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Diversified Option Selling Portfolio


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Diversified Option Selling Portfolio

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  #1501 (permalink)
 myrrdin 
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Tomaz26 View Post
I am in the same boat as you.. Was short CL for a month and just closed a trade today. On friday I wanted to close it for a 50 % gain and I missed a price of 1 cent! Was greedy with a pre-set stop and,.. well. today I closed it for only 40 % gain instead of 49 % gain Anyway I closed it because graphs show global trade falling off drastically and a lot of uncertainties with china trade war, BREXIT etc etc so no short option positions for me from today on also..

will go back to short 40 crude put a about 6 months out again if CL falls off a cliff because I think crude is a buy down at 40 level, but currently not enough premium to warrant a position. If premiums become more juicy I am back in..

I do not intend to sell CL options in the near future. Risk in both directions outweighs profit potential in my opinion.

I would prefer to buy / sell outright futures in case I had a strong opinion on the direction of CL price.

The advantage of trading futures: You have a high risk, but also a high profit potential. Selling options, you have a high risk, but a low profit potential.

I prefer selling options in a low risk environment.

Best regards, Myrrdin

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 ron99 
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I sold NGzc330c400 spreads on Oct 4 for 0.021. Exited today at 0.011. That's a monthly ROI of 7.1% when using 6xIM.

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  #1503 (permalink)
yurahoang
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myrrdin View Post
Currently I find it difficult to find short options trades. I am not invested in any one ...

There are some large moves, eg. currently in LCG and probably soon in KW-W. I prefer trading them via futures.

There are some major uncertainties, eg. in the Indices, in Hogs, or in Crude Oil. I do not like trading them via short options, too.

This shows how important it is to have a tool box of different trading strategies.

I am sure the time for short option trading will come again. Please feel free to write about your short option trading ideas, as soon as they appear.

Best regards, Myrrdin

Hi Myrrdin, thats exactly my current problem, I feel like there arent that many opportunities at the moment so I have to be patient and stay on sidelines.

I hold some short NG put position but watch it closely cause of bearish NG outlook (Im still very far OTM). I messed up with Corn and was down 2%, looking to get back into Corn Calls if the situation is favorable in a few weeks at the end of the harvest, but right now nothing seems very attractive.

I will be looking into Coffee and Cocoa in the coming weeks, last year this trade worked well for me but Ill research fundamentals more in depth before making any trades. Besides that, right now there arent many appealing trades to me.

Maybe, just maybe I will sell NG calls very far OTM if volatility shots up in the next few months.

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  #1504 (permalink)
 myrrdin 
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yurahoang View Post
Hi Myrrdin, thats exactly my current problem, I feel like there arent that many opportunities at the moment so I have to be patient and stay on sidelines.

I hold some short NG put position but watch it closely cause of bearish NG outlook (Im still very far OTM). I messed up with Corn and was down 2%, looking to get back into Corn Calls if the situation is favorable in a few weeks at the end of the harvest, but right now nothing seems very attractive.

I will be looking into Coffee and Cocoa in the coming weeks, last year this trade worked well for me but Ill research fundamentals more in depth before making any trades. Besides that, right now there arent many appealing trades to me.

Maybe, just maybe I will sell NG calls very far OTM if volatility shots up in the next few months.

Selling NG puts in these days would hurt on of my basic trading rules: Never sell NG option in Z, F, G, or H contracts. Neither puts nor calls. I am currlntly long the NGH C3, waiting for a cold blast in the US.

Best regards, Myrrdin

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  #1505 (permalink)
yurahoang
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myrrdin View Post
Selling NG puts in these days would hurt on of my basic trading rules: Never sell NG option in Z, F, G, or H contracts. Neither puts nor calls. I am currlntly long the NGH C3, waiting for a cold blast in the US.

Best regards, Myrrdin

I bought a far OTM NG put as a protection for my short put position, this is the 1st time I bought an option. In my mind I bought it to protect myself from big downturns that goes along with increase in volatility, but it still amazes me a little of how NG price has declined and yet my put not even once increased in price. Not even once it was in profit zone. Just closed it yesterday.

Probably should learn from you and buy a lottery ticket for myself too.

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  #1506 (permalink)
 SMCJB 
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yurahoang View Post
I bought a far OTM NG put as a protection for my short put position, this is the 1st time I bought an option. In my mind I bought it to protect myself from big downturns that goes along with increase in volatility, but it still amazes me a little of how NG price has declined and yet my put not even once increased in price. Not even once it was in profit zone. Just closed it yesterday.

Probably should learn from you and buy a lottery ticket for myself too.

When prices get very low, it's normally because of large supply surplus. In situations like these the chance of sustained volatility is also low, so volatility goes down as prices go down. The opposite is true at higher than normal prices. Been trading some eurodollar options recently and they are behaving the same. Price and Implied Volatility quiet highly correlated.

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 swisstrader321 
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Hi,

I was wondering if you could tell me if 70k is enough to conservatively write commodity options for a goal income of around 2% per month? So roughly 1500?

I trade thorough IB now and do a bit of futures trading but was going to switch to Carley for the sole purpose of selling options. Before I go through the hassle of closing and opening accounts, I would appreciate your opinion.

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  #1508 (permalink)
 myrrdin 
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swisstrader321 View Post
Hi,

I was wondering if you could tell me if 70k is enough to conservatively write commodity options for a goal income of around 2% per month? So roughly 1500?

I trade thorough IB now and do a bit of futures trading but was going to switch to Carley for the sole purpose of selling options. Before I go through the hassle of closing and opening accounts, I would appreciate your opinion.

In my opinion, an account of 70,000 US$ is big enough to sell commodity options.

An income of 2 % per month seems ambitious for someone with limited experience.

Best regards, Myrrdin

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  #1509 (permalink)
 myrrdin 
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After a while, I entered again a "classical" short option trade, and sold the KCH C140/P95 strangle.

Volatility has grown recently, and allows for selling this rather wide spread at an acceptable price.

There is a lot of coffee around, and, thus, I do not see a coffee price of above 130 in the near future. COT data and weather isues in Vietnam should prevent the March contract to move below 1.

I intend to buy the strangle back step by step from 60 % to 25 % of potential profit, and placed such order.

Best regards, Myrrdin

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  #1510 (permalink)
 myrrdin 
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As a small short term play, I sold the LHZ C70/P58 strangle.

Volatility is high due to the discussions with China. But I do not think a lot of additional pork will go to China because of progress in the negotiations against the December contract.

I will exit the strangle step by step between 60 % and 25 %, and placed such order.

This trade has a higher risk than many of my other trades, and should be placed very carefully.

Best regards, Myrrdin

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yurahoang
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myrrdin View Post
After a while, I entered again a "classical" short option trade, and sold the KCH C140/P95 strangle.

Volatility has grown recently, and allows for selling this rather wide spread at an acceptable price.

There is a lot of coffee around, and, thus, I do not see a coffee price of above 130 in the near future. COT data and weather isues in Vietnam should prevent the March contract to move below 1.

I intend to buy the strangle back step by step from 60 % to 25 % of potential profit, and placed such order.

Best regards, Myrrdin

Coffee had quite a rally in the past few weeks, mostly due to growing season but the fundamentals are also a lot more bullish than last year, has your view about prices changed?

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  #1512 (permalink)
 myrrdin 
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yurahoang View Post
Coffee had quite a rally in the past few weeks, mostly due to growing season but the fundamentals are also a lot more bullish than last year, has your view about prices changed?

Yes, my opinion has changed in regard to coffee.

Currently I do not have an idea where prices are going. Thus, I bought back the strangle with a small loss some days ago.

Best regards, Myrrdin

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 ron99 
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yurahoang View Post
Coffee had quite a rally in the past few weeks, mostly due to growing season but the fundamentals are also a lot more bullish than last year, has your view about prices changed?

