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DJ MARKET COMMENT: EU Wheat Futures Up On Chicago Gains, Weak Euro
1014 GMT [Dow Jones] EU wheat futures are higher, supported by gains in
Chicago and a weak euro. Gleadell says that the USDA stocks report due next
week may well indicate more domestic wheat feeding in the US, which would lead
to lower stocks than the market expected. The grain merchant adds that fund
shorts will be a little nervous looking at this, leading to some
short-covering. Meanwhile, Agritel says that the recent decline of the euro is
improving the competitiveness of European origins. The risk manager adds that
delays are reported in spring planting in western Europe, as well as in the US,
due to heavy rains. May Paris milling wheat trades up EUR2.75, or 1.2%, at
EUR241.25/ton.
I had sold Nat gas July 440 calls at $310 (July Nat gas was at $350 Feb 13 when I sold them) and bought them back at $1.050. The previous day they were at $750. Now, they are at $1.300 each.
Those calls were at 0.1052 delta that day. Far too high. Especially when you are selling that far out in time. 132 DTE. Also only being 0.90 on your strike away from futures with 132 DTE is too close.
I am not trying to make light of the possibilities of big losses when it comes to option selling. Just to be clear, when I wrote that I will not exit at double premium received and wait until the next session, I am ONLY referring to when I am in a strangle trade. I made this decision after reviewing about 4-5 years of my previous strangle positions. My data revealed that there were several strangle trades every year where I would exit WHENEVER the premium doubled on one side only to watch the premium quickly go back down, some instances on the SAME day. In fact, I found many instances where I exited at the highest point the premium traded during the time that I was in the trade. Very frustrating indeed.
With that said, I have been burned for additional losses by waiting until the next session. It is a calculated risk that I am willing to take based on the fact that I am far out of the money plus with a strangle, I am hedged on the opposite end. Should the premium on one side of the strangle double, the premium on the opposite side will have eroded quite a bit thus providing some cushion for the losing side.
Seems like a news driven event. It's interesting how these spikes can temporarily drive premium through the window which can be a good place to sell. Even though prices are still up from yesterday's close premium is down on calls across the board.
I have not posted here for a while, but I am enjoying the conversation...
My little test account with this method is doing well. I think today was the first time everything I sold is valued at 1!
Easy to get complacent and bored with this method, but it is working.
Right now, I'm on pace for >40% annual return. But, there is a lot of the year to go, and it is hard finding suitable candidates. Plus, if I add $ to this account, selling volume might also prove tricky.
Thanks again to Ron for initially offering up such a neat trading approach, and to everyone else who has contributed!
Like eudamonia said, looks like short term the prices could go up especially if there is short covering. Good time to sell puts considering that it doesn't look like major market moving news. I am trying to sell the 1000 July Calls. I noticed that the market settled at 1.5 and I had an limit order placed from a couple of days ago at 1.5 but it didn't get filled. Any idea why that is?
Just because it settled at 1.5 does not mean that any traded there. Until the bid hits 1.5, you won't be filled at all. And even then, if there are 1.5 orders in front of you, you'll have to wait your turn.
