Lumber

Lumber is approaching to 170 pretty quickly. I don't think any of people I know trade Lumber. I'm down quite a bit on this Lumber trade. Things just do not look good. I feel like I'm a newbie who is holding the losing trades forever. If I remember that feeling correctly, I felt better once I just sucked it up and took the loss. (Then watched the trade go my way, of course.)

Markets are going to do exactly what they want to do. They will keep doing it until most of people puke and give up everything. I'm trying real hard to remain calm, but it is very hard.

When I first got involved with Lumber, I thought it wouldn't go below 200 although it could. I guess I didn't fully accept the risk. Now I'm considering the ultimate risk level. What if Lumber goes to zero and what the risk is going to be. I still plan on selling puts every 40 pts or so. So 130, 90, 50, and 10. At that time, I'll be holding 8 lots. If Lumber is at 10, my open drawdown will be -$122,100 (excluding commissions including premiums written) with the avg of 148.75. Yikes, I can't even begin to imagine when Lumber becomes free!

The guy who taught me this method said once he was in Coffee trade for 2 years. (I'm holding my lumber for about a year). During that time, he advised this trade to others, but many just couldn't have enough patience. Even if one guy waited for 2 years, he got out at break-even.

Sure enough, Coffee went way beyond the avg price and the guy who taught me got out with $20K profit per contract. He's also in Lumber trade. His avg price is a lot higher than mine, but he seems calm.

At the same time, Natural Gas and Crude Oil are getting very interesting. I'd like to go long any time, but I'm not quite sure if we'll really go through worse than Great Depression. I personally don't think so (or don't want to believe because of Lumber. Yeah I'm biased!). I think Gov will do whatever they can. They don't care if we see Oil at $10000 or not, and they just want to get the heck out of this mess.

I'm just talking loud myself to see what I should do. Sometimes it helps talk out loud, right? What I should do is to stay calm and take advantage of what I'm seeing. Cotton, OJ, Crude, and Natural Gas all look great. I've been sitting on cash and I think I'll move all of them into my position trading account. This doesn't mean I'm going to buy 10 Nat Gas. I'll still approach conservatively, and trade as if they'll go to zero (a mistake learned from Lumber).