A shortage of high quality arabica coffees has boosted spot prices in Central America, Colombia and Brazil, catching speculators who bet on falling futures prices by surprise.
https://www.reuters.com/article/coffee-supplies/quality-coffee-shortage-trips-up-funds-to-send-prices-soaring-idUSL8N28F4I2

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  #1514 (permalink)
Sagal
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Hi all and myrrdhin in particular.
Is it me, but I feel the price you get for selling options is lower and lower for higher and higher risks (I was unable to get a good price for platinum and for cocoa, maybe it is now time to have a close look at it for a good price on a naked put@2300). Maybe it has to do with commodities in general going up.
So far I gave up a little bit on options and I am more on Futures/CFD on commodities (soybeans, silver, sugar, cotton).
Coffee: I am not comfortable with the current trend and I was too early and finally missed the train...

Are you still more on spreads myrrdhin? Can you summarize what you are watching next or on what you are on currently?

Season's Greetings
Sagal

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 myrrdin 
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Sagal View Post
Hi all and myrrdhin in particular.
Is it me, but I feel the price you get for selling options is lower and lower for higher and higher risks (I was unable to get a good price for platinum and for cocoa, maybe it is now time to have a close look at it for a good price on a naked put@2300). Maybe it has to do with commodities in general going up.
So far I gave up a little bit on options and I am more on Futures/CFD on commodities (soybeans, silver, sugar, cotton).
Coffee: I am not comfortable with the current trend and I was too early and finally missed the train...

Are you still more on spreads myrrdhin? Can you summarize what you are watching next or on what you are on currently?

Season's Greetings
Sagal

Hi Sagel,

I agree that it is rather difficult to find short option trades that are worth entering. Even Live Cattle options on the day of the important COF Report were rather cheap.

Currently most of my short option positions are in the Hogs: I hold the LHG 60-50 and LHJ P62-52 spreads. In addition I hold the LCG P116/C134 strangle. I hold all of these positions already for a longer period of time.

In coffee I used the recent rise of volatility to enter the short KCH C1.60/P1.125 strangle.

Please see my comments in the Grains & Beans and the Energies Sections regarding spreads.

Best regards, Myrrdin

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 SMCJB 
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@Sagal & @myrrdin, Mike Green of Thiel Macro has done some excellent interviews on Real Vision TV that discusses how institutions have implemented yield enhancement programs (read : volatility selling strategies) that have now spread to almost all asset classes. Implication is that volatility is cheap everywhere!

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  #1517 (permalink)
yurahoang
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Hello,
Does anyone know where I can get the US historical daily/monthly temperature? Something like a US map that shows temperature either by average number of the month or by color (from red to blue). I wasnt able to find monthly data for previous years.

My main goal is to compare the winter weather of the last 7-10 years, as a part of NG fundamentals for trading, and if anyone has a better way to do it rather than using maps, please let me know. Thank you all in advance.

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 ron99 
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yurahoang View Post
Hello,
Does anyone know where I can get the US historical daily/monthly temperature? Something like a US map that shows temperature either by average number of the month or by color (from red to blue). I wasnt able to find monthly data for previous years.

My main goal is to compare the winter weather of the last 7-10 years, as a part of NG fundamentals for trading, and if anyone has a better way to do it rather than using maps, please let me know. Thank you all in advance.

Here is monthly temperature data in both map and numerical form from NOAA.
https://www.ncdc.noaa.gov/cag/
(Sometimes the website is slow to load or won't load. Just try again another time.)

Here are NWS US maps of temperature by color that can show daily or a range of days. Also temperature anomaly.
https://www.cpc.ncep.noaa.gov/products/tanal/temp_analyses.php

My Tableau charts have NWS Degree Day (DD) data for US. Both population weighted cooling degree day data (pwCDD) and gas weighted heating degree day data (gwHDD). Both daily and monthly. Also difference to the long term average.
https://public.tableau.com/profile/ron.h8870

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yurahoang
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ron99 View Post
Here is monthly temperature data in both map and numerical form from NOAA.
https://www.ncdc.noaa.gov/cag/
(Sometimes the website is slow to load or won't load. Just try again another time.)

Here are NWS US maps of temperature by color that can show daily or a range of days. Also temperature anomaly.
https://www.cpc.ncep.noaa.gov/products/tanal/temp_analyses.php

My Tableau charts have NWS Degree Day (DD) data for US. Both population weighted cooling degree day data (pwCDD) and gas weighted heating degree day data (gwHDD). Both daily and monthly. Also difference to the long term average.
https://public.tableau.com/profile/ron.h8870

Thanks so much Ron thats very helpful!

What is your opinion about NG? Im not sure what I am missing, but I feel like NG prices are a bit low for the current fundamentals. I see that the weekly storage is very close to the 5 year average levels, production is higher (has been increasing for years) but so is the consumption (thus the level of storage not being out of ordinary), export and import numbers are not unusual and are a very small part compared to domestic consumption. The weather is definitely warmer than average, but looking at 2015-2016, the price was around the same level as now (maybe even a bit higher), weather was also very warm but the storage was way higher. In addition the average weekly outflow for the last 2 month of this year is greater than the same number of 2015-2016.

So comparing this year and 2015-2016, I think the price for NG right now is a bit low. Can someone tell me what am I missing?

In addition, why NG prices almost do not react to cold weather blasts? I was in New York area during Thanks Giving, there was a snow storm that I barely escaped and NG prices barely moved up. I was under impression that NG prices are extra sensetive to that kind of information during this time of the year, but I guess Im wrong here, I just want to know why.

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  #1520 (permalink)
 myrrdin 
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yurahoang View Post
Thanks so much Ron thats very helpful!

What is your opinion about NG? Im not sure what I am missing, but I feel like NG prices are a bit low for the current fundamentals. I see that the weekly storage is very close to the 5 year average levels, production is higher (has been increasing for years) but so is the consumption (thus the level of storage not being out of ordinary), export and import numbers are not unusual and are a very small part compared to domestic consumption. The weather is definitely warmer than average, but looking at 2015-2016, the price was around the same level as now (maybe even a bit higher), weather was also very warm but the storage was way higher. In addition the average weekly outflow for the last 2 month of this year is greater than the same number of 2015-2016.

So comparing this year and 2015-2016, I think the price for NG right now is a bit low. Can someone tell me what am I missing?

In addition, why NG prices almost do not react to cold weather blasts? I was in New York area during Thanks Giving, there was a snow storm that I barely escaped and NG prices barely moved up. I was under impression that NG prices are extra sensetive to that kind of information during this time of the year, but I guess Im wrong here, I just want to know why.

I agree that the price for NG is "a bit low". But this does not mean that it cannot go lower if weather stays relatively warm. But longterm I expect higher prices for NG.

COT data is bullish.

There are very strong reactions to cold weather blasts only in case storage is low. In fall of 2019 storage was ok.

I bought some relatively cheap longterm ATM options recently (NGK C2.2, NGU C2.4).

Best regards, Myrrdin

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 ron99 
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yurahoang View Post
Thanks so much Ron thats very helpful!

What is your opinion about NG? Im not sure what I am missing, but I feel like NG prices are a bit low for the current fundamentals. I see that the weekly storage is very close to the 5 year average levels, production is higher (has been increasing for years) but so is the consumption (thus the level of storage not being out of ordinary), export and import numbers are not unusual and are a very small part compared to domestic consumption. The weather is definitely warmer than average, but looking at 2015-2016, the price was around the same level as now (maybe even a bit higher), weather was also very warm but the storage was way higher. In addition the average weekly outflow for the last 2 month of this year is greater than the same number of 2015-2016.

So comparing this year and 2015-2016, I think the price for NG right now is a bit low. Can someone tell me what am I missing?

In addition, why NG prices almost do not react to cold weather blasts? I was in New York area during Thanks Giving, there was a snow storm that I barely escaped and NG prices barely moved up. I was under impression that NG prices are extra sensetive to that kind of information during this time of the year, but I guess Im wrong here, I just want to know why.

The difference between 2015-2016 and now is that there are many new very large pipelines supplying the market. They can supply NG to areas in need at a much greater volume than 4 years ago. Thus the level of NG in storage is not as critical.

