TOS option analysis tool

I don't know if you can see the above image well or not, but the above is a screenshot of ThinkOrSwim option analysis tool. It basically shows how my option is designed to work and where I'm at.

The red line shows the P/L at the expiration. I sold NG Feb 3 put for 0.125 so my break-even is about 2.875 and my max profit is +$1250 taking all the premium. The white line shows the relationship between options and my P/L TODAY. For example, if the options drops to 2.95ish, I'm about b/e. If it drops to 2.875 today (I hope not), then I'm -$522. If the market doesn't move until the expiration, the while line should shift to right everyday.

Now I put an order to buy back this option in case it just shoots up since the profit is limited. What's nice about TOS is it shows what the underlying price will be in regards to options price. In other words, if I place to buy back the 3 put at 0.5, this graph will show that the price of the underlying futures has to go up to 3.1 or something like that.

You can do this in your head, but it's certainly a very nice tool.

2011 Totals

2011 was a pretty quite year in that I didn't start trading until Sept. My portfolio is $25K and I finished with +$1323.03. It's also +5.3%, but I think % is a bit misleading because if, for example, a guy with 1K portfolio comes out, trade forex and makes $1000. Sure, he made 100%, but is it the same as $100K portfolio doubled? I don't think so.

I still have a hard time pulling the trigger. When I didn't know anything, I had no problem getting in, but now I'm very very cautious ended up missing a lot. I still have old bad habits of watching markets tick-by-tick once I get in, which probably doesn't help at all. I hope to make an improvement on this.

I also realized that I didn't do any update on 2009/2010 P/L. At the beginning of 2009, I was down a lot, but made all back + some before I withdrew all to build a house.

Sold Feb NG 3.5 Put

Today I entered Feb NG 3.5 put for 0.125 or $1250.

This winter has been nothing like previous ones. I don't think winter has never been this warm, which probably makes a lot of people think why betting a long on NG? Pricewise, it's already good. If weather starts turning even with a solid cold week, things can turn around quickly. NG is well below the cost of production, so I'm willing to sit on it for a while. $4 or $5 was about half and half, but I like it here.

Looking at nat gas again

Looks like it's heading south pretty hard. I'm not sure if this is just trying to run stops or will come down further. Ideally, I'd like to sell 3.25 puts for $1000+.

NG trade recap - daily P/L

As usual, as soon as I got in, it started going against me and I didn't really see profits unlit the final day. When you sell options, you see a lot of premiums evaporate in the last few days.

Offset Dec NG 3.5 put

I sold 1 Dec NG futures contract at 3.462. If the price was around 3.5, I would have let ride and see where it's settled, but since I'm well within 3.5, I just sold 1 futures lot to offset my assignment. I didn't buy any Jan contract because there's a spread of 0.15 between Dec and Jan (carrying cost etc). The Jan contract is currently being traded at 3.6 or so. So I'll wait to sell 3.5 put if it drops. Since I didn't buy the Jan contract, we all know markets will just shot from here. If I was at loss, I would have rolled over without any choice.

All in all, my break-even point was 3.416, so my profit was $460 less commissions over 2 weeks. Not bad, but not so great either. Actually I was lucky that today's NG storage report came shorter than expected, but at one point NG was at 3.8, so I tried to exit my option at 0.3 or so to get $500+ profit, but usually floor traders make the options spread very wide on the expiration date to screw some dumb people, so I couldn't do it.

For some reason, many people are scared of getting assigned and brokers are so careful about it. I'll post again once I have a final settlement. As a matter of fact, I'm not 100% happy with ThinkOrSwim due to the following:

-You have to pay commissions to get assigned for futures. I understand for equities, it's a PIA process, but futures, there shouldn't be any assignment fee like RJO or tradestation.

-They don't let me trade on an expiration date. There are times I don't know if I get assigned or not, so I want to wait until the next day of an options expiration day, which is a futures expiration day for NG. I have no choice but to trade overnight while bid/ask is widen to offset my position.

Dec NG options expiration day plan

It seems I will likely get assigned on my Natural Gas Dec 3.5 put. Normally, futures contracts expire the day after options expiration, but due to Thanksgiving holidays, the Dec contract expires on Mon, 11/28.

I have a few options.

-If the futures contract closes above 3.5, I don't have to do anything (the least likely case considering where markets are traded at right now).

-If the futures contract closes around 3.5 (not likely happen either), but not sure if I get assigned or not. In this case, I need to see a settlement price and if I get assigned, I'll sell the Dec futures and buy Jan futures outright.

-If it closes below 3.5, I'll sell the Dec futures and buy the Jan as quickly as possible.

Since markets are still open after the pit session closes (1:30 pm CT), I can wait to roll over later. Furthermore since electronic markets open during Thanksgiving holidays, I don't have to roll over today, or even wait until Mon 11/28, the futures expiration day. However ThinkOrSwim says any assigned contract gets liquidated 'any time' during the expiration day, so I want to make sure I don't get liquidated by someone else except me because if I do and markets shoot up until I roll over, I might miss any move.

My break-even point based on Dec contract is 3.416 (3.5 - 0.084 (the premium I sold for) = 3.416). If I have a few hundreds dollars of profit, I may simply exit the trade (meaning offset the Dec NG, but not buying Jan) and I start over by selling Jan put.

Now the twist of this whole thing is due to Thanksgiving, we have Nat gas report coming out today (usually Thursday), so it might be good or bad for me. Shortage usually makes NG go higher but not necessary. The weather has been pretty mild so far, but I'm betting on an old saying the hotter the summer gets, the colder the winter gets. It was one of the hottest in the last 10 years.

I'll update regardless what happens.