Speaking of Natural Gas ... it can be a king maker or a widow
maker ...it's volatile ... so excellent for disciplined traders,
but as a side note, for those who don't remember .... you can
just read about a local "legend" here in Calgary , Brian Hunter ...
who put himself on a map with his Natty trades in the early 2000 by
raking it big and being front and center in the energy world ...
then ended up blowing up the whole Amaranth fund not long
after with it in 2006 in an Epic blowout that rocked the financial
market at the time ...
Posted by DigiNomad on 1st of Feb 2023 at 12:51 pm
UNG - I'm a credit spread guy, but I've been selling UNG puts
naked recently. Not in large size, but it keeps me interested in
this conversation. Can sell March expiration 8 puts for $75
bucks....which puts your break even around $7.25 (depending on TXN
costs). I don't mind being long with a 7.25 basis, and if UNG
bounces, the annualized return on the current premium I would
collect is around 72%.
why not cover the downside and buy the $5 put for .06 ticks.
or...pay .08 for the feb 6.5 p. I was a an options market
maker on the floor of the COMEX and NYBOT for many years and have
seen crazier things happen. LOL. Plus, you free up capital
and can do more!
One word about UNG - like USO, these assets are subject to
"decay" in the sense that they are ETFs that maintain futures
positions and as such are continually forced to roll each both.
Therefore, they are constantly buy more expensive contracts and
selling out cheaper ones. Has to do with contracts being in
contango vs backwardation (This is my understanding of it at
least. Please feel free to elaborate/correct!)
Posted by DigiNomad on 1st of Feb 2023 at 01:51 pm
pep8261 - I normally would cover the downside. But sometimes I
will sell naked puts and calls (sell strangles, or just one side)
1. because it's the lazy way to get in 2. maybe most importantly -
I'm not trading this name in size and 3. because it is typically
much easier to defend a naked option if a strike gets challenged.
For example, if UNG opens at 8 tomorrow, I would roll my naked puts
down and out, most likely to the April expiry, 7 strike, to allow
more time to be right and generate additional credit. Thoughts?
Because I started this trade so small, another option for
defense, if necessary, would be to roll down in the same month and
potentially double the number of contracts (whatever it takes to
generate an equal amount of premium). This works well with SPX, but
I'm not sure about UNG with the dollar wide strikes on an 8 dollar
ish ticker.
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Speaking of Natural Gas ...
Posted by mla127 on 1st of Feb 2023 at 12:45 pm
Speaking of Natural Gas ... it can be a king maker or a widow maker ...it's volatile ... so excellent for disciplined traders, but as a side note, for those who don't remember .... you can just read about a local "legend" here in Calgary , Brian Hunter ... who put himself on a map with his Natty trades in the early 2000 by raking it big and being front and center in the energy world ... then ended up blowing up the whole Amaranth fund not long after with it in 2006 in an Epic blowout that rocked the financial market at the time ...
UNG - I'm a credit
Posted by DigiNomad on 1st of Feb 2023 at 12:51 pm
UNG - I'm a credit spread guy, but I've been selling UNG puts naked recently. Not in large size, but it keeps me interested in this conversation. Can sell March expiration 8 puts for $75 bucks....which puts your break even around $7.25 (depending on TXN costs). I don't mind being long with a 7.25 basis, and if UNG bounces, the annualized return on the current premium I would collect is around 72%.
why not cover the downside
Posted by pep8261 on 1st of Feb 2023 at 01:24 pm
why not cover the downside and buy the $5 put for .06 ticks. or...pay .08 for the feb 6.5 p. I was a an options market maker on the floor of the COMEX and NYBOT for many years and have seen crazier things happen. LOL. Plus, you free up capital and can do more!
One word about UNG - like USO, these assets are subject to "decay" in the sense that they are ETFs that maintain futures positions and as such are continually forced to roll each both. Therefore, they are constantly buy more expensive contracts and selling out cheaper ones. Has to do with contracts being in contango vs backwardation (This is my understanding of it at least. Please feel free to elaborate/correct!)
https://seekingalpha.com/article/4254908-uso-and-ung-worst-etfs-in-world
seekingalpha.com
USO And UNG: The Worst ETFs In The World (NYSEARCA:UNG) | Seeking Alpha
The United States Oil Fund ETF and the United States Natural Gas Fund ETF were among the hottest products on Wall Street when they were started in the mid-2000s.
pep8261 - I normally would
Posted by DigiNomad on 1st of Feb 2023 at 01:51 pm
pep8261 - I normally would cover the downside. But sometimes I will sell naked puts and calls (sell strangles, or just one side) 1. because it's the lazy way to get in 2. maybe most importantly - I'm not trading this name in size and 3. because it is typically much easier to defend a naked option if a strike gets challenged. For example, if UNG opens at 8 tomorrow, I would roll my naked puts down and out, most likely to the April expiry, 7 strike, to allow more time to be right and generate additional credit. Thoughts?
Because I started this trade so small, another option for defense, if necessary, would be to roll down in the same month and potentially double the number of contracts (whatever it takes to generate an equal amount of premium). This works well with SPX, but I'm not sure about UNG with the dollar wide strikes on an 8 dollar ish ticker.