Also be careful of looking at short term regional weather (New York area during Thanks Giving) and applying it to the whole US market.

Here is mean temp anomaly for Thanksgiving week. It was above normal for that week.


Here is the following week. Again above normal for most of the US.


https://www.cpc.ncep.noaa.gov/products/tanal/temp_analyses.php

I am definitely not getting long NG here.

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 SMCJB 
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yurahoang View Post
In addition, why NG prices almost do not react to cold weather blasts? I was in New York area during Thanks Giving, there was a snow storm that I barely escaped and NG prices barely moved up. I was under impression that NG prices are extra sensetive to that kind of information during this time of the year, but I guess Im wrong here, I just want to know why.

You will see more volatile prices at specific locations (Algonquin, which is basically Boston, is the most expensive and volatile gas in the country, in mid November it got as high as $6/$7) but as @myrrdin said, the effect on Henry Hub prices is more dependent upon the expected storage situation. As long as the market thinks we have enough gas in storage for the winter, then this winter will price basis storage economics for next winter! ie at a discount not a premium.

There are markets for these different locations, but they are only available on ICE, and very few retail focused FCMs offer them.

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  #1523 (permalink)
 SMCJB 
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yurahoang View Post
What is your opinion about NG? Im not sure what I am missing, but I feel like NG prices are a bit low for the current fundamentals. I see that the weekly storage is very close to the 5 year average levels, production is higher (has been increasing for years) but so is the consumption (thus the level of storage not being out of ordinary), export and import numbers are not unusual and are a very small part compared to domestic consumption. The weather is definitely warmer than average, but looking at 2015-2016, the price was around the same level as now (maybe even a bit higher), weather was also very warm but the storage was way higher. In addition the average weekly outflow for the last 2 month of this year is greater than the same number of 2015-2016.

Storage for the week ending January 3rd, 44 BCF Withdrawal, smallest withdrawal ever for this week of the year!

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yurahoang
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ron99 View Post
The difference between 2015-2016 and now is that there are many new very large pipelines supplying the market. They can supply NG to areas in need at a much greater volume than 4 years ago. Thus the level of NG in storage is not as critical.

Also be careful of looking at short term regional weather (New York area during Thanks Giving) and applying it to the whole US market.

Here is mean temp anomaly for Thanksgiving week. It was above normal for that week.


Here is the following week. Again above normal for most of the US.


https://www.cpc.ncep.noaa.gov/products/tanal/temp_analyses.php

I am definitely not getting long NG here.

Hi Ron, thank you for the information I was definitely wrong in assuming the US weather using a small region's weather. However I did not fully understand the statement before: can you please explain more why storage is not as critical now that there are larger pipelines directly to the places in need? That means NG will go straght from production to those places via pipelines, while in the past it had to go from storage (via?...) so it takes longer? I apologize in advance for my poorly basic understanding of NG production/transportation.

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  #1525 (permalink)
 ron99 
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yurahoang View Post
Hi Ron, thank you for the information I was definitely wrong in assuming the US weather using a small region's weather. However I did not fully understand the statement before: can you please explain more why storage is not as critical now that there are larger pipelines directly to the places in need? That means NG will go straght from production to those places via pipelines, while in the past it had to go from storage (via?...) so it takes longer? I apologize in advance for my poorly basic understanding of NG production/transportation.

Sorry for not answering question sooner.

The increased volume of NG able to be transported via pipeline means that when there is a need in an area the ability to meet that need is easier because not only can they get NG from storage but also directly from NG producing areas at an increased level than possible previously.

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 myrrdin 
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For all the Euroeans here: Tomorrow is a holiday in the US.

Best regards, Myrrdin

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yurahoang
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This post is similar to the one from "Selling options of futures", but Ill just post it here again in case people dont check that thread as much anymore:

To all who is starting, or have been trading for a while but is still new and want to improve, I just found a very short but good material.

Was reading a book "Higher probability commodity trading" by Carley Garner and there is a short but very nice section about Selling Options. Very clear, easy to understand, no bias, shows clear advantages AND disadvantages. Lists a few examples of terrible trades, and bad things that can happen. A very nice read.

Im thankful to James Cordier for introducing me to this strategy, but his books is totally a sales pitch, not realistic. He probably has a remarkable record, but recently I've been digging into his articles where he makes analysis and gives trade recommendations, and I gotta say that in a way he was a disaster waiting to happen (and it happened). Very risky strategies. The books gives nothing but an illusion, so should be taken with a grain of salt. Carley Graner's book can be a great addition to anyone who has read James Cordier's book.

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  #1528 (permalink)
 myrrdin 
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yurahoang View Post
This post is similar to the one from "Selling options of futures", but Ill just post it here again in case people dont check that thread as much anymore:

To all who is starting, or have been trading for a while but is still new and want to improve, I just found a very short but good material.

Was reading a book "Higher probability commodity trading" by Carley Garner and there is a short but very nice section about Selling Options. Very clear, easy to understand, no bias, shows clear advantages AND disadvantages. Lists a few examples of terrible trades, and bad things that can happen. A very nice read.

Im thankful to James Cordier for introducing me to this strategy, but his books is totally a sales pitch, not realistic. He probably has a remarkable record, but recently I've been digging into his articles where he makes analysis and gives trade recommendations, and I gotta say that in a way he was a disaster waiting to happen (and it happened). Very risky strategies. The books gives nothing but an illusion, so should be taken with a grain of salt. Carley Graner's book can be a great addition to anyone who has read James Cordier's book.

I agree. This book is interesting for every trader - especially for beginners. But also experienced traders find interesting advice.

Best regards, Myrrdin

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yurahoang
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Hi, I have a question about trading options:

When I look for opportunities to sell, I see that sometimes markets can have this characteristics: the delta jumps, price jumps and sometimes bid/ask spreads between different strikes is small. For example, if I look to sell Call options for Corn, and I look at strike prices from 400 to 500 (400 - 405 - 410 - 415 -....-485 - 490 -500), the delta gets smaller the further away from the current price I go, but it gets small in smaller increments. Which means I can find options with delta of 10, 9, 8, 7...etc or even between 10 and 9, between 8 and 7.... all the way to 2 or even 1. I call these markets "deep", and I found that it is usually good to sell in these markets, of course provided that fundamentals/seasonals/COT data/trends are working for you too. I find more markets like this when there seems like more people are interested in trading and the volatility is higher, for example during growing season for grains. But thats not always the case.

On the other hand, some markets are not that "deep": delta can jump from 12 to 10 to 7 to 4, without anything in between. Same goes for price of those options, for example if I dont want to get an option with delta 10 and price 8-10 ticks, the next best option is delta 7 and price 4-6. I tend to stay away from these kind of markets, but of course I also look at other things like fundamentals/seasonals/COT... Those are just examples, but I hope you get what I mean. At this moment, I see Cocoa options market seems to be more or less like this, or even a Corn market.

Can anyone please explain what does it mean, and what are the things we as options seller should avoid or should seek?

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  #1530 (permalink)
 myrrdin 
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Hi, I have a question about trading options:

When I look for opportunities to sell, I see that sometimes markets can have this characteristics: the delta jumps, price jumps and sometimes bid/ask spreads between different strikes is small. For example, if I look to sell Call options for Corn, and I look at strike prices from 400 to 500 (400 - 405 - 410 - 415 -....-485 - 490 -500), the delta gets smaller the further away from the current price I go, but it gets small in smaller increments. Which means I can find options with delta of 10, 9, 8, 7...etc or even between 10 and 9, between 8 and 7.... all the way to 2 or even 1. I call these markets "deep", and I found that it is usually good to sell in these markets, of course provided that fundamentals/seasonals/COT data/trends are working for you too. I find more markets like this when there seems like more people are interested in trading and the volatility is higher, for example during growing season for grains. But thats not always the case.

