I'm looking at a few new trades now and they are all long-term position trades. The strategy I'll be using is similar to my lumber trade. Basically I sell put options, and either take profits or get assigned. If assigned, I sell lower strike puts (cost-average) or sell higher-strike calls (covered call). If I don't get assigned, I sell another put at either lower or same strike price on another month.
They will eventually go up although cycles can take years.
-Orange juice
-Cotton
-Natural Gas*
*Natural Gas could be a real money maker, but it's not for new traders or small account holders. NG's margin is about $13K per contract and it can be very volatile. One should easily be able to handle $10-30K draw-downs. Rewards are very high regardless. Sell at the or slightly out-of money options could bring easily $2-4K in options premium and sell covered calls could bring $3-7K. What's good about the covered call is if the call is not assigned, your average price gets lower. If the call is assigned you would make $5-7K profits from the long position plus $3-7K options premium you wrote. If its price hangs around that level long enough with a good volatility, $20K profits are not unusual.
If none of this makes sense, I wouldn't consider selling options.
Tuesday, August 19, 2008
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2 comments:
dude, I need pictures...i'm trying to understand your selling puts strategy and getting assigned, but I'm not quite getting it.
I'll post a chart with some comments soon.
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