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Diversified Option Selling Portfolio


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Diversified Option Selling Portfolio

  #851 (permalink)
 myrrdin 
Linz Austria
 
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TraderGriz View Post
Have been watching the hog market with some interest. It has been going up for a time.
Cash is bout 75
July an August bout 81
Then October drops down to 68
My thoughts are to sell some calls at some point. I can't find enough fundamentals to support my thoughts as yet, then the technicals confuse me with the drop from August to October prices.
Anyone got thoughts on this?

Contracts for meats trade more or less independently from each other The reason is that it is difficult and expensive to store meat.

Gold can be stored easily and cheaply, and thus prices for contracts with more DTE move similarly than the nearer contracts.

Once per month (Cattle on Feed Report) or once per quarter (quartlery hogs report) there are important reports for these commodities, which influence the trade for a longer period. These reports can cause severe price moves.

Best regards, Myrrdin

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  #852 (permalink)
mdsay
Belarus Minsk
 
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myrrdin View Post
I often sell short-dated options. At this time of the year I am interested in options based on the November (soybeans) or December (corn) contracts, and ending in June or July. They move less volatile than the July or August contracts. Disadvantage: The fills are worse than options for the July or August contracts.

I rarely trade the weekly options. I only use them as a protection in case of a report.

Best regards, Myrrdin

We are talking about the same thing?

Short-Dated New Crop Options
Take advantage of hedging flexibility with Short-Dated New Crop options on Corn, Soybeans, Soybean Meal and Oil, and Wheat futures.
Lower premiums than standard new crop options due to reduced time value
Cost-effective way to take a position in new crop futures contracts
Hedge a lower cost “window” version of traditional minimum price contracts
Precision timing to trade high impact events on new crop markets, such as USDA reports
Manage risk during specific windows of the growing season at reduced costs

sorry i cant insert link from cme at now.

Br, mdsay

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  #853 (permalink)
 myrrdin 
Linz Austria
 
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mdsay View Post
We are talking about the same thing?

Short-Dated New Crop Options
Take advantage of hedging flexibility with Short-Dated New Crop options on Corn, Soybeans, Soybean Meal and Oil, and Wheat futures.
Lower premiums than standard new crop options due to reduced time value
Cost-effective way to take a position in new crop futures contracts
Hedge a lower cost “window” version of traditional minimum price contracts
Precision timing to trade high impact events on new crop markets, such as USDA reports
Manage risk during specific windows of the growing season at reduced costs

sorry i cant insert link from cme at now.

Br, mdsay

Yes, I am talking about short-dated new crop options. CZ and SX are considered as new crop futures. The "normal" CZ and SX options expire in November (CZ) or October (SX). The short-dated new crop options are also related to the CZ or SX futures. They expire in June, July etc. depending on the option.

Best regards, Myrrdin

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  #854 (permalink)
 jokertrader 
NYC, NY
 
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myrrdin View Post
I often sell short-dated options. At this time of the year I am interested in options based on the November (soybeans) or December (corn) contracts, and ending in June or July. They move less volatile than the July or August contracts. Disadvantage: The fills are worse than options for the July or August contracts.



I rarely trade the weekly options. I only use them as a protection in case of a report.



Best regards, Myrrdin



Are u thinking of selling puts on beans ending July or August for a summer weather rally?? Based on Nov contract? Leave the call side open and the sell calls if there is a big rise


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  #855 (permalink)
 myrrdin 
Linz Austria
 
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jokertrader View Post
Are u thinking of selling puts on beans ending July or August for a summer weather rally?? Based on Nov contract? Leave the call side open and the sell calls if there is a big rise


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No, currently I am not interested in selling options on beans.

This might change, if bean prices move upwards strongly within the next couple of weeks according to seasonals. In this case I intend to sell calls for the SX far above the market.

If weather cooperates SX price could move far below 900 within a very short period of time. Have a look at the chart for 2014 (and others). Thus, I will not sell puts.

Best regards, Myrrdin

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  #856 (permalink)
 manuel999 
Germany
 
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myrrdin View Post
No, currently I am not interested in selling options on beans.

This might change, if bean prices move upwards strongly within the next couple of weeks according to seasonals. In this case I intend to sell calls for the SX far above the market.

If weather cooperates SX price could move far below 900 within a very short period of time. Have a look at the chart for 2014 (and others). Thus, I will not sell puts.

Best regards, Myrrdin

And the same for Corn as well?

Thanks.

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  #857 (permalink)
 myrrdin 
Linz Austria
 
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manuel999 View Post
And the same for Corn as well?

Thanks.

Similar for corn. In my opinion downside potential for corn is not as big as for beans, as some damage has been made. But if bean price moves severely below 9, corn might follow.

Best regards, Myrrdin

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  #858 (permalink)
 ron99 
Cleveland, OH
 
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Here's a video with transcript of James Cordier talking about grains, oil and selling options.

https://seekingalpha.com/article/4077113-end-u-s-planting-can-opportunity-grain-option-writers?uprof=11&isDirectRoadblock=false

Here's a list of his other articles
https://seekingalpha.com/author/james-cordier/articles

Good fundamental info in them.

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  #859 (permalink)
rajab
westhills california US
 
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myrrdin View Post
Commercials usually buy into falling prices. They hold their largest position at the price low. Commercials do not have to liquidate positions, when they move against them. They can give or take delivery when the future expires.

Non-Commercials usually buy into higher prices. They tend to liquidate positions that move against them, as they usually do not give or take delivery when the future expires.

How do I use this in selling opions ? I will explain for selling calls, but of course it works for selling puts in an analogue way.

1. When the non-commercial position is at a multi-year maximum you have to ask yourself: Who else should buy ? Very often the price is near a maximum, and it is a good place to sell calls. But be careful: There are few cases when commercials were on the wrong side and bought their shorts back. This usually ends in a dramatic rise of price.

2. COT data gives you a clue where the next move can be expected. But it never is an entry signal. You have to look for an entry signal somewhere else, eg. in the chart.

3. If non-commercials hold a significant short position there is risk that in case of a bullish change in fundamentals there is significant short-covering by non-commercials. Thus, I do not sell calls in such situation.

Best regards, Myrrdin

myrridn
Would you say the above also depends on the type of commodity or index traded?

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  #860 (permalink)
 myrrdin 
Linz Austria
 
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rajab View Post
myrridn
Would you say the above also depends on the type of commodity or index traded?

This is my experience for the commodities I usually trade: Grains & Beans, Meats, Softs. Energies. My experience in trading Indices, Currencies, and Metals is limited.

Best regards, Myrrdin

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Last Updated on May 26, 2022


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