On the other hand, some markets are not that "deep": delta can jump from 12 to 10 to 7 to 4, without anything in between. Same goes for price of those options, for example if I dont want to get an option with delta 10 and price 8-10 ticks, the next best option is delta 7 and price 4-6. I tend to stay away from these kind of markets, but of course I also look at other things like fundamentals/seasonals/COT... Those are just examples, but I hope you get what I mean. At this moment, I see Cocoa options market seems to be more or less like this, or even a Corn market.

Can anyone please explain what does it mean, and what are the things we as options seller should avoid or should seek?

Looking at the CCK options, they are "deep". Delta moves very regularly.

Please be sure to check delta during trading hours, the best thing is to check end of day data. And check options with approx. 100 days to expiry or more. Options with only a few days to go show a different behaviour.

Best regards, Myrrdin

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  #1531 (permalink)
yurahoang
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myrrdin View Post
Looking at the CCK options, they are "deep". Delta moves very regularly.

Please be sure to check delta during trading hours, the best thing is to check end of day data. And check options with approx. 100 days to expiry or more. Options with only a few days to go show a different behaviour.

Best regards, Myrrdin

Hi,
Im currently looking at CCK puts with 57 days to expiration, and the delta is -0.152, -0.112, -0.078, -0.053, -0.036, -0.026, -0.012 and so on, and on the calls side it is 0.147, 0.118, 0.096, 0.078, 0.048, 0.037, 0.027. Im using Interactive Brokers. The Call side does seem "deeper", but still this is not as for example grain market during growing season. Is there a reason for this?
Besides, bid/ask spread for example in Calls CCK with 57 days goes like 21 - 23, 16-19, 12-14, 9-12,... I think thats pretty big jumps. Or maybe Im wrong and it is normal? I think I definitely seen a lot more markets with smaller jumps.

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  #1532 (permalink)
 myrrdin 
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Hi,
Im currently looking at CCK puts with 57 days to expiration, and the delta is -0.152, -0.112, -0.078, -0.053, -0.036, -0.026, -0.012 and so on, and on the calls side it is 0.147, 0.118, 0.096, 0.078, 0.048, 0.037, 0.027. Im using Interactive Brokers. The Call side does seem "deeper", but still this is not as for example grain market during growing season. Is there a reason for this?
Besides, bid/ask spread for example in Calls CCK with 57 days goes like 21 - 23, 16-19, 12-14, 9-12,... I think thats pretty big jumps. Or maybe Im wrong and it is normal? I think I definitely seen a lot more markets with smaller jumps.

Regarding "deepness", I would consider this as normal befaviour. The differencies between puts and calls reflect the interest of the market. You will find this also for options with very high volume, eg. the ES.

bid / ask ist generally rather high at ICE. Market makers might haave an influence, but I do not know about this subject. Additionally, this is certainly influenced by the lower volume.

Best regards, Myrrdin

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  #1533 (permalink)
yurahoang
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Hi,
I know this question has been asked a lot, but in case anything has changed in everyone's trading method, what is your current exit strategy in selling options?

I know that Ron's strategy is a famous formula that was introduced to all of us years ago. I simply cannot follow it at the moment cause I (for personal reasons) have to use Interactive Brokers at the moment and SPAN margin doesnt apply here. Also, using this strategy will eventually lead to us having to close at much bigger than x2 losses if we do eventually reach the exit point, am I correct? So the losses are less frequent, but are bigger.

For now Im still using the x2 rule, put simply: if option doubles in value then I either roll or close at least 1/3 of position and gradually all of it,depending on the situation. However I am seeing more and more problems with this:

- The 1st problem is that as I gradually build a position over lets say 10-14 days, I have a different strike prices, not just one strike, therefore some options may double in value (entering very early) and others may be far from it. Im experimenting with using x2 rule for the WHOLE position, but obviously this can have disadvantages as well (for example being in denial of accepting the loss, clining into strikes that should have been closed or rolled).

- The 2nd problem is that I sell options with delta around 4-6, therefore chance of these option doubling in value is a lot higher than options with say 8-9 delta (cause further out of money options more easily rise in value because of increase in volatility). And if Im not mistaken, lets assume I sold an option with delta of 6, it doubles in value and delta now is 9, and with regard to increase in volatility it has become a SAFER option right? (With paper losses though). Of course it probably also became closer to money, thus more dangerous, so it depends on situation.

With that being said, I think I need to think of a better exit strategy. I recently saw my KC calls nearly double in value (only the closest strike) just to lose all the gains, everything happened in matter of 5 days or less. Thankfully I always wait for the opening price of the next day to see if the premium gain is "real" or not, but this just shows me that maybe my exit strategy can be improved a bit.

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  #1534 (permalink)
 myrrdin 
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yurahoang View Post
Hi,
I know this question has been asked a lot, but in case anything has changed in everyone's trading method, what is your current exit strategy in selling options?

I know that Ron's strategy is a famous formula that was introduced to all of us years ago. I simply cannot follow it at the moment cause I (for personal reasons) have to use Interactive Brokers at the moment and SPAN margin doesnt apply here. Also, using this strategy will eventually lead to us having to close at much bigger than x2 losses if we do eventually reach the exit point, am I correct? So the losses are less frequent, but are bigger.

For now Im still using the x2 rule, put simply: if option doubles in value then I either roll or close at least 1/3 of position and gradually all of it,depending on the situation. However I am seeing more and more problems with this:

- The 1st problem is that as I gradually build a position over lets say 10-14 days, I have a different strike prices, not just one strike, therefore some options may double in value (entering very early) and others may be far from it. Im experimenting with using x2 rule for the WHOLE position, but obviously this can have disadvantages as well (for example being in denial of accepting the loss, clining into strikes that should have been closed or rolled).

- The 2nd problem is that I sell options with delta around 4-6, therefore chance of these option doubling in value is a lot higher than options with say 8-9 delta (cause further out of money options more easily rise in value because of increase in volatility). And if Im not mistaken, lets assume I sold an option with delta of 6, it doubles in value and delta now is 9, and with regard to increase in volatility it has become a SAFER option right? (With paper losses though). Of course it probably also became closer to money, thus more dangerous, so it depends on situation.

With that being said, I think I need to think of a better exit strategy. I recently saw my KC calls nearly double in value (only the closest strike) just to lose all the gains, everything happened in matter of 5 days or less. Thankfully I always wait for the opening price of the next day to see if the premium gain is "real" or not, but this just shows me that maybe my exit strategy can be improved a bit.

I do not think that currently is a good time for option selling. Implied volatility (IV) is relatively low for almost all commodities. After taking a short look at MRCI data, only Lean Hogs show an acceptable IV for contracts with 60 or more DTE. I closed my LHJ P64 popsition yesterday with a nice profit, as these options get rather close to expiry date. Currently I do not hold any short option position.

But back to your question:

I usually determine a support / resistance in the underlying (!) on a closing base, where I would buy back the short options. I choose this support / resistance in a way that the value of the option has approximately doubled.

I also quit short option trades in case the basic fundamental idea does not work anymore.

And I exit short option positions, which are rather close to the money, in case the expiry date gets close.

I hope this helps. In case of further questions, please do not hesitate to ask.

Best regards, Myrrdin

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yurahoang
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myrrdin View Post
I do not think that currently is a good time for option selling. Implied volatility (IV) is relatively low for almost all commodities. After taking a short look at MRCI data, only Lean Hogs show an acceptable IV for contracts with 60 or more DTE. I closed my LHJ P64 popsition yesterday with a nice profit, as these options get rather close to expiry date. Currently I do not hold any short option position.

But back to your question:

I usually determine a support / resistance in the underlying (!) on a closing base, where I would buy back the short options. I choose this support / resistance in a way that the value of the option has approximately doubled.

I also quit short option trades in case the basic fundamental idea does not work anymore.

And I exit short option positions, which are rather close to the money, in case the expiry date gets close.

I hope this helps. In case of further questions, please do not hesitate to ask.

Best regards, Myrrdin

Thank you for your reply,

Can you please tell me how do you estimate the resistance/support points where options double in value?

