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Are you shorting a strangle (a put and a call option) at the same time? So for NGK21 you would sell the put at 2.7 and sell the call at 3.0 collecting approx: 1.5K with 55 days to expiry? Or will you in the case of NGK21 start by selling the put and if price goes from 2.88 to 2.95 then as a second step sell the call (more what I have in mind)?
From "the bible of options strategies"
Edit to be honest, I keep maintaining the options I could take depending on price evolution, I have just start to assess CLN21 and keeping an eye on SIN21 and KCU21 while NGK21, RMN21, HEJ21, and KCN21 will not be pursued...
I sold the HEJ C90 recently as a more speculative trade, and the LCQ P116, as I consider this contract to be severely undervalued. But these are other strategies. I just want to show that there is a lot to pick up. I consider it to be important to have a large repertoire of strategies.
All the other commodities you mention are on my watch list, but I am waiting for higher volatilities. I like selling strangles with 60 to 100 DTE.
Coming from a Futures background, thinking about strategies that would combine the power of selling premium and technical/fundamental analysis:
Is it feasible to sell credit Put spreads, sell 1 P ATM and buy 1 P OTM to limit the risk at all dips to use the high IV associated with the dip ?
Should we use longer dated to build that inventory as 45 DTE or longer, or can apply this with the weeklies ?
exit the spread once the collected premium is 50 to 80 % from initial credit and hold the losing trades till expiry, just in case it would recover or accept the limited risk from the spread?
I sell ATM puts in special fundamental situations. But it seems to be your intention to sell ATM puts regularly based on the chart. I do not have any experience in this kind of trading.
I suggest testing it in a paper account for a while to find out, how it works.
60 to 180 DTE is my working period. Short strangles are not part of my strategy for commodities and I don't think it will be any time soon.
I could enter a short strangle or a vertical short strangle but as a 2nd step when prices are moving away from my first leg.
Usually (except when the leverage is too important as Silver and Gold), when I enter a short leg, if the price moves unfavorably, I'm ready to enter another short position at a different level and/or with another expiry and if the price moves very favorably I could then but only then enter a short strangle and similarly if prices go unfavorably for this newly added position, be ready to add another position at a different price and/or expiry.
To summarize when I enter a short leg with options, I can end up by having 2 naked put and 2 naked call and on top of that be ready to intervene with the underlying. As with WTI in March 2020: be ready to check prices every 15 mn, shorting futures or exiting the futures position and doing that eventually 2 to 3 times per day, and as well stay awake up to at least the first 30 mn after the opening and put an alarm during the night (European time) to check prices. It is a full commitment....So I need to be convinced before entering and for my part certainly not relying on a third party or on historical analysis or seasonal analysis only. It is focusing then on only one commodity.
This is very similar to what I have been doing with various equity option markets when volatility spikes. I'm interested in trying the same thing with options on commodity futures.
How do you know which months are well known weather markets for each commodity (specifically energy and grains)? Can this information be found somewhere (maybe MRCI) or is it just gained from years of experience?
Yes, MRCI shows seasonal charts for volatility. They clearly show, when there is a high volatility every year.
It is usually easy to find out the reasons. Temperatures in winter are hard to predict, but severely influence NG consumption. Weather in July severely influences corn production, weather in August Soybean production. Coffee needs rain during the flowering period in September.
It often works extremely well to sell strangles at the end of such a period.
