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These are huge numbers, and potentially record setting.
At time of writing 8:43 EPT, NG market is already up almost 16c (3.7%) so it could be an 'interesting' day.
I had used Rich Nelson at Futures Mag but they quit printing his articles a month ago. I now use Hightower that I get from OX. I think DeCarley has Hightower too.
Yikes. I am short some March 6.9 and 7.4 calls. I sold the 6.9s @ .016 and the 7.4s @ .009. I'm underwater quite a bit.
I know that Ron recommended against selling March calls, although that was a few days after I sold them. At the time I asked why I shouldn't sell the "hell out of them". I did sell a fair amount, but not as many as I was going to.
In addition to Ron's sage advice about dealing with positions going against us, Harvard16 has shared his experiences when he held positions last April.
I'm saying all this to get input from everyone as to how far I let this go before doing something and to let everyone ride along and learn with me.
The BidAsk on the 6.9 is currently .026/.035 and on the 7.4 it is .011/.030. What would you do?
Hi - You're getting hurt by a very sharp rise in implied volatility. The $6.90 and $7.40 calls are about 80% and 90% IV, respectively. That's the bad news. The good news is you're not taking much heat due to a rise in the underlying.
Assuming you're not 'over-positioned' (whatever that means for your circumstances), I'd hang on a bit. IV and the underlying can certainly rise if people keep milking the cold wxr story, but time decay will soon accelerate and mean reversion (in IV) is also on your side.
If you don't want to exit but also want some protection again continued move higher, you can buy some lower strike (and lower volatility) calls to convert the naked calls into ratio spread position. Like for every few (5-6) naked calls buy 1 call of about 1 dollar lower strike. That will reduce impact of margin increase at expense of lower profit...Or you can sell some more of the naked calls but use the proceeds to buy lower strike calls again to make it ratio spread. Like if you had 10 7.4 call naked, sell 6 more at 3 cents and use 18 cents to buy 3 6 calls to make 1 to 5 (approx) 6 to 7 ratio spread...Numbers are not exact and you have play with it. There will not be any more margin need and margin increase will be quite less compared to naked position. Only drawback is if NG shoots higher 2 dollar in a week then you will lose big which you will also with naked call position....
