22 April 2019 MONDAY TRADE COMMENTARY and NEWSLETTER today.
Greetings: New Trades: My outstanding GTC (good til canceled) order to buy back my short DEC19 Corn 540-strike CALLs for 1.375 was filled. I had sold them ON 25 MAR 2019 (see: https://www.timefarming.com/blog/25-march-2019newsletter/ )
They were sold for 2.875 cents and after the closing purchase last Thursday at 1.375, the net profit excluding commissions was: 2.875 minus 1.375 = 1.50 cents x $50 = $75 profit each. This was an easy trade with little drawdown and the strike was never under any threat at all. The initial margin was around $370, so a $75 profit is a return of (75/370)*100= about 20% in only (25MAR until 18Apr) = 24 days. Please notice this: This trade was never in any jeopardy, it wasn’t exciting, it wasn’t “brilliant”, – it was quite a dull ride actually. All of this is “a good thing” in the type of trading I do. The more dull and almost boring a trade is, the better!
New Trade:
I sold the NOV19 Soybean 1200-strike CALLs for 2.125 ($106.25) each. It is my hope this trade will be as ‘boring’ as the Corn trade (above).
Sold Soybean NOV19 1200-strike CALLs for 2.125 ($106.25)
Date placed: 18APR19
Proceeds from option $106.75
Prob OTM: 96%
190 Days until expiration (25OCT2019)
Net Margin required: ~ 296.75
Potential ROI: ~ 33% (may vary due to drawdown requirements)
I have posted a video here (and on YouTube for the public) that describes this trade. The video also includes an explanation of how a farmer might use this NOV19 soybean contract as a price hedge to lock in an acceptable sales price. This video also shows how I used the Kansas State Univ. chart based on the most recent USDA/ WASDE report to justify the trade and my market view. If you know someone who might be interested in the type of trading I feature on the newsletter here, please pass this link on to them:
Trade Commentary continued:
At present, I do not see anything remarkable about either Crude Oil prices or Gold Prices. By that I mean I have nothing to add to the original comments when I placed these trades (see below.)
When I shopped for CALL strikes on the new trade of shorting the NOV19 soybean CALLs, I found many closer-to-the-money options offering more premium. In particular, the 1100-strike offered about twice the premium while still having a “Prob OTM” just above 92%. My thinking in choosing to sell the 1200 instead of the more profitable (and more risky) 1100-strike was “the math.” I feel one of the underlying risks of this trade is the trade talks w/China. The soybean shipments since last summer when the trade disputes began were very poor indeed – and the result is that stocks of beans have mounted up even higher. Even if the talks resolved and China made big purchases of beans right away, I don’t feel it would be enough to threaten my short 1200-strike. Such an event might cause a spike in bean prices, which the NOV19 is currently trading around $9.13/bushel. I would be less sure about an 1100 or lower strike. My consideration here keeps in mind that if the 1200-strike premium (2.125) doubles, I might choose to exit. For these reasons, I chose the 1200 instead of something lower. Also “the math,” as you will see in the video (above) the ROI could be as high as 33%, which I think is great —- therefore: I chose to keep the risk lower and take the smaller premium. It’s a personal choice for sure. Here’s the matrix: (just go by the “last X” price because this screen shot was taken after trading hours so the bid/ask are not meaningful.)
I am traveling today and Tuesday this week, so unless there is something urgent, the next post will be WED or THU of this week. This week I’ll be shopping for another Corn CALL to go with my short 330 PUT and form another short strangle. Corn stocks, per the latest WASDE report by USDA are becoming large, which reduces chances of any large moves UP in prices. This large ending stock number may come down a bit, especially if China makes large purchases of corn and ethanol. Even with such a development, corn prices higher than 450 seem (at this time) to be unlikely. So I’ll keep that in mind as I shop for strikes to sell.
I am still shopping for more short Gold strangles, and will consider selling more Crude strikes should the fundamental information over the next two weeks warrants a look at this.
