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Diversified Option Selling Portfolio


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Diversified Option Selling Portfolio

  #1361 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
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Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
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sinpeople View Post
Hi folks,

In the July's edition of his newletter, James Cordier recommended a trade : Sell Natural Gas January 2018 Call 4.0 at premium 600 per contract. The analysis is OK. But the Call 4.0 is a bit lower comparing to the trade of C5.0 above last year.

What do you think about this trade? Thank you for sharing your opinion.
Best Regards
David

I like selling NG calls about now. Maybe when it looks like the weather forecast is showing the heat wave will end.

I'm not sure about selling Jan 2019 calls at 180 DTE. From May 21 to June 29 the Jan 4.00 call option premium stayed in the range of .049 to .067 while futures were 3.08 to 3.23. Not a lot of price erosion because it is so high DTE.

I would find a closer strike that is the same 15 delta like Nov 3.40.

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  #1362 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
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ron99 View Post
I like selling NG calls about now. Maybe when it looks like the weather forecast is showing the heat wave will end.

I'm not sure about selling Jan 2019 calls at 180 DTE. From May 21 to June 29 the Jan 4.00 call option premium stayed in the range of .049 to .067 while futures were 3.08 to 3.23. Not a lot of price erosion because it is so high DTE.

I would find a closer strike that is the same 15 delta like Nov 3.40.

This idea is supported by a potential El Nino, which should bring a warmer winter to the US.

I am currently short the NGV C3.4-3.6 , and intend to add NGX call spreads when the weather forecast shows an end of the current heat wave, as suggested by Ron.

In my opinion, options with 180 DTE are only interesting if you have a clear opinion regarding the price of the underlying moving upwards or downwards.

Best regards, Myrrdin

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  #1363 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
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Currently I hold the following positions in the short option portfolio:


LHG P52
Sold the options recently, and intend to buy them back at 50 %.

NGX C3
Sold the options recently, and intend to buy them back at 50 %.

Additionalls I sold Gold puts and a ZN position according to Carleys recent suggestion.

I currently prefer to trade outright futures and futures spreads, as well as even some long options. See Commodities section.

Best regards, Myrrdin

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  #1364 (permalink)
zxcv64
London, UK
 
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myrrdin View Post
Currently I hold the following positions in the short option portfolio:


NGX C3
Sold the options recently, and intend to buy them back at 50 %.


Best regards, Myrrdin

That's an aggressive trade. Not sure which expiry month your options are and with NGX at around 2.9 it'll be interesting
to see how this pans out. I sold a 2.7-2.65 NG put spread in Jul (expiry 18-Sep) for 0.017, and hope to
close it soon when it gets down to 0.004 (currently mid is 0.006).

I used to sell a lot of nakeds on equity indexes but am trying to move to credit spreads for defined risk. The
sleepless nights that I experienced after my Brexit naked calls on the FTSE went wrong have made me cautious.
I currently have credit put spreads on LE and LH (sadly, they are under-water), SB, SI, KC and ZM. Plus some
credit call spreads in ZW, which seems to be very overbought right now.

(I'm with DeCarley too, and must have missed their Gold, ZN recommendation.)

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  #1365 (permalink)
 myrrdin 
Linz Austria
 
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zxcv64 View Post
That's an aggressive trade. Not sure which expiry month your options are and with NGX at around 2.9 it'll be interesting
to see how this pans out. I sold a 2.7-2.65 NG put spread in Jul (expiry 18-Sep) for 0.017, and hope to
close it soon when it gets down to 0.004 (currently mid is 0.006).

I used to sell a lot of nakeds on equity indexes but am trying to move to credit spreads for defined risk. The
sleepless nights that I experienced after my Brexit naked calls on the FTSE went wrong have made me cautious.
I currently have credit put spreads on LE and LH (sadly, they are under-water), SB, SI, KC and ZM. Plus some
credit call spreads in ZW, which seems to be very overbought right now.

(I'm with DeCarley too, and must have missed their Gold, ZN recommendation.)

I do not consider selling the NGX C3 an agressive trade. The closer to the money options react much more moderate to a rise in volatility than the FOTM options. Of course, the number of options must be in accordance with the size of the account, and you need a well defined stop. To achieve the same profit, you need to sell less near the money options than FOTM options. This helps when volatility explodes ...

These options are related to the November contract.and expire on October, 26th. "X" denotes the November contract.

To avoid sleepless nights, it is essential to keep lot sizes small, and to diversify. (Diversification is the main reason why I like trading inter-commmodity future spreads.)