In addition to your statement, I do agree that IV across the assets that I usually trade is rather low, but some trades are that Ive entered for a while still seem to be acceptable for me. I do however strongly agree with you, and Im trading with lots of cautios at the moment waiting for better opportunities. This also leads to a question: how do you determine if current IV is the appropriate IV to sell options? For IV I usually look at the recent and historical volatility, do you use anything more advanced?

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  #1536 (permalink)
 myrrdin 
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yurahoang View Post
Thank you for your reply,

Can you please tell me how do you estimate the resistance/support points where options double in value?

In addition to your statement, I do agree that IV across the assets that I usually trade is rather low, but some trades are that Ive entered for a while still seem to be acceptable for me. I do however strongly agree with you, and Im trading with lots of cautios at the moment waiting for better opportunities. This also leads to a question: how do you determine if current IV is the appropriate IV to sell options? For IV I usually look at the recent and historical volatility, do you use anything more advanced?

I make a very rough judgement of a suited sesistance / support level, using a static delta. I so not care if I exit at 2.0 or 1.7 or 2.5, but I like to have a fix exit point. As I usually exit end of day, the exact exit condition is not hit anyway.

I compare different trades - short options, future spreads, outright futures. And take the one that is best suited. In recent months often suture trades had a better relation between risk and profit potential.

Best regards, Myrrdin

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  #1537 (permalink)
yurahoang
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Hi, does anyone know why coffee had a recent rally?

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 myrrdin 
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yurahoang View Post
Hi, does anyone know why coffee had a recent rally?

In my opinion, it started with short covering due to bullish COT data. Since Friday it helped that the stock market strongly moved upwards, and that it looks like the number of Corona patients does not rise significantly anymore in China.

Best regards, Myrrdin

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  #1539 (permalink)
 myrrdin 
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myrrdin View Post
In my opinion, it started with short covering due to bullish COT data. Since Friday it helped that the stock market strongly moved upwards, and that it looks like the number of Corona patients does not rise significantly anymore in China.

Best regards, Myrrdin

Additionally, I just read that too much rain in Brazil might limit the crop.

Best regards, Myrrdin

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 myrrdin 
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myrrdin View Post
Additionally, I just read that too much rain in Brazil might limit the crop.

Best regards, Myrrdin

I did not write anything in this tread recently, and the reason is simple: i did not sell any options to report about. The environment is extremely volatile, and difficult to predict. Thus, I prefer other strategies. See in the commodity section.

Once in a while, the best trade is staying on the side line.

Best regards, Myrrdin

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  #1541 (permalink)
 myrrdin 
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myrrdin View Post
I did not write anything in this tread recently, and the reason is simple: i did not sell any options to report about. The environment is extremely volatile, and difficult to predict. Thus, I prefer other strategies. See in the commodity section.

Once in a while, the best trade is staying on the side line.

Best regards, Myrrdin

Nothing to add. I still do not hold any short options position.

There are expensive options, eg. in the meat markets, but the risk of selling them is not in an acceptable relation to the potential profit. I preferred times when the options were cheaper, but the outcome was easier to predict.

Best regards, Myrrdin

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Sagal
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Hi myrrdin, thanks for the update.
I sold put options in Copper and Silver 3 weeks ago and I am looking forward to the expiry of a put and a call options for coffee C in less than 3 weeks. I was considering selling put option on Sugar 11 one week ago but I missed the right timing.
I have been doing business as usual during this time but was impacted by Crude Light Oil (WTI) put options (july expiry) despite a long fight to protect it (with short futures). The "coup de gr‚ce" was indirectly delivered by my broker when he suspended/prevented trading on June futures for an undetermined period that lasts in fact for approx. 5 days. If the same was to happen let's say in July and I couldn't rely on protecting my put options with short futures then it was not possible anymore to go on like this and I exited my positions with losses. Crude Light Oil was a real disappointment as on top of that, I was convinced up to recently that prices will go down another time (then I would have sold some naked put options) but it didn't happen that way.
I confirm that these times were quite difficult. At least long term investment in physical ETF on gold, silver and gold miners are doing fine despite a big alert in the middle of the crisis (liquidity issue of some investors).
Edit: Still no trade initiated on spread futures, I am monitoring dec/jul for coffee C but it sounds as a gambling to me at least for the time being....Inter commodities spread Gold/Silver would have been a nice play but probably too late now

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 ron99 
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Sagal View Post
Hi myrrdin, thanks for the update.
I sold put options in Copper and Silver 3 weeks ago and I am looking forward to the expiry of a put and a call options for coffee C in less than 3 weeks. I was considering selling put option on Sugar 11 one week ago but I missed the right timing.
I have been doing business as usual during this time but was impacted by Crude Light Oil (WTI) put options (july expiry) despite a long fight to protect it (with short futures). The "coup de gr‚ce" was indirectly delivered by my broker when he suspended/prevented trading on June futures for an undetermined period that lasts in fact for approx. 5 days. If the same was to happen let's say in July and I couldn't rely on protecting my put options with short futures then it was not possible anymore to go on like this and I exited my positions with losses. Crude Light Oil was a real disappointment as on top of that, I was convinced up to recently that prices will go down another time (then I would have sold some naked put options) but it didn't happen that way.
I confirm that these times were quite difficult. At least long term investment in physical ETF on gold, silver and gold miners are doing fine despite a big alert in the middle of the crisis (liquidity issue of some investors).
Edit: Still no trade initiated on spread futures, I am monitoring dec/jul for coffee C but it sounds as a gambling to me at least for the time being....Inter commodities spread Gold/Silver would have been a nice play but probably too late now

You may want to consider exiting short options before expiration. Waiting for the last little bit of premium in these extremely volatile times is very risky without much reward. Studies have been done that show exiting early, around 50% drop in premium, in many cases will give you a higher rate of return than holding to expiration.

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  #1544 (permalink)
 myrrdin 
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ron99 View Post
You may want to consider exiting short options before expiration. Waiting for the last little bit of premium in these extremely volatile times is very risky without much reward. Studies have been done that show exiting early, around 50% drop in premium, in many cases will give you a higher rate of return than holding to expiration.

I fully agree.

Even if I do not have any use for the money, I buy back short options at 10 % of the original value. The last few days can be very painful ...

Usually I buy back short optoins between 50 % an 10 % of the original value. I made quite good experience buying back in many small steps. This reduces risk before it gets critical. (The software of my broker allows for placing one order to liquidate one option at 50 %, the next at 48 %, 46 % etc.)

Best regards, Myrrdin

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Sagal
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myrrdin View Post
I fully agree.

Even if I do not have any use for the money, I buy back short options at 10 % of the original value. The last few days can be very painful ...

Usually I buy back short optoins between 50 % an 10 % of the original value. I made quite good experience buying back in many small steps. This reduces risk before it gets critical. (The software of my broker allows for placing one order to liquidate one option at 50 %, the next at 48 %, 46 % etc.)

Best regards, Myrrdin

Thanks both for your feedback ron99 and myrrdin
I am not following this kind of strategy. I sell naked put or call options 4 to 6 months before expiry and I do not have so many good possibilities during the year. An example of what I target is 8 days ago something I missed Sugar 11 at a strike of 9.75 while price was around 10.2 for a short put option with expiry in September). I wouldn't go for a strike at 10.5 so this opportunity is over. Would I have taken it I wouldn't have sold it at 50% but at a minimun of 80% Why? Because 9.75 floor is not easily broken or if only briefly up to the expiry in September. So what would be the point to cash in only 50% in this case and not have good other opportunity in the same range? Currently there is no possibility I can see on commodities for short selling options (no options to take again HG Copper at 2.1 or Silver at 14 with a nice premium..). You even said the same myrrdin: today it is too volatile for you to get involved and it can go in any direction with a second wave of covid-19 and other lockdowns.

