It will be interesting to see how Chavez's passing will influence the oil markets when an new administration is put in place. Venezuela, I believe, is one of the top oil producing countries so there will be either a friendlier, less friendlier, or about the same administration towards the US. With the US export demands falling off due to the increased production stateside...will it even matter who is in charge in V? This will take some time to fall into place but it will be interesting.
Summer driving season and hurricanes are just around the corner.
Thanks MJ, I got filled in at a limit price of 1.70. Still trying to get used to bid/ask spread when pacing orders but next time I think I will place an order closer to the ask and adjust from there. Since this is a demo, I just wanted to get in the trade so that I can get a feel for the the movement of option prices.
Currently I am looking at the 65P for CL priced at 0.05 with the May 16th expiry. CL looks like it is making a bounce up. I am going to monitor it for a while though before making my decision as the down trend could continue.
Because of how liquid ES options are, I would always use a limit order at the ask or higher, I want the market to come to me instead of adjusting lower. If the market moves away from my limit price, so be it, I won't chase it to get in at a lower price, I try again tomorrow.
I exited my May CL 75 puts at 0.07 a little while ago, since I sold at 0.19, I booked a 0.12 or $120 profit per option. I feel a little bit uncomfortable being short puts even though the seasonal's say that CL should move higher. Gut feeling is telling me that today is just a dead cat bounce and the trend lower may continue with CL especially if the equities markets sell off after getting to record highs. Of course I could be wrong and CL rallies from here! Watching......
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Aside from just the seasonal tendencies I have a few other things to consider before entering. Charts are on other variable to consider. Crude is in a downtrend but may but is at a critical level around 90 right now. If this area breaks then 86 looks to be the next target. This means that you might be able to sell puts a little lower than (psychologically safer?) than what you could have initially. I always let the trend, stalls, or pullbacks dictate my entry. Crude is at a fundamentally and technical juncture right now. Chavez passed away yesterday but the US has become less reliant on foreign oil due to US production on the rise and more fuel efficient vehicles. I have crude on the watch list but I am waiting to see what price does over the next few weeks. If this is the 'bottom' and oil moves back up from this point I'll sell puts later. They might be a few strikes higher but I am still waiting on the chart to tell me what might be happening.
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Homerjay, as a fellow IB user, I am very interested in what you are doing for margin optimisation.
I wonder if you could clarify how you monitor volatility. I presume your system is not using TWS alone....
MJ, thank you for sharing your experience and the detailed explanation. I find short strangles less stressful. It's like watching a digital pet (Tamagotchi), spending a few minutes a night to check out the position and see if the profits are growing. Thank you.
I just got done reading this thread from page 1. What a wealth of information, thanks everyone that contributed and especially Ron for starting this.
I've been trading seasonal futures for years in outrights and never thought to get into looking at options until this year. My main bread and butter trade is taking long positions in July corn during March and covering during May to expiration. This year everything looks good technically but the fundamentals are mixed. Will we get a continuing drought or no?
So I have started looking at options for possible ways to profit on this trade even if things go sideways for the next few months in Corn. Currently we are at about 687 July 13 Corn. I'm thinking to wait for a push down to 650-660 and then sell July 13 puts OTM at around 600-610 depending on what I can get a reasonable delta for.
Also, I've noticed a seasonal tendency for volatility to pick up dramatically in mid-May to early July (currently we are at like 5 year lows for Corn volatility). Ron I think you mentioned that this doesn't affect your trades (except in terms of margin hikes). How would you (or would you) factor this into this type of trade?
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