Selling Crude Oil December Futures

Sold 60c@$250 and closed on the same day for $200. Nothing much to see here..

Basis:

  • With a longer term trade with around 45 days to go, getting 20% of premium value within a day enticed me to close early and free up margin for more trades.
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Selling Crude Oil September Futures

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Sold the 49c/38p strangle at $170 per strangle.  45p@ $70 for a shorter term trade too.

Basis:

  • the 38p part of the strangle was put behind regions of price reversal. the 49c however was mostly based on selling low delta/far out of the money.
  • 45p trade was a very short term trade betting that prices would be up for the next few days as price had breached previous support levels. I cant remember if there was positive news fuelling the rally too.

Selling Natural Gas August Futures

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Sold 3.15C@$330 and a couple more@$350 a few weeks later. Closed the 3.15c positions on the 2nd of August at around $115 a pop. I felt that for the short period of 3 trading days, extracting 67% of value from my positions seemed like a good deal and reason enough to close early. Also, short term sale of the 2.8p@$180. 

Basis of trade:

  • Natural gas prices were suggested to head into a downward trajectory from July to mid October according to seasonal charts. Selling above the long term resistance of $2.95 provided extra margin for error.
  • Short term sale of $2.8 puts were risky and based off a near term support point of $2.8. True enough, prices hit $2.796 and bounced back up a few minutes later.

Trading Natural Gas July Futures

This was my first ever option selling trade.

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Sold the 3.00 Calls@ $270  a couple days after natural gas experienced a pullback from the recent rally.and 2.55 puts@ $210  shortly after to convert my position into a strangle. Added a second layer of strangle at $2.80C@$220/ $2.65P@ 60$ after that and got out of the $2.80 sold calls as i got spooked. I realised that price action nearly breached my other side of the strangle in the coming days too. Definitely a lesson learnt not to play too close to the fire here…

Here is the basis of my trade. I reckoned that:

  • $3 was a psychological barrier for further advance and the steep rally from $1.99 meant that the market had to take a breather and then decide on which direction to go. In addition, prices breached long term resistance line of $2.95. However, prices fell back steeply the day after.

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  • EIA (The U.S energy information administration) estimates did not put NG from breaching the $3 price mark for the next few months.
  • The rally was the consequential aftermath of a gentle winter, which drove prices down. With a large NG supply glut still looming ahead, i felt that it was not a strong enough basis for a sustained rally.
  • Seasonal charts suggested that natural gas prices experience a decline from July to Mid oct. The image below is taken from The Moore Research Center , Inc.

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