The other way, but yes. here is what it would like for crude - short ATM and long PF

Thanks for your suggestions. One of the important issues according to my experience is to roll (or close) the option before it gets the nearby one. (In so far I trade it differently than other options I sell.) In case it gets warmer in December and price and volatility are reduced a bit, I will be out anyway. I consider a profit of approx. 50 % in a couple of weeks an excellent result.

Another important issue is to watch the weather outlook daily. The extreme cold last year was announced, and at that time it was possible to exit short calls at a reasonable price. One of the big mistakes in OTM option selling is assuming that nothing can happen, because they were sold so far OTM. And to stay in all trades.

I will let you know how I procede.

Best regards, Myrrdin

I've learned the hard and expensive way not to fight the trend.

oic.

I would argue against it, as you're long the synthetic 4x1 in puts/futures (short four puts at PF strike, short one futures contract). The ATM combo is the origin of skew (up and out strikes are under ATM, of course), so no vol-edge ATM, but no leverage. I suppose you're using the PF as a stop in this case? A quick shot down to the PF strike will benefit from stickiness, for sure. IMO there are better tail-hedges. Let me know how it goes.

Oh crap, ignore the above. I missed that you're trading CL.

I intend to sell puts on crude oil futures.

Arguments pro:
Implied volatility is rising and now at the highest level for appox. two years.
Seasonals show a significant low at this time of the year.
Price gets close to an area were some production technologies get problems to make money, and where some governments (eg. Russia, Iran) feel uncomfortable.

Arguments con:
There will be an important OPEC meeting in a couple of days. (This might be a reason for the high volatility.) I expect them to reduce production to get prices higher, but I might be wrong.
Trend is still downwards.

My favorites are the CLK P60 or 65. Delta as of Friday 11.4 % or 18.7 %, respctively. Option premium 1060 US$ or 1870 US$. I prefer the May contract as I expect a longterm rise in crude oil prices. Seasonally it should go upwards until spring.

Any comments on the trade as such, on entry conditions, and on alternative trades are welcome.

Best regards, Myrrdin

FYI - I was checking a rarely used email account and noticed something from Liberty Trading / OptionSellers.com

It looks like there is a new edition (3rd edition) of their book out, and Michael Gross, the research guy, is back (with a shaved head).

Anybody who did sell NG-H5 calls though is probably happy.