I am also long the hogs, metals and coffee, as shown in the respective threads. And I am looking at selling LCV puts around 108 for the underlying. To me, sugar fundamentals look weak, and the options are cheap. I currently do not sell options on beans and the products, as the outcome of the trade war is impossible to predict for me. There could be significant price moves - upwards as well as downwards ... Regarding wheat calls (old crop), I suggest to look at the longterm charts. In recent years, when Russia stopped selling wheat, prices went above 800. This year again the weather in Russia (and elsewhere with the exception of the US) does not cooperate at all.

Good luck !

Best regards, Myrrdin

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  #1366 (permalink)
rajab
westhills california US
 
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Hey myrrdin
What are the Striks and DTE on your Gold puts?

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  #1367 (permalink)
 myrrdin 
Linz Austria
 
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rajab View Post
Hey myrrdin
What are the Striks and DTE on your Gold puts?

I copied this trade from a newsletter by Carley, which is sent to her customers. Thus, I do not publish the details of this trade.

Please understand that it is my principle not to publish details from newsletters for which I pay or which are published for customers of a broker only.

Best regards, Myrrdin

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  #1368 (permalink)
zxcv64
London, UK
 
Posts: 74 since Jan 2018
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Just wanted to share my two recent options trades.

(Background - I have tons of options experience on equities, but just started trading commodities very recently and am building up experience via a large number of different trades done on various underlyings.)

NG

Fearful of selling nakeds, I sold 2.70-2.65 short put spreads on 12-Jul for 0.0017. The underlying (NGU8) was 2.762 at the time. I closed this yesterday for 0.003, giving a profit of 0.0014/contract. The trade was held for 18 business days. I like to calculate the %profit on these spreads as net-credit-received/max-possible-loss, and this worked out to be a respectable 38%.

HE

This is ugly - but a necessary part of learning.

On 10-Jul, I sold the Aug 67-64 put spread based on HEQ8. You can already guess the rest. I received 0.775 credit for a 3-wide spread. Hogs have been decimated recently and I expect to be hitting my max loss. But it gets interesting. Yesterday, someone somewhere decided to exercise their 67 puts, and I got assigned futures on part of my position. So, now I am holding some futures and long 64 puts, plus some 67-64 short put spreads. I will be closing both soon.

Luckily, as I am still finding my way around commodities, I am keeping position sizing small, so there are no alarm bells and no sleepless nights.

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  #1369 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
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zxcv64 View Post
Just wanted to share my two recent options trades.

(Background - I have tons of options experience on equities, but just started trading commodities very recently and am building up experience via a large number of different trades done on various underlyings.)

NG

Fearful of selling nakeds, I sold 2.70-2.65 short put spreads on 12-Jul for 0.0017. The underlying (NGU8) was 2.762 at the time. I closed this yesterday for 0.003, giving a profit of 0.0014/contract. The trade was held for 18 business days. I like to calculate the %profit on these spreads as net-credit-received/max-possible-loss, and this worked out to be a respectable 38%.

HE

This is ugly - but a necessary part of learning.

On 10-Jul, I sold the Aug 67-64 put spread based on HEQ8. You can already guess the rest. I received 0.775 credit for a 3-wide spread. Hogs have been decimated recently and I expect to be hitting my max loss. But it gets interesting. Yesterday, someone somewhere decided to exercise their 67 puts, and I got assigned futures on part of my position. So, now I am holding some futures and long 64 puts, plus some 67-64 short put spreads. I will be closing both soon.

Luckily, as I am still finding my way around commodities, I am keeping position sizing small, so there are no alarm bells and no sleepless nights.

Thanks for showing us how it is going.

I suspect the price of the NG spreads was 0.017 not 0.0017 and 0.014 and not 0.0014.

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  #1370 (permalink)
zxcv64
London, UK
 
Posts: 74 since Jan 2018
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ron99 View Post

I suspect the price of the NG spreads was 0.017 not 0.0017 and 0.014 and not 0.0014.


Yes, that is correct. To give an update on my HE short 67-64 put spread, I experienced the expected max loss on the position. It was a good learning experience on meats and how volatile things can get very quickly.


I am currently short the following spreads :

NG - short Sep call spread, 3.0-3.1

LE - short Sep put spread, 112-110

ZW - short Oct call spread, 560-580

GC - short Dec put spread, 1180-1170. Opened yesterday and want to give this one plenty of time to recover. I have a
unhealthy relationship with GC - I don't quite understand it and it's fundamentals as yet. I want to get familiar with its behaviour and the best way for me is to have some skin in the game. Thus, I opened this trade (with a small allocation) even though it is not a screaming one.


On my short spreads, I'm intentionally selling close to the money, but in smaller quantities, rather than selling larger quantities of lower delta, further OTM. This suits my trading style better.

Regards

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Last Updated on May 26, 2022


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