drops, the time decay accelerates, then I'll consider an early exit.

Short 2 S at 1470.25

Covered 1 at 67.50
Covered 1 at 69.25

Net +187.5 (less commissions)

Sold 1 CL 150 Calls for 0.55

I sold this morning 1 July CL 150 calls for 0.55 or $550. CL oil has a ridiculous opportunity here. almost about 30 points away with a little over a month left. We'll see how this plays out.

Short 1 S at 1327.25

-2 or -$100

We have a support at 1325. I got stopped out on a snap back action. Will short again if it breaks 1325.

Long 1 S

Result:

+0.25 or $12.5 before commissions

The action was very very slow, so I exited early. Beans ended limit-up .