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Diversified Option Selling Portfolio


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Diversified Option Selling Portfolio

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  #1471 (permalink)
Zurich
 
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myrrdin View Post
I prefer holding 2 or 3 accounts to avoid third party risk. Consequently, I need 1 or 2 additional brokers to Interactive Brokers.


In case of further questions, please feel free to ask.

Best regards, Myrrdin

I appreciate the detailed answer. Maybe your way of having two or more account is getting the best of both worlds. Something I haven't considered.

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  #1472 (permalink)
Market Wizard
Linz Austria
 
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swisstrader321 View Post
I appreciate the detailed answer. Maybe your way of having two or more account is getting the best of both worlds. Something I haven't considered.

There are several risks having only one broker.

A broker can use illegal methods and go bancrupt, as it happened to Manfinancial many years ago.

Software issues can prevent you from trading for a while. In case you have more than one acount you are in a position to hedge a position of the other account that you are unable to close.

Regarding Interactive Brokers: They claim that for European customers trading will be possible after a Brexit without interruption. But we do not have any experience regarding this topic.

Best regards, Myrrdin

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  #1473 (permalink)
Hanoi, Vietnam
 
 
Posts: 29 since Nov 2018
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Hi everyone,

I have not finished the entire thread yet (got busy for a few weeks with my main business), but would like to go ahead and ask a question:

I have recently sold Natural Gas Put options with strike 1.6 and 1.7, expiring in 56 days. I know natural gas has been going down lately, but I see that the inventory storage is a little lower than 5 year average (2569 bcf vs 2720 bcf), and the last time NG was around 2 for September contract is back in 2016 and back then there was a way way bigger inventory storage. I know there is weather uncertanties, but the current price seems to be really low for given storage.

I know I might be missing details here, but can you guys give me your opinion about current state of NG? Are there any huge fundamental changes Im not aware of?

I might be totally wrong here, but I think prices wont go much lower from this point. I think Im in a pretty good shape being far out of money, currently Im having a small profit for position. What do you guys think about my position?

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  #1474 (permalink)
Market Wizard
Linz Austria
 
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yurahoang View Post
Hi everyone,

I have not finished the entire thread yet (got busy for a few weeks with my main business), but would like to go ahead and ask a question:

I have recently sold Natural Gas Put options with strike 1.6 and 1.7, expiring in 56 days. I know natural gas has been going down lately, but I see that the inventory storage is a little lower than 5 year average (2569 bcf vs 2720 bcf), and the last time NG was around 2 for September contract is back in 2016 and back then there was a way way bigger inventory storage. I know there is weather uncertanties, but the current price seems to be really low for given storage.

I know I might be missing details here, but can you guys give me your opinion about current state of NG? Are there any huge fundamental changes Im not aware of?

I might be totally wrong here, but I think prices wont go much lower from this point. I think Im in a pretty good shape being far out of money, currently Im having a small profit for position. What do you guys think about my position?

I liquidated my short put positions in NGV with a loss. In my opinion, all depends on the weather now. In case it stays cool in wide parts of the US, the NG price might move further down. Not necessarily to 1.6, but far enough to hurt your options. In case it gets hot in the second half of August, NG price will move upwards.

The most recent negotiations of the US and China were, in my opinion, no help to move the NG price upwards.

I prefer to stand on the sidelines in markets, that are mainly determined by the weather.

Best regards, Myrrdin

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  #1475 (permalink)
Hanoi, Vietnam
 
 
Posts: 29 since Nov 2018
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myrrdin View Post
I liquidated my short put positions in NGV with a loss. In my opinion, all depends on the weather now. In case it stays cool in wide parts of the US, the NG price might move further down. Not necessarily to 1.6, but far enough to hurt your options. In case it gets hot in the second half of August, NG price will move upwards.

The most recent negotiations of the US and China were, in my opinion, no help to move the NG price upwards.

I prefer to stand on the sidelines in markets, that are mainly determined by the weather.

Best regards, Myrrdin

Wow nice timing askig the question, NG is up over 5% at this very moment. I had this position for a while, I had a profit of close to 50% but then NG started downtrend and I went back to 0 profit, untill about 1 week ago it stepped into little profit zone again.

I do understand that weather can affect it and of course it doesnt need to move to 1.7 or 1.6 to hurt me, its just that at this price and level of storage, unless there is a big change in NG and energy fundamentals, I think there are good chances I will profit from this position. Ill see how it goes and make changes along the way.

Am I right to say that huge spikes up during winter is more common (and have larger price momevent) compared to spikes during summer?

Sent using the futures.io mobile app

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  #1476 (permalink)
Market Wizard
Linz Austria
 
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yurahoang View Post
Wow nice timing askig the question, NG is up over 5% at this very moment. I had this position for a while, I had a profit of close to 50% but then NG started downtrend and I went back to 0 profit, untill about 1 week ago it stepped into little profit zone again.

I do understand that weather can affect it and of course it doesnt need to move to 1.7 or 1.6 to hurt me, its just that at this price and level of storage, unless there is a big change in NG and energy fundamentals, I think there are good chances I will profit from this position. Ill see how it goes and make changes along the way.

Am I right to say that huge spikes up during winter is more common (and have larger price momevent) compared to spikes during summer?

Sent using the futures.io mobile app

Definitely, according to my experience, huge spikes are much more frequent in winter. Years ago, also Hurricanes could be responible for huge spikes. But this problem is reduced now since a lot of the production facilities are not in the sea anymore.