It comes back to the way of doing business/strategy:
1- not so often (around 12 times per year) with bigger premiums and deep OOM and long expiry date but with in my view a good ratio of profits/risk and not taking profits before 80%
or
2 more often, just a little bit OOM but with smaller premiums, with shorter expiry dates (I guess 1 to 3 months) and in my view a less good ratio of profits/risks but then taking profit at 50%
or
3 even as soon as the trend reverses (why not even taking profit at 30 or 20%?)

So I can notice, that I am still active in the commodities options (ok with losses due to a black swan event WTI/Brent) but with your strategy you are not active currently...

I may come to your strategy one day (I even experienced it with Cotton in February but it didn't go well, I never reached even 20% as covid-19 issue exploded), but for sure it is not a strategy I feel comfortable with. Main reason being more trading for reaching the same target.

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 myrrdin 
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Sagal View Post
Thanks both for your feedback ron99 and myrrdin
I am not following this kind of strategy. I sell naked put or call options 4 to 6 months before expiry and I do not have so many good possibilities during the year. An example of what I target is 8 days ago something I missed Sugar 11 at a strike of 9.75 while price was around 10.2 for a short put option with expiry in September). I wouldn't go for a strike at 10.5 so this opportunity is over. Would I have taken it I wouldn't have sold it at 50% but at a minimun of 80% Why? Because 9.75 floor is not easily broken or if only briefly up to the expiry in September. So what would be the point to cash in only 50% in this case and not have good other opportunity in the same range? Currently there is no possibility I can see on commodities for short selling options (no options to take again HG Copper at 2.1 or Silver at 14 with a nice premium..). You even said the same myrrdin: today it is too volatile for you to get involved and it can go in any direction with a second wave of covid-19 and other lockdowns.

It comes back to the way of doing business/strategy:
1- not so often (around 12 times per year) with bigger premiums and deep OOM and long expiry date but with in my view a good ratio of profits/risk and not taking profits before 80%
or
2 more often, just a little bit OOM but with smaller premiums, with shorter expiry dates (I guess 1 to 3 months) and in my view a less good ratio of profits/risks but then taking profit at 50%
or
3 even as soon as the trend reverses (why not even taking profit at 30 or 20%?)

So I can notice, that I am still active in the commodities options (ok with losses due to a black swan event WTI/Brent) but with your strategy you are not active currently...

I may come to your strategy one day (I even experienced it with Cotton in February but it didn't go well, I never reached even 20% as covid-19 issue exploded), but for sure it is not a strategy I feel comfortable with. Main reason being more trading for reaching the same target.

Currently I prefer trading outright futures or spreads. There will be times when short options are appropriate again.

But there are many different ways to make money ...

Best regards, Myrrdin

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 myrrdin 
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We know much more about COVID19 than we did in February / March. We will find "softer" ways than a complete lock-out for the whole nation to avoid a second wave during summer. Additionally, infections are not likely outside of houses. I am rather optimistic for the next couple of months that there will be no severe damages to the economy. I am not so sure about the winter 2021.

According to MRCI data, volatilities for a number of commodities is still rather high. Thus, I intend to enter some short option trades in the near future.

Size of the trades will be limited to approx. 1 % of the account size due to the still relatively high level of risk. Normally my maximum size is 3 % of the account size per trade.

I will enter these trades at Interactive Brokers. This broker has very high margins for naked short options. Thus, I will enter option spreads.

I will comment on the trades in separate posts to be able to comment on them later.

Best regards, Myrrdin

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 myrrdin 
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Volatility for Crude Oil is still high. I expect CL between $30 and $50 for the next couple of months.

Implied volatility has been at 90 - 100 % some weeks ago , and has come to approx. 50 %. In recent years, it has spent most of the time between 25 and 35 %.

COT data is slightly bearish, but far away from extreme values.

Currenty I do not give much on seasonal charts, as they are overruled by the influence of COVID19.

I will enter the short CLV P20 / C60 strangle early next week for $600 - $700 each.

Best regards, Myrrdin

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 myrrdin 
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As discussed earlier, Natural Gas seems to be very cheap.

COT data is neutral.

I intend to sell the NGU P1.5-1.25 on a further move downwards.

Best regards, Myrrdin

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 myrrdin 
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The contract low For Kansas Wheat (September contract) is at 431.75 . Currently, the price is only a few cents above this value.

Kansas Wheat is approx. 50 c cheaper than Chicago Wheat, which is extremely unusual. Wheather for Minneapolis Wheat looks less than perfect, which should support the price of KW.

Harvest advances, and a harvest low should be near.

I intend to sell the KW P420-380 early next week.

Best regards, Myrrdin

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 myrrdin 
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Cattle on Feed Report last Friday was bearish, and I expect LC prices open lower.

Still I expect LC to move higher in the long run. LCV should expire at a price significantly above $100, my current expectation is in the area of $110.

I intend to sell the LCV P90-P80 some time next week.

Best regards, Myrrdin

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 jokertrader 
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NG premium looks rich how about a short straddle.. of course thatís different from your put spread which is more a bullish play


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 myrrdin 
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jokertrader View Post
NG premium looks rich how about a short straddle.. of course thatís different from your put spread which is more a bullish play


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I agree. I am thinking about adding short calls at a higher price some time later.

Best regards, Myrrdin

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 myrrdin 
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I agree. I am thinking about adding short calls at a higher price some time later.

Best regards, Myrrdin

Currently you get approx. $200 for the NGU C2.5 . I would sleep better selling the C2.7 or C2.8 - in case it will be hot in summer, air conditions will run again. And, as you know, weather in the long run is not predictalbe in the long run.

Best regards, Myrrdin

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 jokertrader 
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My thought is more along the lines of getting $2700 for ATM straddle in Aug but of course BEs are tighter and might need to adjust if sudden moves happen


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 myrrdin 
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myrrdin View Post
As discussed earlier, Natural Gas seems to be very cheap.

COT data is neutral.

I intend to sell the NGU P1.5-1.25 on a further move downwards.

Best regards, Myrrdin

I revised my plans and entered the short NGU P1.5 / C2.5.

Current weather forecasts do not see severe heat for the next couple of weeks, and I doubt that China will buy a lot of NG in the near future. Thus, a strangle seems to be better suited.

Best regards, Myrrdin

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 SMCJB 
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Massive storage injection announced today for last week. Believe the 120 BCF was not only a record for this week but also the largest in any week June thru October in the last 10 years. Storage at 3,012 bcf is already 711 bcf above last year and 430 bcf above the 5-year average.

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 myrrdin 
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The Hogs Report yesterday afternoon was bearish. Prices for all contracts fell today.

In the long run, I am still neutral to bullish LH.

Sold the LHV P40-36 today, using the high volatility after the report. Intend to take profit beetween 10 and 30 % of the original value.

Again: Small position size, approx. 1 % of account size.

Best regards, Myrrdin

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 myrrdin 
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myrrdin View Post
The contract low For Kansas Wheat (September contract) is at 431.75 . Currently, the price is only a few cents above this value.

Kansas Wheat is approx. 50 c cheaper than Chicago Wheat, which is extremely unusual. Wheather for Minneapolis Wheat looks less than perfect, which should support the price of KW.

Harvest advances, and a harvest low should be near.

I intend to sell the KW P420-380 early next week.

Best regards, Myrrdin

I changed my mind, and decided not to enter this trade.

Best regards, Myrrdin

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 SMCJB 
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re: Natgas. Somebody forwarded this to me I believe it's the most recent Goldman Sachs research outlook but can not be sure of its accuracy.

