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Diversified Option Selling Portfolio
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Diversified Option Selling Portfolio

  #981 (permalink)
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myrrdin View Post
What fundamental data do I currently look at before I sell options in the grains ? Corn as an example:

1. Tomorrow, Wednesday, an important report is published. No good time to enter a short option trade.
2. Pollination period for corn is usually in July. This year it is a bit late due to late planting, and might extend until the first week of August in the most important regions. I do not intend to sell calls until there are reliable weather reports for this period available.
3. Corn was planted a bit late this year. Thus, early frost could be a larger problem than in average years.
4. MW crop will be a desaster, but no-one knows how big the desaster will be. An exploding MW price could move corn price upwards.
5. COT data is not bearish. Funds have a lot of amunition to move corn price upwards if weather remains hot and dry.
6. I do not rely on seasonals in such situations. Seasonals are average values, but in weather markets deviations from the average can be huge.

Best regards, Myrrdin

Do you take the FED remark into any account?
What Yellen just said would support the case for inflation.
Do you think that makes higher prices for commodities more probable?

I do suffer a bit of information overload?

Thanks.

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  #982 (permalink)
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manuel999 View Post
Do you take the FED remark into any account?
What Yellen just said would support the case for inflation.
Do you think that makes higher prices for commodities more probable?

I do suffer a bit of information overload?

Thanks.

Yes, inflation and moves of the currencies do influence prices for commodities. But for me these influences are of less importance and difficult to predict for the next couple of months. I do not consider them when selling options in the grains.

Best regards, Myrrdin

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  #983 (permalink)
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@myrrdin

What do you think about selling cattle calls? I'm new to this but: there's a chance that supply will increase due to the heat. Producers may want to sell ready cattle now instead of potentially incurring higher operating costs (higher feed costs, etc.) In the short term demand may also decline due to the heat. Our bodies need fewer calories to maintain normal temperatures when it's hot outside.

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  #984 (permalink)
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TFOpts View Post
@myrrdin

What do you think about selling cattle calls? I'm new to this but: there's a chance that supply will increase due to the heat. Producers may want to sell ready cattle now instead of potentially incurring higher operating costs (higher feed costs, etc.) In the short term demand may also decline due to the heat. Our bodies need fewer calories to maintain normal temperatures when it's hot outside.

I agree with your evaluation of the fundamentals.

This would be a short time trade, using the August contract. Dave Hightower suggested this trade. I prefer selling options with 90 to 150 DTE.

Regarding cattle, I hold the LCV P100/C136 strangle for some weeks. And I consider to sell LCZ puts at lower prices of the underlying during the next couple of weeks. In my opinion cash price in December should be above $ 120.

Best regards, Myrrdin

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  #985 (permalink)
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myrrdin View Post
I agree with your evaluation of the fundamentals.

This would be a short time trade, using the August contract. Dave Hightower suggested this trade. I prefer selling options with 90 to 150 DTE.

Regarding cattle, I hold the LCV P100/C136 strangle for some weeks. And I consider to sell LCZ puts at lower prices of the underlying during the next couple of weeks. In my opinion cash price in December should be above $ 120.

Best regards, Myrrdin

An additional remark for the ones new to trading the meats:

the individual contracts for different months trade more or less independently from each other. This is different to other commodities futures. The reason is that it is difficult to store meat for a longer period of time compared to grains, coffee or metals.

Best regards, Myrrdin

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  #986 (permalink)
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myrrdin View Post
I agree with your evaluation of the fundamentals.

This would be a short time trade, using the August contract. Dave Hightower suggested this trade. I prefer selling options with 90 to 150 DTE.

Regarding cattle, I hold the LCV P100/C136 strangle for some weeks. And I consider to sell LCZ puts at lower prices of the underlying during the next couple of weeks. In my opinion cash price in December should be above $ 120.

Best regards, Myrrdin

Live Cattle futures are limit-up today, and the trade suggestion mentioned above is stopped out on the day of entry.

This is a good example, why it is not wise to enter short options with only 20 DTE. Although it is tempting - you can make a lot of money within a month. But you can also loose a lot of money withinin less than a day.

Best regards, Myrrdin

PS: I am still waiting patiently to enter the LCZ puts ...

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  #987 (permalink)
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After the report yesterday, ZC is markedly down,and the outlook seems to point to a further sell off.

"USDA now expects the 2017 corn harvest at 14.25 billion bushels versus its previous 14.065 billion. It cut 2016/207 feed use 75 million to 5.425 billion bushels but raised 2017/2018 feed use by 50 million to 5.475 billion. For old crop it left exports and industrial use, including ethanol, unchanged."

It also seems to be in-line with the seasonals.

I am planning to sell ZCZ17 calls today or tomorrow.

The main risk is the weather.
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  #988 (permalink)
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manuel999 View Post
After the report yesterday, ZC is markedly down,and the outlook seems to point to a further sell off.

"USDA now expects the 2017 corn harvest at 14.25 billion bushels versus its previous 14.065 billion. It cut 2016/207 feed use 75 million to 5.425 billion bushels but raised 2017/2018 feed use by 50 million to 5.475 billion. For old crop it left exports and industrial use, including ethanol, unchanged."

It also seems to be in-line with the seasonals.

I am planning to sell ZCZ17 calls today or tomorrow.

The main risk is the weather.
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I might sell corn calls if - after a warmer and / or drier weather forecast - corn prices and volatility move up again next week. But currently calls look too cheap for me. If there is no such chance I will stay without corn calls at the time being.

The only position I hold in the grains & beans is a WH9-WN8 spread from -18 c. This spread has not moved above 0 for many years. It should move further downwards when farmers begin talking about their planting intentions in fall.

Best regards, Myrrdin

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  #989 (permalink)
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ron99 View Post
On May 26 I sold NGu7p260c425 for 0.041. 94 DTE. IM is 289.

Took 52 days held but exited today at 0.017 for 7.6% mROI. Exited put today. Exited call a while ago.

I also exited my NGu7p260c450 today after 81 days held. Made 5.0% mROI.

I also exited my NGv7p255c450 today after 73 days held. Made 6.3% mROI.

The NG price drop prevented me from exiting earlier because put premium went higher than what I sold it for.

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  #990 (permalink)
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ron99 View Post
Took 52 days held but exited today at 0.017 for 7.6% mROI. Exited put today. Exited call a while ago.

I also exited my NGu7p260c450 today after 81 days held. Made 5.0% mROI.

I also exited my NGv7p255c450 today after 73 days held. Made 6.3% mROI.

The NG price drop prevented me from exiting earlier because put premium went higher than what I sold it for.

Are you planning to get back into NG?
I still have the NGU7p250 from a Strangle, but will hopefully close it this week.
Bias currently seem to me to be to the downside; I am considering a new strangle with a lower put then.

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