Why do I feel like the two trades that I'm holding will never work out? Eventually I can't scale in any more and I'm running out of money etc. Murphy's law says as soon as I got forced out due to margin calls, markets will rally way beyond my targets.I also feel as if I'm completely against the trend. Lumber's been downtrend of 3 years. If you ever looked at the chart, even monkey would have made money simply shorting every bounce. Nat gas is the same way, bu heading into multi-year low.
I also looked at monthly charts on commodities v.s. stock indexes and I didn't see much corelation. Commodities seem to be doing own things. I'm just really tired of holding onto positions this long. It requires more patience than I've ever imagined. I'd like to build a house, quit my job and day-trade, but feels like it'll never come true.
Maybe I just need to take a nap. zzzz...
Friday, March 6, 2009
Wednesday, March 4, 2009
Options
I was thinking about my natural gas trade today. As natural gas slowly move up, I started wondering when my call will get filled. Shortly after, I realized that I made a big mistake. Early Feb, it ran to 4.9 and at that time I was trying to sell 5.25 call for 0.3. That call got to 0.26ish and I barely missed that sell. What I should have done was instead of selling March 5.25, I would have sold Apr 5.25 for 0.45 ish. I was focusing only on near term (30 days or less) options.
The current price of nat gas is about 4.335 and Apr 5 call I'm trying to sell is only going for 0.068. There's no way I'm going to bring 0.3 before 3/26 expiration unless it goes in the money. On the other hand, May 5 call is going 0.183. Should nat gas rally another 0.5 or so, I should be able to bring 0.3. Remember once markets trend up, calls get inflated and I may be able to sell 5.25 call. The downside of this is, the May expiration is almost 50 days away and once I'm filled, there's nothing I can do.
By the way, the Apr 4 call I sold for $3100 is not worth $1300, so I'm +$1800. I'll let this one either expire worthless or get assigned. However if we rally in next 5-7 trading days, I'll look into exiting at 0.02.
The current price of nat gas is about 4.335 and Apr 5 call I'm trying to sell is only going for 0.068. There's no way I'm going to bring 0.3 before 3/26 expiration unless it goes in the money. On the other hand, May 5 call is going 0.183. Should nat gas rally another 0.5 or so, I should be able to bring 0.3. Remember once markets trend up, calls get inflated and I may be able to sell 5.25 call. The downside of this is, the May expiration is almost 50 days away and once I'm filled, there's nothing I can do.
By the way, the Apr 4 call I sold for $3100 is not worth $1300, so I'm +$1800. I'll let this one either expire worthless or get assigned. However if we rally in next 5-7 trading days, I'll look into exiting at 0.02.
Tuesday, March 3, 2009
Another lesson
Very interesting thing happened today. As you know, I'm long lumber for quite some time. Even though it's super-long term trade, I check quotes every second as if it's a day trade. I'm kidding on every second, but I do check open and close.
Lumber expires every two months, 15th of every two months to be exact. I usually don't wait until the final moment to roll over because I do not want to get caught on price manipulation from floor traders. They know who's 'stuck', so since I have no intention of taking delivery 100s of 2X4s... what do I need 2X4s, they know I have to cover. Better yet, my broker will 'kindly' cover for me and he'll push the price down artificially right before forcing my sell.
Anyway, when I rolled over in late Feb, the difference between Mar contract and May was about 15 pts. Rolling over to higher price doesn't mean you're losing money. It's just simply where it's being traded at.
The lumber's limit is 10 pts or $1100 per contract. Today, May lumber went limit up. Great for me since I'm long 4 lots. But then I looked at March contract and it's +16! How is this possible because Lumber's limit is 10! So, I did some research and it seems that the front month's contract doesn't have limit on limit move. If I didn't roll over and just wait until today or tomorrow, I would have made additional 16 points on 4 lots (calculated from the day I rolled over. the spread got smaller and smaller!), which is equivalent to $7040! What a bummer.
