Wish I had taken my own thought from Jan 4th seriously ..... Guess paying money to open a trade when the main objective is to have a steady cash inflow in the form of premiums is harder to do once you get used to selling premium.
I need to dust my options books and get back to basics .... NG this past couple of months has been a option trader's wet dream come true and I only lost money by putting on the (get credit) blinders.
CafeGrande, you need to go into further detail on "watching your IVs and deltas on a regular basis". How can people apply those numbers to their trading. Putting on positions and exiting positions. Give examples.
I know some of you still have some NG options on so I'll continue to post this for a few more few weeks.
29-Jan EIA Release EARLY Estimates.
First estimates coming in, still subject to a lot of changes.
First survey I have seen had 15 respondents and an average of -231.6, median -230 Range was -209 to -300 with standard deviation 21.8!!
Take out the high and low though, average is -228, median -230 but range becomes -215 to -250 and standard deviation drops to 10.3
Last year same week -191
5 year average same week -162
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I'm not sure about that. An increase in margin normally means a floud of activity in the EFS and NYMEX/ICE markets. Based upon activity in the EFS and NYM/ICE today (G EFS moved from 4 to 6 either clear, H NYM/ICE moved from 1 to 1.5 and J-Z NYM/ICE moved from 1.5 to 2) I suspect people are short NG and long fin settle in general and ICE in particular. So this will probably widen both the EFS and NYM/ICE spreads widen .... Urhhh... REALLY don't like that...
Ohhh I'm not sure I agree with that. At least February has some connection to fundamentals. My fear (pun intended) is that once Feb expires, March will become the fear game, and start bouncing around with no respect for reality.
I suspect once Feb expires, anybody who doesnt want to play the chicken game, will need to trade April... which might as well be a completely different market... at least for the first few weeks.
In the context of this thread, it doesn't need to be very complicated. Anyone considering an option trade has or should have:
1. An opinion on the underlying's absolute price move over the life of the option
2. An opinion on actual and implied volatility over the life of the option
3. Risk mgmt - initial position size, position size/net deltas you can tolerate if things go against you, adjust?/don't adjust? (a topic in its own right), when to cry Uncle, etc.
Now, depending on your broker, you might have a platform that does some of this work for you and free tools to assist you with the rest. If not, two of the three firms I mentioned in my long post - Ivolatility and Quikstrike - offer free options calculators that can price an individual option and then you can play around with the underlying price, time and IV inputs so you know what that option may look like in the future. I used to do things this way - price them individually on a simple calculator, multiply by X, and record the results on paper.
Fortunately, good options technology is becoming inexpensive and widespread. A sophisticated trading platform or standalone application allows you to track your IV and individual and aggregate greeks in real time or close to real time. With one or more parameter tweaks, you can change the entire value of your portfolio to learn 1) how bad things might get, 2) if they're already bad, why did they get that way (is underlying price or IV hurting the most?) and 3) what combination of price, time and IV will allow the position to recover and are those projections realistic?
I'm far from an options geek (the quantitative guys) but I can't trade without knowing the market's IV and skew and my aggregate delta and gamma. I can't imagine hedging an initial position or adjusting an existing one by just adding or subtracting deltas to get me to neutral (or wherever I want to be).
All that said, if someone is well capitalized, has a good system and plenty of discipline to follow their rules, they can probably do fine and never concern themselves with IV or the basic greeks. They'll still get whacked in weeks like this one, but they won't get wiped out.
Looking at the just released DCOT futures only report for NG as on 1/21. Specs added 13k longs and got out of 13k shorts. So net were up 26k longs.
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The Commercials and Non-Reportables are at normal levels. Swaps got out of some longs but are still long.
But the Other Reportables are major net short. I checked the combined Futures and options report and this group doesn't have many options. Mainly futures. There are short 236,764 futures and options and short 235,619 futures only. So minimal short options.
They are long 36,081 futures and options and long 29,526 futures only. Only long about 6,500 options.
OI for NG futures have been some what flat the last 10 days.
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