GS on GAS "last shoe to drop"By the end of this summer we believe US LNG export cancellations will have added more than 760 Bcf to US gas storage, which is 50% larger than what we would expect a 1-standard-deviation colder-than-average winter to remove from storage. Specifically, the low and sustained levels of feedgas this month lead us to lower our Bal-summer feedgas expectations by another 1.7 Bcf/d to 4.2 Bcf/d, helping take our expected end-Oct20 storage levels under current forward prices to 4330 Bcf, above its 4261 Bcf capacity. Incremental C2G substitution from current levels is likely limited by an already wide gas price discount to coal and by reduced spare capacity at gas-fired plants during peak summer. As a result, we see US gas production shut-ins, which we had been discussing as a risk, as now part of our base case for this summer. Accordingly, we lower our Oct20 NYMEX gas forecast to $1.40/mmBtu from $1.75 previously, implying Dom South at $0.90/mmBtu, below its estimated $1.10/mmBtu cash costs, to incentivize Appalachia production shut-ins. This is effectively the last shoe to drop in a global gas rebalancing process that started with Asia pricing its LNG lower to push excess cargoes towards Europe, followed by Europe sorting its resulting gas market overhang out by pricing high-cost gas supply - US LNG - out of the market n Admittedly, this transition from full storage into a tight forward balance will likely weigh on the November 2020 contract and keep it below our $3.50/mmBtu 2020/21 winter NYMEX gas price forecast, and we lower our Nov20 forecast to $2.75/mmBtu from $3.50 to reflect that transition. Nevertheless, we maintain our view that as we move into withdrawal season and associated gas production declines become increasingly more visible, gas prices will have to move higher to start incentivizing higher supply and lower demand to manage 2021 storage. Accordingly, we maintain our Dec20-Mar21 and Apr-Oct 2021 NYMEX gas price forecasts at $3.50/mmBtu and $3.25/mmBtu, respectively.

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 myrrdin 
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myrrdin View Post
I revised my plans and entered the short NGU P1.5 / C2.5.

Current weather forecasts do not see severe heat for the next couple of weeks, and I doubt that China will buy a lot of NG in the near future. Thus, a strangle seems to be better suited.

Best regards, Myrrdin

Bought back the NG strangle with a loss of approx. 20 %.

Best regards, Myrrdin

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 myrrdin 
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For the European traders:

Trading hours in the US begin 1 hour earlier for 1 week because of the change to Winter Time in Europe. Eg. stock market in New York will open at 2.30 pm Central European Time.

Best regards, Myrrdin

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 txsroper 
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I have been trading options for a long time. Have taught many classes to large groups. That said, Hands down the best ( most Knowledgeable and best TEACHER ) is Don Kaufman founder of https://www.theotrade.com/ .

He did a webinar , Free to Members, During the March Sell off on how to hedge your portfolio in less than a few minuets.
I was very impressed and learned some very advanced info. Out right buying an option to hedge over long haul is worst / most expensive.
He taught how step by step how convert your portfolio to an accurate Delta, then choices to accurately Beta Weight HEDGE ANY stock portfolio.

And why NOT to use the DIA.

Excellent Class, Trust me I am a skeptic.

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  #1564 (permalink)
 myrrdin 
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Recently volatility was quite high for some commodities, which allowed for entering some OTM short strangles simply based on this fact:

KWK P500/C800
LHJ P60/C80
KCK P1/C2 (after taking approx. 75 % profit for a similar KCH strangle)
SIK P18/C60
NGJ P1.75/C3.4 (small position)

My current strategy is to place an order for profit taking of positions between 50 % and 10 % of the original value, thus, the average profit is 70 % of the original value. This allows for reducing risk rather early.

I hesitated to sell the KW strangle, as C is in a weather market (South Americas), and C can be replaced by KW to a certain degree. But as I hold a significant KW-W position which should work well with rising KW prices, I decided to enter.

The NGJ strangle is a small position. As mentioned earlier in this thread, I do not enter short options for the Z, F, G, and H contracts in Natural Gas. And J is just following H, thus, it is not without risk in case of a cold blast. What helps is that I hold a long position in the NG futures.

Best regards, Myrrdin

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 SMCJB 
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myrrdin View Post
The NGJ strangle is a small position. As mentioned earlier in this thread, I do not enter short options for the Z, F, G, and H contracts in Natural Gas. And J is just following H, thus, it is not without risk in case of a cold blast. What helps is that I hold a long position in the NG futures.

April is a different animal. Even if we do get a winter cold blast, and deplete storage, supply in April is still greater than demand, so it shouldn't spike like the winter can.

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mosalem2003
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He is offering a class now. Are you really sure of this service ? I have been in so many courses and classes and nothing in retail business mentoring is true .. If they are profitable from trading, why they sell courses and waste their trading time in education. Kindly provide @txsroper more info or contact me directly on why I should take it as I have watched his last marketing video and have an interest to register but I am worried it would be like other marketing hypes...so your input is appreciated on why this service could be really differentiated from the crowd!
txsroper View Post
I have been trading options for a long time. Have taught many classes to large groups. That said, Hands down the best ( most Knowledgeable and best TEACHER ) is Don Kaufman founder of https://www.theotrade.com/ .

He did a webinar , Free to Members, During the March Sell off on how to hedge your portfolio in less than a few minuets.
I was very impressed and learned some very advanced info. Out right buying an option to hedge over long haul is worst / most expensive.
He taught how step by step how convert your portfolio to an accurate Delta, then choices to accurately Beta Weight HEDGE ANY stock portfolio.

And why NOT to use the DIA.

Excellent Class, Trust me I am a skeptic.

Sent using the futures.io mobile app

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Sagal
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myrrdin View Post
Bought back the NG strangle with a loss of approx. 20 %.

Best regards, Myrrdin

Thanks for the info. I missed the good opportunity for NG: a naked put option at 2.3 expiry February when it was at 2.4 to 2.5.
I keep an eye for a naked put options on Coffee and Cocoa, eventually WTI but that's it. I'm fully focused on PM (silver, platinum or palladium) with CFDs rarely with Futures (for Platinum) as the size of the Silver or Palladium contract is quite big.
No plan for any spreads. As we discussed, Saxo has to change the way the leverage is calculated so that I can reconsider.
All the best for this new trading year Myrrdin!
Sagal

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 myrrdin 
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Sagal View Post
Thanks for the info. I missed the good opportunity for NG: a naked put option at 2.3 expiry February when it was at 2.4 to 2.5.
I keep an eye for a naked put options on Coffee and Cocoa, eventually WTI but that's it. I'm fully focused on PM (silver, platinum or palladium) with CFDs rarely with Futures (for Platinum) as the size of the Silver or Palladium contract is quite big.
No plan for any spreads. As we discussed, Saxo has to change the way the leverage is calculated so that I can reconsider.
All the best for this new trading year Myrrdin!
Sagal

Thanks a lot for your good wishes !

I used the high volatility in some commodities to enter wide short strangles in NGJ, SIK, KWK, KCH and KCK, LCJ, LHJ. All of them run smoothly.

I intend to enter a further strangle in NGK this week.

All of these strangles were sold for $400 to $500 per strangle. I intend to buy them back with a profit of 50 % to 75 %.

I wish you a healthy and prosperous New Year !

Best regards, Myrrdin

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mosalem2003
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Is there a recommendation for a broker who is futures' options friendly given that I will use spread selling not naked?
I have challenges with many brokers who whether can accept Canadian but only support long options or claim they support options selling to figure out when funding the account that they don't have even a platform to sell options spreads.
Unfortunately DeCarley doesn't accept people from Canada yet.
I have an IBKR account and it seems this would be my last resort given they are a huge FCM and that spread selling may not be sensitive for their risk.
I am checking now with other brokers who can clear from Ironbeam but I am not sure about them.
Any recommendation for options selling brokers for Canadian is highly appreciated from the experts who is using this strategy.

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 myrrdin 
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mosalem2003 View Post
Is there a recommendation for a broker who is futures' options friendly given that I will use spread selling not naked?
I have challenges with many brokers who whether can accept Canadian but only support long options or claim they support options selling to figure out when funding the account that they don't have even a platform to sell options spreads.
Unfortunately DeCarley doesn't accept people from Canada yet.
I have an IBKR account and it seems this would be my last resort given they are a huge FCM and that spread selling may not be sensitive for their risk.
I am checking now with other brokers who can clear from Ironbeam but I am not sure about them.
Any recommendation for options selling brokers for Canadian is highly appreciated from the experts who is using this strategy.

