Trade: Sell JUN19 Gold 1550-strike CALL for 1.10 cents ($110)
Date placed: 24JAN19
Proceeds from option $110.00 Commission Fees: $3.75 per side Net Credit: $106.25 Probability option expires OTM: 97% Buying Power effect: $468 124 Days until expiration (27MAy2019)
Return on Investment: (based on Initial net margin of $468) = 110/468 (100) = 23.5%
Note: Margin requirements are marked-to-market each day which could change ROI.
Here is the chart with the 1550-strike marked:
Comment 24 JAN 2019:
I still feel that Gold prices which (see chart) have been creeping up since November-2018, could have some correction once the government shutdown is resolved and the China trade talks show some progress. The resolution could bring a less volatile stock market. Even if neither of these events come to pass, this strike of $1550 is still a little more than $250 OTM. I went out to the JUN19 class of options to get enough time-value premium to make this trade attractive.
Should gold futures go down a bit in the next two to four weeks, I plan on using that opportunity to sell JUN19 Gold PUTs to form short strangles. At that time, I will again shop for Silver PUTS to sell.
I also plan on selling more soybean CALLs soon. I am NOT doing so at this time because China is the largest buyer of United States soybeans – and if (perhaps a big ‘if’) these trade talks allow purchases, this could trigger a ten to thirty cent rise in soybean prices. I do not want to sell CALL now and get in the way of that. I choose to be patient and see what happens.
Remember: There was not a WASDE report in JAN 2019 due to the government shutdown (supply demand and price projections for grains and other commodities), so this leaves traders a bit in the dark for data right now. This of course adds risks due to the unknown stats we usually have in these reports. Again, I am choosing patience for now – rather than to risks having resumed reports issuing any surprises. As soon as the USA government shutdown is over, there will be a rush by USDA to get some revised numbers posted. Planters need these numbers to plan planting in just a few short weeks. Both traders and commercial accounts will be anxious to get these numbers.
Since there could be some resolution of the political and trade disputes coming soon, I’ll be studying a few scenarios that could come about, in preparation for some more trades soon.
Please notice I have an open GTC order to close my APR19 Crude Oil 70-strike CALL (see below.) This is a chance to take a nice profit, so I choose to say ‘thank you’ and take it while I can – and not risk giving it back trying to make just a little more by letting it expire worthless. This is one of those judgment calls a trader must regularly make; the logic is quite simply really. I am choosing to bank a profit while I can – and move on to shop other trades.
Please remember this is not a trade advisory service, I post my trades, my research, and my reasoning here for educational purposes only – to help others consider strategies and trade suitability for themselves. This type of trading, while I am a huge fan, is not suitable for everyone and is risky. The trade I made today has a potential ROI (return on investment) of 23.5% in 124 days. This is an annualized return of about 69%. I would caution readers not to jump to the conclusion that your entire account might make such a high annualized return because traders using the selling commodity options strategies will never (should never) be running with margin values at 100% of the account; it is usually a maximum of 25% to 50% of total account funds. This is a guideline of course. I have an article posted that discusses some suggested guidelines at: (Rules of Thumb)
My Current Positions as of 24 JAN 2019 are:
Short the APR19 Crude Oil 70-strike CALL at 0.18 ($180) Pending Order: I have a GTC order to make a closing purchase of the Apr19 Crude Oil 70-strike CALL at 0.04
Short the APR19 Crude Oil 35-strike PUT at 0.06 ($60)
Short the JUN19 Crude Oil 70-strike CALL at 0.420 ($420)
Short the JUN19 Crude Oil 30-strike PUT at 0.08 ($80)
Short the APR19 Gold 1600-strike CALL at 0.60 ($60)
Placed Today: Short the JUN19 Gold 1550-strike CALL for 1.10 cents ($110)
Short the MAY19 Corn 360-strike PUT at 3.375 ($168.25)
Note: I always use examples with a quantity of 1 (one) option per trade. This is not because I only trade one of each option, it is to keep the illustrations simple and easy to understand in the newsletter.
That is all for now. Thank you for your support. I always welcome questions and comments. You may email me directly at Don@WriteThisDown.com I am glad to answer as time permits. The questions and comments provide me with valuable feedback, so know I appreciate them.- Don
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.