I know when markets try to turn, usually front month's contract takes off first and then the next month's contract follows and I think this is what happening with lumber. Sure housing markets are still bad. I don't know about other areas, but where I live, I talked to a builder yesterday to get a quote on a house plan, he said they are building 6 homes simultaneously right now. My co-worker, who's been thinking about buying a house in last 2 years, just bought a house to take advantage of $8K tax credit.
I'm not surprised if lumber limits down, but if we have some sort of up-move, I'll look to add some more on a pull back.
Lumber expires every two months, 15th of every two months to be exact. I usually don't wait until the final moment to roll over because I do not want to get caught on price manipulation from floor traders. They know who's 'stuck', so since I have no intention of taking delivery 100s of 2X4s... what do I need 2X4s, they know I have to cover. Better yet, my broker will 'kindly' cover for me and he'll push the price down artificially right before forcing my sell.
Anyway, when I rolled over in late Feb, the difference between Mar contract and May was about 15 pts. Rolling over to higher price doesn't mean you're losing money. It's just simply where it's being traded at.
The lumber's limit is 10 pts or $1100 per contract. Today, May lumber went limit up. Great for me since I'm long 4 lots. But then I looked at March contract and it's +16! How is this possible because Lumber's limit is 10! So, I did some research and it seems that the front month's contract doesn't have limit on limit move. If I didn't roll over and just wait until today or tomorrow, I would have made additional 16 points on 4 lots (calculated from the day I rolled over. the spread got smaller and smaller!), which is equivalent to $7040! What a bummer.
I know when markets try to turn, usually front month's contract takes off first and then the next month's contract follows and I think this is what happening with lumber. Sure housing markets are still bad. I don't know about other areas, but where I live, I talked to a builder yesterday to get a quote on a house plan, he said they are building 6 homes simultaneously right now. My co-worker, who's been thinking about buying a house in last 2 years, just bought a house to take advantage of $8K tax credit.
I'm not surprised if lumber limits down, but if we have some sort of up-move, I'll look to add some more on a pull back.
Wednesday, February 25, 2009
LB and NG update
Today I rolled over Mar Lumber to May contract. I've been using pit contracts even if CME launched electronic contract in late 2008. Pit trades really suck because I have no idea where the current bid/ask is and I don't know if someone (even my broker) is trying screw me.
During my last roll-over, I was holding Nov long and I sent 3 sell orders. After about a few mins later, it showed last price was at my sell, so I thought I got filled. In pit trading, usually the # of contracts doesn't really mean much because it's very liquid. I, then, went bought 3 Jan Lumber and I got filled because I saw last traded price was below mine, so someone also got filled below my price.
Another thing sucks about pit trading is you don't get confirmation immediately. It takes about 2-3 hours. Later I found that my sell didn't get filled, so I ended up holding 6 lots of lumber instead of 3. Furthermore, Lumber kept dropping and my on-going loss suddenly became -$3000+. Fortunately lumber came back up and filled my sell.
Long story short, I'm now more comfortable trading lumber in electronic markets. The bid/ask spread is still wide, but at least I can time when the spread gets smaller to roll over.
Lumber continues to drop and it's at the point where I would aggressively buy. I plan on buying 2 lots at a time from this point. Margin is only $1100 per contract.
Sold 4 Mar lumber at 142.5 (1 will offset 170 put at expiration)
Bought 4 May lumber at 153.025
As for natural gas, I'm still holding 1 long outright and 1 short Apr 4 put. I have an order to sell Apr 5 call for 0.34 (or $3400).
To be honest, I'm down quite a bit and it gives me a lot of pressure / headache. I looked at monthly charts on all commodities during 80s stock market crash / 2001 dot com bubble burst, but commodities don't seem to be affected. The tricky thing about this market is, it seems when indexes go lower, it triggers margin calls, which in turn forces liquidate other commodities first. Besides, it usually takes a while for commodities to turn around. It could spend a few 'years' basing before shooting higher. Hope I have enough money to hold on to. This strategy is definitely not for someone who's not patient.
