You have pretty easy targets in the 15-16 area, which is $3.00
gas ... you'd almost have to work at it to lose $$$ on gas
down this low
12 / 15 Risk reversal for April with 11 c credit ... if you can
handle holding gas at /qg equivalent of $2.50 should it continue to
peter out, which it did a couple of years ago... that's a no
brainer
Bull put spread on UNG ...July 10 long 85 delta / short march 15
monthly 26 delta for about 3.40 ... you could sell the 25 to 30
delta short calls 4 times and make about $1.20 credit ... if it
just sits there, you make about about 80c to a buck on your 3.80
initial call outlay, which is not small cheese, very high
annualized rate of return. If it goes down, you can
roll down and lengthen the deep in the money put once or twice and
not lose anything. We can follow this one along.
The bull call spread we looked at yesterday is up 12% from 3.38
to 3.78 as of now. Much easier to deal with gappiness this
way. The credit you're selling in the front month is
essentially your stop loss to keep you in the game if you don't get
a quick pop. Pretty hard to lose money on $2.65 nat gas if
you have the means to stick with it. (yesterday's quote on
right)
We looked at a UNG bull put spread, a directional long play with
a deep in the money, hi delta call (jul 10) and a short call on the
shorter term month (jul 15). We filled on that for
about 3.19 debit, with the short call worth about 30c (about 30
delta at the time). The spread is now worth about 4.45,
with the short call up to 80c or so. So we face the nice
dilemma of being way up on the trade, but down on the short call,
and very wide spreads (the banksters always have a way of getting
even) on the in the money call. Our "options" are
numerous. We can assume global warming reasserts and nat gas
will go to zero and just take what we can get for the spread at
around 4.45 (tidy gain of 39%). Or , we can rollout the 15
short call from May to April. That sounds like a 50c
loss, but the credit we take in for April is about $1.15, so we get
another net credit of around 35c for April in addition to the 30c
for when we initially sold the March 15.
Or , if we're neutral on gas for the rest of the month, we could
sell short credit spreads on either side of the 15 strike and
collect about 80c for an iron condor (short 15 / 14 put spread ,
short 15/16 call spread). With the 80c short call, that's
1.60 opportunity. Assuming we're at $15.00 on UNG as we
write, if we close above 16, we gain 1 point on the long July 10
put, collect the 1.60, but lose 2 points on the 2 short 15 calls
for a net gain of 60c. In that case, we would exercise our
long call and it would get called away and we'd be
done. If we close below 14 , we collect 1.60 and lose
1, still gain 60 c , but we're still in the trade as nothing would
get called away. We'd just close our puts near expiry in
March and resell out of the money calls for April and let those
hardworking Jul 10 calls continue to generate huge percentage
annual returns
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thanks, this is exactly the
longer term trade on oil
Posted by frtaylor on 9th of Feb 2015 at 09:58 am
thanks, this is exactly the kind of option analysis I need to learn.
UNG would be more appropriate for bull put spread here
Posted by hatefalseweight on 9th of Feb 2015 at 10:25 am
You have pretty easy targets in the 15-16 area, which is $3.00 gas ... you'd almost have to work at it to lose $$$ on gas down this low
12 / 15 Risk reversal for April with 11 c credit ... if you can handle holding gas at /qg equivalent of $2.50 should it continue to peter out, which it did a couple of years ago... that's a no brainer
Bull put spread on UNG ...July 10 long 85 delta / short march 15 monthly 26 delta for about 3.40 ... you could sell the 25 to 30 delta short calls 4 times and make about $1.20 credit ... if it just sits there, you make about about 80c to a buck on your 3.80 initial call outlay, which is not small cheese, very high annualized rate of return. If it goes down, you can roll down and lengthen the deep in the money put once or twice and not lose anything. We can follow this one along.
UNG JUL 10 MAR 15 DIAGONAL WE LOOKED AT YEST. UP 12%
Posted by hatefalseweight on 10th of Feb 2015 at 01:31 pm
The bull call spread we looked at yesterday is up 12% from 3.38 to 3.78 as of now. Much easier to deal with gappiness this way. The credit you're selling in the front month is essentially your stop loss to keep you in the game if you don't get a quick pop. Pretty hard to lose money on $2.65 nat gas if you have the means to stick with it. (yesterday's quote on right)
UNG JUL 10 MAR 15 BULL PUT SPREAD - UPDATE ROLLOUT ETC
Posted by hatefalseweight on 20th of Feb 2015 at 01:05 pm
We looked at a UNG bull put spread, a directional long play with a deep in the money, hi delta call (jul 10) and a short call on the shorter term month (jul 15). We filled on that for about 3.19 debit, with the short call worth about 30c (about 30 delta at the time). The spread is now worth about 4.45, with the short call up to 80c or so. So we face the nice dilemma of being way up on the trade, but down on the short call, and very wide spreads (the banksters always have a way of getting even) on the in the money call. Our "options" are numerous. We can assume global warming reasserts and nat gas will go to zero and just take what we can get for the spread at around 4.45 (tidy gain of 39%). Or , we can rollout the 15 short call from May to April. That sounds like a 50c loss, but the credit we take in for April is about $1.15, so we get another net credit of around 35c for April in addition to the 30c for when we initially sold the March 15.
Or , if we're neutral on gas for the rest of the month, we could sell short credit spreads on either side of the 15 strike and collect about 80c for an iron condor (short 15 / 14 put spread , short 15/16 call spread). With the 80c short call, that's 1.60 opportunity. Assuming we're at $15.00 on UNG as we write, if we close above 16, we gain 1 point on the long July 10 put, collect the 1.60, but lose 2 points on the 2 short 15 calls for a net gain of 60c. In that case, we would exercise our long call and it would get called away and we'd be done. If we close below 14 , we collect 1.60 and lose 1, still gain 60 c , but we're still in the trade as nothing would get called away. We'd just close our puts near expiry in March and resell out of the money calls for April and let those hardworking Jul 10 calls continue to generate huge percentage annual returns