NG roll over

NG made 10 year low today. I don't think my puts will be out of money, so I just rolled NG contracts from Apr to May.

Sold 2 Apr NG at 2.191

Bought 2 May NG at 2.285

My new break-even based on May contract is 2.692

Next week

The Apr options expire on 3/27. My 2.45 put is well in the money. From that position, I'm +$500 or so, but was +$1400 at one point. I was hoping after today's inventory report, it'd go up, but the opposite was true.

The overall theme of NG is that it goes up very little and comes down hard easily. I liked the way it acted over the last few days. Very quite, narrow ranges, not much up or down, which means it was bottoming.

That didn't last long. We're about 5 cents away from the 10 year low. With 3 days to go, my put options will probably be assigned a long position, so I need to roll over on 3/27. At that point, I would be holding 2 longs with the average price of 2.596. Once I roll to May contract, it'll be around 2.7 due to contango.

NG can get very volatile from time to time. I feel as if all I need is two to three solid days. To make that happen, we need some sort of news. At this level, buyers are definitely sitting aside and commercial sellers seem to lock whatever price they can get. Weather doesn't seem to help much and neither does the rig count. They are certainly worried about overflow of underground storage tanks.

A question I keep asking myself everyday is should I add or just sit out.

I'm also looking at other contracts too. It seems both Wheat-Corn trade and Gold-Platinum are available again. I'm hesitant on this because TOS doesn't give you any margin break on spread unlike other good brokers. In addition, what if I need more bullets on NG...

Apple puts also seem interesting. Everybody likes Apple stock. People who lost money in others bought all the AAPL they can afford and sitting on them. If this starts coming down, I think you'll see 550 pretty quick. Chart patterns already look like topping. I'm thinking buying an out of money put and simply forget about it risking 100%.

Close high of the low bar

A very interesting day on nat gas. Today is the first time it closed the high of the low bar (on daily) after making a 10 year low. There were hammer patterns in the last few days, but never had a follow-through (meaning the next day didn't close the high of the previous day's high).

I watched the close of NG and it seemed as if lots of stops run as people tend to put stops just above previous day's high. I'm attempted to add more here, but that will make me feel as if I'm all in. Any thought?

NG update

Only 2 positive days out of 14 recent days. I'm definitely on the wrong side. Sure, it'll bounce some day, but if I were smarter, I would have taken advantage of this down move first before buying it. I feel quite dumb to say the least.

As winter seems to be over, we're into stock-building season again. People are not talking about storage being over-capacity. In other words, there's just too much gas and they can't store gas they collect. What do they do in this case? You'd think not to collect, but from what I hear, they dump and keep pumping new gas.

NG roll over from Mar to Apr

Today I rolled over my NG long from March to April contract:

Sold 1 Mar NG at 2.589

Bought 1 Apr NG at 2.728

My new break-even is at 2.955.

NG Update

Not much to update. At the end, I didn't sell 2.5 put. I was very close to pull the trigger on the 2.5 put for $2000 or so, but chickened out. It would have lowered my break even to $2.61, but to be honest I was scared and I was worried about NG dropping to below 2, which was probably a sign that the short term bottom was in.

I've been watching NG quite closely, but I just couldn't figure it out. Sometimes it's technical, and sometimes, it just doesn't matter and does its own thing. Regardless, it just seems so heavy. It goes down easily, but goes up very slowly.

The March options expire on Friday and the futures expire on Monday. I was hoping to exit before the expiration, but my break-even is no where near. The chart patterns don't look that bad, but I think it it was going to higher, it would have been yesterday or today. Long bottom tails for two days in a row are good signs, but we have an inventory report tomorrow, which can invalidate everything. They are estimating about -150 B, which is too much consumption based on recent 50s (heck, today it's 65! where normally 40s).

Just like the 2.5 put sell, I felt I had multiple chances to add as I said I'd like to scale in every 50 cents, but failed to execute and I'm quite frustrated about myself. I didn't have a solid plan or ability to trade at the end, I suppose.

I'm flying out of country on Thursday night, so I might roll over my futures a day early instead of Friday. I will check options price to see if I should buy cheap puts to hedge, but premiums will still be high with even 1 day left.

NG new order

NG is about -7% today. I expect this to test the low. Accordingly, I placed an order to sell 2.5 put.

NG update

I probably shouldn't even look at what NG is doing everyday, considering it's a position trade, but I treat it like a day trading, which is completely wrong. I don't know why and I didn't have this kind of issue last time. After seeing $6K+ down, maybe I lost confidence in me.

On Friday, I placed an order to sell at 2.852 figured it might gap up after the weekend (based on the Friday's close). Markets also like to test previous high / low to see if it'll attract buyers and sellers and run some stops. I think the previous swing high was 2.830s so I figured, it'll spike higher to 2.850s, which give me a fill.

It did gap up nicely, but only to 2.844. A lot of things were going through my mind.

-I just risked $6K and only take $300ish profit at 2.844? That doesn't make sense.

-Based on my analysis, we're still on a downtrend, so I'm sure this wants to head down and test the bottom (or higher high) at some point.

-Should I set a stop at about break-even?

-Should I just get out?

At the end, I just decided to leave it alone. Instead of going to 2.855, Nat gas started heading down and today closed at 2.710 LOD about $1350 off today's high, so I'm -$1K again.

I think we're at a critical level. It looks like a bull flag on daily, but it also can dive from here pretty hard. I was hoping for a strong close, but we closed very weak. NG has been very volatile, so buying an put doesn't seem like a good idea. I don't sell a call at least until I have two contracts.

Anyway, I move my target up a bit because I figured if it breaks 2.844, it'll probably go 2.9 or so. If you have any advice on being patient, please let me know.

NG roll over

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

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

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

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

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.

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

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.

NG trade update

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.

Update

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.

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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

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

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

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