In my previous post I mentionned that my breakeven was brought down to 10.95 because I wrote Nov 11 calls for 0.9 against my position. Since UNG tanked below the ascending trendline, the short call position dropped to 0.5, which would make a 0.4 profit on the short side. So I decided to buy back the Nov 11 calls to lock in some profits on the down side. So that made my new breakeven to 11.35.
So the long short of it was... Bought at: 12.05 Short Nov 12 calls at: -0.50 Covered Nov 12 calls: +0.30 Short Nov 11 calls: -0.90 Covered Nov 11 calls: +0.40 ---------- New Breakeven: 11.35
... Then I sold it at: 11.45... which makes 11.45 -11.35 = 0.10
So all that work for 10 cents:). But at least I didn't loose any money.
The moral of the story is that hedging your bet is better than not hedging at all. If I didn't write calls against my position or even bought puts, I would lost from 12.05 to 11.45. That's a 0.60 loss. Now imagine if you had 500 shares, that wouldn've been a loss of $300 in a few days. It's not the kinda risk I like to take.
In addition, another important lesson learned was that I should've picked an uptrending stock with decent yield. I guess that part completely slipped my mind.
Decided to try out covered calls with UNG (Nat Gas). I know it's not the most popular ETF around but I figured I should be able to make money on the up and down side... whichever way the price goes.
Since the USD/CAD is showing more signs of weakness, I figured that I'd pick a commodity that's pulled back significantly on the monthly/weekly, but has strengthened a bit and could potentially entering a stage 1 basing. The price of UNG finally broke a long ass weekly descending channel. It by no means it will V bottom, but it does mean a fundamental shift in price geometry. Volume has also been heavy on the rise up leading the breakout (09/04/09 to 10/02/09), and at the current state it's still holding above the breakout point.
Here's my trade so far:
Bought UNG at: 12.05 Sold to Open Oct 12 Calls at: -0.5 Bought to Close Oct 12 Calls at: +0.3 Sold to Open Oct 11 Calls at: -0.9 (option expiration on the 11/16/09, 7 days away) So my Break even is now at: 10.95
This position is meant for covered calls so I can generate income for the long run. Essentially I'll collect rent money until UNG gets shut down. Or, if I get striked out before options expiration, I still win. The goal is to keep selling calls against my position untill I get bored.
Snuck in a quick trade this morning. Things have been hectic with work and my parents visiting, but I did manage to get one in for the week.
Traded WFR for a quicky. It gapped lower so I was looking for signs of strength for a potential gap fil and found it after walking the dogs. All the stars were lined so I pulled the trigger at 17.43 and rode it up to 17.65 for a 22 cent gain... times X amount of shares of course.
Here's the setup... BTW, the stock has been hammered for the past week, so I didn't want to hold it even for a swing trade... As I'm writing it looks like it's gonna pop again...
Here's my contribution to the RTS part of the presentation (near the end). It was actually an emergency last minute request from the team so I was kinda stuck doing it. Hectic weeks leading to E3. Anyway, I'm glad the turnout was positive.
Closed UNG it at $15.72. Could've made more but don't wanna be greedy in a bear market. Still happy with the profit... I mean profit is profit.
It was looking like an inside day which usual means a reversal of the recent trend. Additionally, I have E3 in a bit so having this on my mind would get me too distracted. So, cash position for now.
If USO (crude) is any indication of the direction of the energy sector, then it seems that it has formed a short term top. I'm looking at a retracement or a gapfill of 36.4 eventually. So I'd stay away from oil until it retraces. It's likely to hit major resistance at the 39 level. So I guess selling UNG isn't a bad idea after all.
Bought UNG again B/E @ $14.83 Sold 1/2 at $15.97 for a %7.68 gain Will let the rest ride as long as support trendline from the 30min chart remains intact Stop set at $15.15, just below today's low
WFR has a sweet breakout. Will try to enter if pullsback, if not, will buy 1/2 position the next trading day ideal stop would be a bit below breakout point or low of the day... roughly $19.5
Had to close because it started to look really weak. In fact it started looking like a bear flag and gut tells me price wants to retest the breakout area of $16ish. Did make a tiny profit though... of course not enough to brag about.
- Closed @$1.10 - Opened @$0.9, which makes a profit of 22% - Will likely retest the breakout area of $16ish - EIA Natural Gas report coming tomorrow... anything can happen. Don't wanna chance it. - All in cash now. Will see how market reacts the next few days. - Market pretty extended.
- Opened position UNG June $18 Calls @ $0.9 - Will add if holds >$16. - Target or exit @ $18 or better...will see.
Mega volume possibly due to short covering or insitution buying. Nat Gas unsdustry been hammered for the longest time. Broke above channel with significant volume. I missed the first moves but entered at consolidation. Will see if bullflag formation manifests itself. If so, will add 2nd position.
John Wu is a 2D/3D Visual Development Artist at Sony Computer Entertainment of America. Prior to working there, John has spent five years at Insomniac Games where he contributed to the creation of the 'Ratchet and Clank' franchise for the PS2, and 'Resistance: Fall of Man' for the PS3.
