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The chart is generated in Excel 2003. You might be referring to the variety of unusually toolbars. These are all VBA API's that I have written into excel.
Thanks for your feedback. It is early days for me as I look into seasonality. I am keen to hear others views and have this influence my thinking. In the absence of futures data the chart uses USO. This is a starting point. The key feature of the chart is how each year is normalized so the years are comparable much like a percentile.
I hear what you are saying about the differences between the front and back month. I am just becoming aware of this and starting to think about it. On my CL strangles as I have said I do stay close to 30 DTE.
I guest the questions the chart raises are:
1. Does this seasonal chart for USO reflect the continuous CL?
How could this chart help my trading?
I am thinking of seasonality as a clue to what to expect. If seasonal sales rallying and actual is rallying then I might leg into my strangle in two stages. First shorts puts and then 3-4 days latter shorting calls. I thinks someone once said to me that that is favorable beta, but i am not sure about this technical reference. For me if the first leg is in 20% profit and then I get a better risk reward probability. I try to do this over the week when the most recent month becomes the current month.
I will have a look at comparing seasonality of USO to XSP/SPY. This might be a postive next step unless yourself or some might like to suggest how I cold progress this study.
With the recent surge in Soybeans, I thought I'd share with what I just did with some November Soybean Calls.
I sold some 1600 Calls last week, which with the 3x excess margin that Ron recommended, equated to about 18% of my equity (I like to target 15%, and I went a bit over on this one).
Friday the price of Beans soared 40 cents/bushel, and tonight (Sunday) it has risen another 45 cents or so.
My initial guess was that if on close of Monday, Beans stay up 45 cents, I'll still be OK with regards to the "Ron Loss Rule" (when increase in option price combined with increase in margin, takes away all your excess, it is time to exit). No need to exit yet.
BUT even so, I am not feeling good about the trade. My delta went from .04 to .12 or so - in less than 2 trading days. I'm feeling some heat.
So, I decided that instead of exiting the position completely, I would roll up to a higher strike price. My goal was to exit the 1600s with a loss, and sell enough 1800s to end up profit wise where I started (right after selling the 1600s).
I was able to do this, but at the expense of dedicating more margin to the trade (up to around 22%, from 18%). I guess there is no free lunch. I also am short more 1800s than I was 1600s.
Good news: my delta is around .03 now Good News: if 1800s expire worthless, I'll still make money overall on the trade Bad news: I now am short more 1800s than I was 1600s, so if things go really bad, losses will multiply more quickly.
Anyhow, I thought I'd share this with you, in case you find yourself in a similar position. Rolling to deeper Out of the Money options may be a solution, if you don't want to outright exit. I do suspect, however, that most times the outright exit is the best option.
Kevin,
It is the Bad News part that is the rub. I have been here before. I try not to roll like this any more. The first thing I do with any strangle I short is decide where I become a buyer ATM (next month). This is normally resistance or support. When one leg is threatened I consider becoming a buyer ATM. The critical point here is when it occurs in the cycle and how many DTE. This significantly effects how I think about what I might do. The second thing I do now is roll and spread. For example if I am threatened on the short call with 10 contracts I will look to buy it back and then do a new strangle short 10 puts and calls (in the same month). Again this is critically effected by DTE. As I try to focus on the last 30 DTE in most cases, if I get clear the first 7 to 10 days of a trade then these options above are viable when a position is threatened in my view. But I am not expert and I am always learning on the job even after doing this for a number of years.
