NG roll over

I rolled over nat gas as follows:

Sold 1 Apr NG at 4.297
Bought 1 Jun NG at 4.497

Remember this doesn't mean I lost money. It's just where the current bid/ask is. I also placed an order to sell 1 Jun 5.25 call for 3.1. It seems NG has to move at least 0.5 or so for my call to get filled, so it'll take a while.

In the mean time, last Thursday (3/19/09), Nat gas shot up, so my 4 Apr put is current out of money profiting about $3K. This expires coming Thursday (3/26/09). What's interesting is Nat gas report comes out on the same day. It's currently out of money by 0.27 which can easily go back in the money, so I'm not sure if I want to get out before that or not because options sellers' upside target is limited.

However, if it goes back in the money and I get assigned, my avg price of the outright position is lower, so I can probably sell 4.75 call for $5K on 2 lots or so instead of waiting 5.25 on 1 lot to get hit. As a matter of fact, this is what I'll do. I either let it expire worthless or get assigned.

As a side note, this blog helps me trade better because I can clear up my mind and look at how I trade from the 3rd person's view although not many people visit here.

Wednesday morning

I'm not doing much other than holding lumber and nat gas. Lumber is forming an triangle, but can't get out of there for about a month. Trends are down, so the path to the downside is highly likely. I have a few more orders to sell lumber options. From this point, instead of scaling-in at 1 ever 30 pts, I'll go in 1, 2, 4 lots ever 10 pts. I need to take advantage of this price, but markets need to go down first.

For nat gas, I have 1 long and 1 short put. The put option will likely get an assignment, so I'll prepare for that. This morning, I called TradeStation to ask about futures options assignment. One guy picked and I can tell he doesn't have much experience with futures options. He ended up hung up on me as I was putting him into the corner by asking him some questions. He said he's gotta go.

I've never had a guy from trading desk say he's gotta go... So, I called back and talked to a supervisor, and of course this guy knows what he's talking about. I told him I'll file a complaint.
Basically, TS doesn't want to deliver any positions and since there's only 1 day between options expiration and futures expiration, they are extra cautious. In addition, nat gas big contract requires $50K, so I guess I understand.

Anyway, I'm looking to sell 3.5 put May options if nat gas continues go down. I need to be very patient, but I don't think I need as much patient as lumber.

Today's FOMC day. I don't know what markets are going to do. Bulls and bears both have execuses to move either way at this point. Just don't get caught during annoucement time.

ES day trades

After I missed two long trades, but caught small two shorts.

+$100

Short 3 ES at 686.25

I scalped ES this morning.

+$350

Salmon trade

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...

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.

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.