Best regards, Myrrdin

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  #1477 (permalink)
Cleveland, OH
 
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yurahoang View Post
Hi everyone,

I have not finished the entire thread yet (got busy for a few weeks with my main business), but would like to go ahead and ask a question:

I have recently sold Natural Gas Put options with strike 1.6 and 1.7, expiring in 56 days. I know natural gas has been going down lately, but I see that the inventory storage is a little lower than 5 year average (2569 bcf vs 2720 bcf), and the last time NG was around 2 for September contract is back in 2016 and back then there was a way way bigger inventory storage. I know there is weather uncertanties, but the current price seems to be really low for given storage.

I know I might be missing details here, but can you guys give me your opinion about current state of NG? Are there any huge fundamental changes Im not aware of?

I might be totally wrong here, but I think prices wont go much lower from this point. I think Im in a pretty good shape being far out of money, currently Im having a small profit for position. What do you guys think about my position?

The 5yr avg summer injection through July 19 is 1,085 Bcf. In 2019 injection is 1,462. Much higher. That is why price is where it is even though inventory lower vs 5 yr.

In March the 2019 inventory vs the 5yr avg was -565. Now it is -151.

They are closing the gap fast.

See my NG charts here. https://public.tableau.com/profile/ron.h8870#!/vizhome/Energies-NaturalGas-USInventory/NGData

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  #1478 (permalink)
Legendary Market Wizard
Houston, TX
 
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yurahoang View Post
Are there any huge fundamental changes Im not aware of?

Production? They are producing so much gas in some area's of the country they have quite literally been giving it away the last few months. (Why? Isn't enough transport available to move the gas out of production areas)

myrrdin View Post
Definitely, according to my experience, huge spikes are much more frequent in winter. Years ago, also Hurricanes could be responible for huge spikes. But this problem is reduced now since a lot of the production facilities are not in the sea anymore.

Lot more onshore production is true, but we have also discovered (painfully) that Hurricanes tend to cause more demand destruction than they do supply destruction!

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  #1479 (permalink)
Hanoi, Vietnam
 
 
Posts: 29 since Nov 2018
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As of this very moment, I have finished both this thread and Ron's "Selling options on futures" thread, it really did take a lot of work, but the information and knowledge gained is truly beyond measures. I took a lot of notes (based on different commodities/types of strategies), I will spend the next weeks and months going through them one by one and come back here with questions, I got so many of them.

One thing I noticed is that clearly Ron's and Myrrdin's way of trading has a lot of very noticeable differences. I think at this moment I fall somewhat in between, which is really good cause I was able to learn so much from both.

Another thing seems to be a sad fact that many traders who used to sell options and particiapte actively in threads simply left. Many of them posted astronomical returns at the beginning. Seems like many have a good start (cause of luck?) and then when things started getting worse they switched to other trading strategies (or maybe stopped trading altogether). Not many traders from 5-6 years ago still hang around this threads. I wonder what actually happened? (NG spike in 2013-2014 winter?).
This is quite discouraging to new traders like me, I myself had quite a good and lucky run for the 1st year, and based on people's experience here I am very physcologically prepared to have a worse, even much worse year ahead, but hopefully proper education/research and proper risk management will keep me on the right path. People who stayed the course actually proved that Selling Options actually can be done, no matter what anybody says about risk/reward. Id take a business of an insurance company or lottery company over an insurance/loterry ticket buyer anyday.


Special thanks to Myrrdin and Ron for starting these amazing threads on the subject, and thanks everyone who contributed and shared their experience.

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  #1480 (permalink)
Market Wizard
Linz Austria
 
Experience: Advanced
Platform: Zaner360, TWS, Vantage
Broker: DeCarley, IAB, RJO
Trading: Commodities
 
Posts: 1,652 since Nov 2014
Thanks: 2,700 given, 2,221 received



yurahoang View Post
As of this very moment, I have finished both this thread and Ron's "Selling options on futures" thread, it really did take a lot of work, but the information and knowledge gained is truly beyond measures. I took a lot of notes (based on different commodities/types of strategies), I will spend the next weeks and months going through them one by one and come back here with questions, I got so many of them.

One thing I noticed is that clearly Ron's and Myrrdin's way of trading has a lot of very noticeable differences. I think at this moment I fall somewhat in between, which is really good cause I was able to learn so much from both.

Another thing seems to be a sad fact that many traders who used to sell options and particiapte actively in threads simply left. Many of them posted astronomical returns at the beginning. Seems like many have a good start (cause of luck?) and then when things started getting worse they switched to other trading strategies (or maybe stopped trading altogether). Not many traders from 5-6 years ago still hang around this threads. I wonder what actually happened? (NG spike in 2013-2014 winter?).
This is quite discouraging to new traders like me, I myself had quite a good and lucky run for the 1st year, and based on people's experience here I am very physcologically prepared to have a worse, even much worse year ahead, but hopefully proper education/research and proper risk management will keep me on the right path. People who stayed the course actually proved that Selling Options actually can be done, no matter what anybody says about risk/reward. Id take a business of an insurance company or lottery company over an insurance/loterry ticket buyer anyday.


Special thanks to Myrrdin and Ron for starting these amazing threads on the subject, and thanks everyone who contributed and shared their experience.

You are welcome. i appreciate you read through these threads - congratulation.

Some contributers here left, because they were successful, founded a consulting company and do not want to give their knowledge to others free of charge.

Most traders who left this forum have stopped trading for one reason or the other.

The major fault of young traders is overtrading. In this case there are two possibilities: Either you have an extremely successful year, and your account is wiped out later. Or your account is wiped out in the first year.

I suggest you very carefully read the posts on this topic again and again. All traders who are here after 10+ years have a very sound money management.

Always keep in mind: Preserving your capital is more important than high profits.

Best regards, Myrrdin

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