I do a lot of option selling with Interactive Brokers.

Regarding margin, they are ok as long as you do not sell naked.

Regarding order entering for spreads, they offer everything I wish.

As an Austrian, I also have the problem that I am not accepted as a customer by many US brokers.

Best regards, Myrrdin

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mosalem2003
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myrrdin View Post
I do a lot of option selling with Interactive Brokers.

Regarding margin, they are ok as long as you do not sell naked.

Regarding order entering for spreads, they offer everything I wish.

As an Austrian, I also have the problem that I am not accepted as a customer by many US brokers.

Best regards, Myrrdin

Thanks for the prompt response @myrrdin -- I assumed that their main stream is stocks' options which is a plus to options on Futures. I think the options on futures offer more flexibility than options on stocks in terms of margins, liquidity, and 23hr/day, pricing. Some folks tried to convince me to sell the SPY options or commodity stocks options as USO, UNG but I still prefer the Futures' options - may be I am biased as coming from Futures background - what do you think ?
On another note, it seems the OptionsTrader at TWS is comprehensive tool for our requirements as per your experience?

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 myrrdin 
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mosalem2003 View Post
Thanks for the prompt response @myrrdin -- I assumed that their main stream is stocks' options which is a plus to options on Futures. I think the options on futures offer more flexibility than options on stocks in terms of margins, liquidity, and 23hr/day, pricing. Some folks tried to convince me to sell the SPY options or commodity stocks options as USO, UNG but I still prefer the Futures' options - may be I am biased as coming from Futures background - what do you think ?
On another note, it seems the OptionsTrader at TWS is comprehensive tool for our requirements as per your experience?

You are welcome.

I prefer selling options on futures. When selling options on USO etc, you have to watch closely which contracts they are invested in. The oil market in spring of 2020 showed us how important this matter is.

For me the capabilities of TWS for selling options are absolutely sufficient and better than other tools I know.

Best regards, Myrrdin

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mosalem2003
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myrrdin View Post
You are welcome.

I prefer selling options on futures. When selling options on USO etc, you have to watch closely which contracts they are invested in. The oil market in spring of 2020 showed us how important this matter is.

For me the capabilities of TWS for selling options are absolutely sufficient and better than other tools I know.

Best regards, Myrrdin

Thanks a lot @myrrdin -- This is a good point to take into account regarding the ETF underneath Future contract, and the fact that they invest in Futures is enough to trade directly the Futures market not the ETF market.. Thanks for emphasizing this point..

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mosalem2003
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I am planning to switch from Futures to Options on Futures in terms of Intraday and swing trading to avoid the premature stops and high volatility of the futures and have a lasting power beyond the daily close without margin requirements.

Simply, if I accumulate OTM calls in dips or accumulate OTM Puts at rally. May be adoptions of being only long on ES or MES or only short on ZN or ZB ...

Two things can be done buying the OTM directional long Call or Selling credit bull Put spread. The latter needs and margin and it's limited profit. The former one with an OTM like a price technical target or may be even 0.25 would appreciate to good delta if trade evolves ... The other factor should we trade it on weeklies or monthly to avoid the decay as long as we r trading he direction. The lo Inger maturity might be more expensive but worth as if u have a crash in ES it can recover in a week or two or may be stick to weeklies and just exit with the loss and roll with a higher quantity, etc...

Any feedback from any one who trades options on futures as intraday or swing is highly appreciated...

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 Big Mike 
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 myrrdin 
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I sold the KWZ C900-C1000.

This trade is a good example for my strategy to hedge one trade against another. I re-entered the KW-W futures spread a short time ago around -40. This spread usually works well when wheat price moves upwards. Now the price of KW looks overbought. Thus, I entered the option spread to hedge a potential setback of the KW-W spread. In case of the option spread will be in danger the KW-W should make great profit - significantly larger than the loss in the option spread.

Volatility of KW is extremely high. Thus, I chose the December contract to be able to take profit for a long time.

I intend to buy back the options in case the futures move beyond 800.

Best regards, Myrrdin

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 myrrdin 
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Ron99 suggested long time ago selling NG OTM strangles from spring until fall, and I started this strategy again.

Currently, I am short the NGN C3.25 / 2.5, and intend to buy back the strangle at 50 %.

Best regards, Myrrdin

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 ron99 
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myrrdin View Post
Ron99 suggested long time ago selling NG OTM strangles from spring until fall, and I started this strategy again.

Currently, I am short the NGN C3.25 / 2.5, and intend to buy back the strangle at 50 %.

Best regards, Myrrdin

I was just looking at that today. NGn 10 yr seasonal average is to peak May 1st. But that is not really strong. A couple of years are skewing the average.

https://public.tableau.com/profile/ron.h8870

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 myrrdin 
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myrrdin View Post
Ron99 suggested long time ago selling NG OTM strangles from spring until fall, and I started this strategy again.

Currently, I am short the NGN C3.25 / 2.5, and intend to buy back the strangle at 50 %.

Best regards, Myrrdin

On Thursday, I rolled the NGN C3.25 / P2.5 to C3.4 / P2.6 to allow for higher temperatures in June. Weather is difficult to predict.

Additionally, I sold the NGQ P2.5 / C3.5 with 89 DTE.

I intend to follow this approach into fall. Exit point will be when a spread has doubled in value. Assuming 8 trades per year (April contract until November contract), and exiting successful trades at 50 %, this concept will be profitable even if two of the trades fail.

Best regards, Myrrdin

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mosalem2003
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When is the difference between selling spreads and outright spreads. Can we take the same trade using NG outright spreads, if yes when to decide to use selling options strangles vs buying outright spreads ?

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 myrrdin 
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mosalem2003 View Post
When is the difference between selling spreads and outright spreads. Can we take the same trade using NG outright spreads, if yes when to decide to use selling options strangles vs buying outright spreads ?

Sent using the futures.io mobile app

Sorry - I do not understand the question. Possibly because of my limited knowledge of the English language.

Could you please explain ?

Best regards, Myrrdin

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mosalem2003
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Sorry - I do not understand the question. Possibly because of my limited knowledge of the English language.

Could you please explain ?

Best regards, Myrrdin

Sorry for the confusion.
I mean what is the strategy to define execution of the seasonal trade as selling options credit spreads strangles as in the example Versus execution of the same trade using normal calendar spreads for the outrights like buying one month outright and selling another month outright....

I assume if it is a directional move , like we expect the spread price to go higher in a certain time then we take the seasonal spread as outright ---
If the market will move in range like NG summer into fall, then we take short of credit option spreads ?

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 myrrdin 
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mosalem2003 View Post
Sorry for the confusion.
I mean what is the strategy to define execution of the seasonal trade as selling options credit spreads strangles as in the example Versus execution of the same trade using normal calendar spreads for the outrights like buying one month outright and selling another month outright....

I assume if it is a directional move , like we expect the spread price to go higher in a certain time then we take the seasonal spread as outright ---
If the market will move in range like NG summer into fall, then we take short of credit option spreads ?

I like selling strangles when I assume that the underlying moves more or less sideways. Preferably, the volatility is high.

I like buying / selling future spreads, when I assume the spread moves in my direction. (It would not move at all in a sideways market.) Regarding spreads for growing commodities there are special strategies, using futures for two different crops of the same commodity.

Best regards, Myrrdin

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 myrrdin 
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myrrdin View Post
On Thursday, I rolled the NGN C3.25 / P2.5 to C3.4 / P2.6 to allow for higher temperatures in June. Weather is difficult to predict.

Additionally, I sold the NGQ P2.5 / C3.5 with 89 DTE.

I intend to follow this approach into fall. Exit point will be when a spread has doubled in value. Assuming 8 trades per year (April contract until November contract), and exiting successful trades at 50 %, this concept will be profitable even if two of the trades fail.

Best regards, Myrrdin



I added the NGU P2.5 / C3.75 with 107 DTE today.

Currently, I hold short strangles in the July, August, and September contracts.

Best regards, Myrrdin

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