Thank you and have a great week – Don
Summary of My Positions:
Short Strangle: Short JUL19 Gold 1450-strike CALL for 0.90 Short JUL19 Gold 1200-strike PUT for 0.90 (total of 1.80 = $180)
This new Trade Origination button will take you back in time – to the post where the trade was originally placed, so you can review the chart, fundamentals, and the details of this trade’s selection. This way you get much more than just the position listing. – DAS
Short Strangle: Short SEP19 Crude Oil 80-strike CALL for 0.17 Short SEP19 Crude Oil 45-strike PUT for 0.17(added today)
Short Strangle: Short the JUL19 Crude Oil 75-strike CALL for 0.11 ($110) Short the JUL19 Crude Oil 50-strike PUT for 0.15 ($150)(added today)
Short the DEC19 Corn 330 for 2.0 cents ($100.) The 540-CALL on Corn is closed of course, though it’s still on this chart.
I hope you have a great trading week. Please remember I welcome comments and suggestions from subscribers. You can contact me anytime at Don@WriteThisDown.com
Don A. Singletary
The commentary and examples are for teaching purposes only and are not intended to be a trading or trade advisory service. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein on the web site and/or newsletter, are committed at your own risk, financial or otherwise. Trading with leverage could lead to greater loss than your initial deposit. Trade at your own risk. Investors and traders are responsible for their own investment/trading decisions including entries, exits, position, sizing and use of stops or lack thereof. This is not a trade advisory service and is for educational purposes only. The content on the pages here is believed to be reliable - but we cannot guarantee it.
Don A. Singletary is a teacher and writer. For 25 years he was a commodity risk management (hedge) consultant for major corporations. He is the author of Option Income Training Bulletin, the only such publication dedicated to teaching small/medium personal investors how to sell commodity options for a second income, a strategy traditionally used mostly by professional investors, the wealthy, and money managers.
While this website is for subscribers only, you can get full access with a free trial subscription. Also you may visit his blog with many trade examples and articles on this valuable strategy at: SellingCommodityOptions.com
Greetings:
New Trades:
My outstanding GTC (good til canceled) order to buy back my short DEC19 Corn 540-strike CALLs for 1.375 was filled. I had sold them ON 25 MAR 2019 (see: https://www.timefarming.com/blog/25-march-2019newsletter/ )
They were sold for 2.875 cents and after the closing purchase last Thursday at 1.375, the net profit excluding commissions was: 2.875 minus 1.375 = 1.50 cents x $50 = $75 profit each. This was an easy trade with little drawdown and the strike was never under any threat at all. The initial margin was around $370, so a $75 profit is a return of (75/370)*100= about 20% in only (25MAR until 18Apr) = 24 days. Please notice this: This trade was never in any jeopardy, it wasn’t exciting, it wasn’t “brilliant”, – it was quite a dull ride actually. All of this is “a good thing” in the type of trading I do. The more dull and almost boring a trade is, the better!
New Trade:
I sold the NOV19 Soybean 1200-strike CALLs for 2.125 ($106.25) each. It is my hope this trade will be as ‘boring’ as the Corn trade (above).
Sold Soybean NOV19 1200-strike CALLs for 2.125 ($106.25)
Date placed: 18APR19
Proceeds from option $106.75
Prob OTM: 96%
190 Days until expiration (25OCT2019)
Net Margin required: ~ 296.75
Potential ROI: ~ 33% (may vary due to drawdown requirements)
I have posted a video here (and on YouTube for the public) that describes this trade. The video also includes an explanation of how a farmer might use this NOV19 soybean contract as a price hedge to lock in an acceptable sales price. This video also shows how I used the Kansas State Univ. chart based on the most recent USDA/ WASDE report to justify the trade and my market view. If you know someone who might be interested in the type of trading I feature on the newsletter here, please pass this link on to them:
Trade Commentary continued:
At present, I do not see anything remarkable about either Crude Oil prices or Gold Prices. By that I mean I have nothing to add to the original comments when I placed these trades (see below.)