During my last roll-over, I was holding Nov long and I sent 3 sell orders. After about a few mins later, it showed last price was at my sell, so I thought I got filled. In pit trading, usually the # of contracts doesn't really mean much because it's very liquid. I, then, went bought 3 Jan Lumber and I got filled because I saw last traded price was below mine, so someone also got filled below my price.
Another thing sucks about pit trading is you don't get confirmation immediately. It takes about 2-3 hours. Later I found that my sell didn't get filled, so I ended up holding 6 lots of lumber instead of 3. Furthermore, Lumber kept dropping and my on-going loss suddenly became -$3000+. Fortunately lumber came back up and filled my sell.
Long story short, I'm now more comfortable trading lumber in electronic markets. The bid/ask spread is still wide, but at least I can time when the spread gets smaller to roll over.
Lumber continues to drop and it's at the point where I would aggressively buy. I plan on buying 2 lots at a time from this point. Margin is only $1100 per contract.
Sold 4 Mar lumber at 142.5 (1 will offset 170 put at expiration)
Bought 4 May lumber at 153.025
As for natural gas, I'm still holding 1 long outright and 1 short Apr 4 put. I have an order to sell Apr 5 call for 0.34 (or $3400).
To be honest, I'm down quite a bit and it gives me a lot of pressure / headache. I looked at monthly charts on all commodities during 80s stock market crash / 2001 dot com bubble burst, but commodities don't seem to be affected. The tricky thing about this market is, it seems when indexes go lower, it triggers margin calls, which in turn forces liquidate other commodities first. Besides, it usually takes a while for commodities to turn around. It could spend a few 'years' basing before shooting higher. Hope I have enough money to hold on to. This strategy is definitely not for someone who's not patient.
Thursday, February 19, 2009
Sold 1 NG Apr 4 Put for 0.310 (or $3100)
Natural gas report came out pretty bad, so it tanked to $4 ish and I got filled on 1 NG 4 Apr put for 0.31 or $3100 premium. My break-even is now 4.236. NG can go below below 4, but I'd be very surprised if it'll drop below 3. I'll sell 2 more at 3 should we get there.
Apr contract has about 4 weeks to go, so still plenty of time to decide what calls I want to sell. I still keep 5.25 Apr call if we rally.
Apr contract has about 4 weeks to go, so still plenty of time to decide what calls I want to sell. I still keep 5.25 Apr call if we rally.
Friday, February 13, 2009
NG update
I rolled over my natural gas position:
Sold 1 Mar NG at 4.418
Bought 1 April NG at 4.430
I also placed the following orders:
Sell 1 Apr 5.250 Call for 0.340 (or $3400)
Sell 1 Apr 4 put for 0.310 (or $3100)
Sold 1 Mar NG at 4.418
Bought 1 April NG at 4.430
I also placed the following orders:
Sell 1 Apr 5.250 Call for 0.340 (or $3400)
Sell 1 Apr 4 put for 0.310 (or $3100)
Wednesday, February 11, 2009
Markets
I'm not doing much. I keep an eye on markets, but there's simply no direction. Since stocks are not moving, all other commodities are not moving either. I'm still holding NG and LB. NG is hanging around break-even point. I'll roll over early and try to sell Apr puts. Lumber went as low as 139ish and had 3 limit up days. It then again went down, so now being traded around 155.
I'm not sure if markets are trying to bottom out here or test the low again. The best possible case is we have one extreme hammer day to run stops and close above the open.
Bull markets are usually very slow and small ,and bear market rallies are fast and big.
I'm not sure if markets are trying to bottom out here or test the low again. The best possible case is we have one extreme hammer day to run stops and close above the open.
Bull markets are usually very slow and small ,and bear market rallies are fast and big.
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