When I shopped for CALL strikes on the new trade of shorting the NOV19 soybean CALLs, I found many closer-to-the-money options offering more premium. In particular, the 1100-strike offered about twice the premium while still having a “Prob OTM” just above 92%. My thinking in choosing to sell the 1200 instead of the more profitable (and more risky) 1100-strike was “the math.” I feel one of the underlying risks of this trade is the trade talks w/China. The soybean shipments since last summer when the trade disputes began were very poor indeed – and the result is that stocks of beans have mounted up even higher. Even if the talks resolved and China made big purchases of beans right away, I don’t feel it would be enough to threaten my short 1200-strike. Such an event might cause a spike in bean prices, which the NOV19 is currently trading around $9.13/bushel. I would be less sure about an 1100 or lower strike. My consideration here keeps in mind that if the 1200-strike premium (2.125) doubles, I might choose to exit. For these reasons, I chose the 1200 instead of something lower. Also “the math,” as you will see in the video (above) the ROI could be as high as 33%, which I think is great —- therefore: I chose to keep the risk lower and take the smaller premium. It’s a personal choice for sure. Here’s the matrix: (just go by the “last X” price because this screen shot was taken after trading hours so the bid/ask are not meaningful.)
By the way, you can download the “trading hours” for your reference here: https://sellingcommodityoptions.com/blog/trading-hours-futures-and-options/
And you can download expiration dates for 2019 options from this link: https://sellingcommodityoptions.com/SFOE.pdf
These links are from this website’s TAB for RESOURCE LINKS LIBRARY
I am traveling today and Tuesday this week, so unless there is something urgent, the next post will be WED or THU of this week. This week I’ll be shopping for another Corn CALL to go with my short 330 PUT and form another short strangle. Corn stocks, per the latest WASDE report by USDA are becoming large, which reduces chances of any large moves UP in prices. This large ending stock number may come down a bit, especially if China makes large purchases of corn and ethanol. Even with such a development, corn prices higher than 450 seem (at this time) to be unlikely. So I’ll keep that in mind as I shop for strikes to sell.
I am still shopping for more short Gold strangles, and will consider selling more Crude strikes should the fundamental information over the next two weeks warrants a look at this.
Thank you and have a great week – Don
Summary of My Positions:
Short Strangle:
Short JUL19 Gold 1450-strike CALL for 0.90
Short JUL19 Gold 1200-strike PUT for 0.90
(total of 1.80 = $180)
This new Trade Origination button will take you back in time – to the post where the trade was originally placed, so you can review the chart, fundamentals, and the details of this trade’s selection. This way you get much more than just the position listing. – DAS
Short Strangle:
Short SEP19 Crude Oil 80-strike CALL for 0.17
Short SEP19 Crude Oil 45-strike PUT for 0.17 (added today)
Short Strangle:
Short the JUL19 Crude Oil 75-strike CALL for 0.11 ($110)
Short the JUL19 Crude Oil 50-strike PUT for 0.15 ($150) (added today)
Short the DEC19 Corn 330 for 2.0 cents ($100.) The 540-CALL on Corn is closed of course, though it’s still on this chart.
I hope you have a great trading week. Please remember I welcome comments and suggestions from subscribers. You can contact me anytime at Don@WriteThisDown.com
Don A. Singletary
The commentary and examples are for teaching purposes only and are not intended to be a trading or trade advisory service. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein on the web site and/or newsletter, are committed at your own risk, financial or otherwise. Trading with leverage could lead to greater loss than your initial deposit. Trade at your own risk. Investors and traders are responsible for their own investment/trading decisions including entries, exits, position, sizing and use of stops or lack thereof. This is not a trade advisory service and is for educational purposes only. The content on the pages here is believed to be reliable - but we cannot guarantee it.