Here is a Neutral Nick update.
Showing posts with label Delta Neautral Trading. Show all posts
Showing posts with label Delta Neautral Trading. Show all posts
Wednesday, January 15, 2014
Tuesday, January 14, 2014
Neutral Nick Update Shell Shocked via commodity price movement
First off I want to wish my wife Happy Anniversay!
As for our MOCK trading character Neutral Nick; he got shell shocked so to speak; as he like many producers has been a little busy; and he found his hedge account not where he wished it to be.
A couple days ago Nick looked at where his hedge account was in regards to profit/loss; before the movements the past several days he was up around $5 million dollars in profits; while yesterday his acount had fallen all the way back to around even; after the drop in volatilty his account today showed gains off about 1.3 million.
So today he was forced to try and get his account back in line with his goal of staying short delta bushels of about 100,000. The problem he has found is his small project has just exploded. He went from trading 10 lot increments to trading a couple thousand lot increments when trying to adjust today.
I don't know if a bank in the world would give Nick the type of credit line he might need for his position. So folks don't try this at home as futures and options are very risky and not suitable for many.
For soybeans Nick sold 775 of the 13.80 puts, 1,000 of the 1300 puts, and 500 of the 15.00 calls.
For wheat Nick sold 2000 of the 8.00 puts, 1,000 of the 7.50 puts, and 820 of the 9.00 calls.
To square his corn position position back to 100,000 bushels sold he sold 2,000 of the 7.00 puts, 1970 of th 7.50 puts, and 300 of the 8.00 calls.
Some quick thoughs on Nick's trades; first no clue how deep some of these trades he is trying to do are; so he probalby has big slippage considering his volume that he is working towards. The next thought is the mentioned margin requirement.
Below are some screen shots of Nick and his portfollio; for a complete list of his positions send me an email at jeremey.frost@chsinc.com
As for our MOCK trading character Neutral Nick; he got shell shocked so to speak; as he like many producers has been a little busy; and he found his hedge account not where he wished it to be.
A couple days ago Nick looked at where his hedge account was in regards to profit/loss; before the movements the past several days he was up around $5 million dollars in profits; while yesterday his acount had fallen all the way back to around even; after the drop in volatilty his account today showed gains off about 1.3 million.
So today he was forced to try and get his account back in line with his goal of staying short delta bushels of about 100,000. The problem he has found is his small project has just exploded. He went from trading 10 lot increments to trading a couple thousand lot increments when trying to adjust today.
I don't know if a bank in the world would give Nick the type of credit line he might need for his position. So folks don't try this at home as futures and options are very risky and not suitable for many.
For soybeans Nick sold 775 of the 13.80 puts, 1,000 of the 1300 puts, and 500 of the 15.00 calls.
For wheat Nick sold 2000 of the 8.00 puts, 1,000 of the 7.50 puts, and 820 of the 9.00 calls.
To square his corn position position back to 100,000 bushels sold he sold 2,000 of the 7.00 puts, 1970 of th 7.50 puts, and 300 of the 8.00 calls.
Some quick thoughs on Nick's trades; first no clue how deep some of these trades he is trying to do are; so he probalby has big slippage considering his volume that he is working towards. The next thought is the mentioned margin requirement.
Below are some screen shots of Nick and his portfollio; for a complete list of his positions send me an email at jeremey.frost@chsinc.com
Monday, January 13, 2014
Another Neutral Nick Update via the nice and volatile commodity (grain) markets.
It looks like our Mock grain trading character Neutral Nick; who has a grain marketing plan of staying short delta bushels of 100,000 bushels for each corn, soybeans, and CBOT wheat had another update today. He is using the a delta neutral hedging type of style........but instead of long options Nick is normal just short options. Basically if his bank roll is big enough he thinks his program or grain hedging style will add more money to his bottom line via selling the volatility and riding time out thus picking up Theta.
Today Nick did something a little different then normal..........he bought back in the money options that had seen much of the time erosion go by and then to keep on the theme of always collecting premium he sold options that helped he get close to his grain marketing plan goal of being short 100,000 bushels.
With the market movements lately Nick found himself buying in the money call options while he sold at or near the money put options. Net he still collected money and the good thing that Nick has had going for him self is the fact that he is now up about 6.9 million dollars.
Keep in mind the risk that he is taking and the fact that it isn't suitable for many if any; plus past results don't mean the same thing happens in the future.
To get back towards 100,000 bushels Nick made the following trades.
He purchased 500 of the 7.00 July Corn calls and sold 1865 of the July 750 corn Puts.
In CBOT July wheat he Purchased 500 of the 7.50 July Wheat calls and sold 2555 of the July 8.00 puts.
In July Soybeans he purchased 100 of the July 13.00 Soybean Calls and sold 272 of the July 13.80 Soybean puts.
I would note that as I was going threw Nick's trades and possiblities on what to do to get back towards his goal on bushels sold the thought of simply buy back or closing all of his positions cross my mind. After all if you don't go broke making sales that make sense how would he go broke locking in nearly 7 million dollars in profits on his hedge account. Call it fake greed if you will but I decided to adjust in a different manner and ride it out. The good thing that Nick has going for him time value; he is down to just a few weeks.
Below are updated P and L Graphs.
Today Nick did something a little different then normal..........he bought back in the money options that had seen much of the time erosion go by and then to keep on the theme of always collecting premium he sold options that helped he get close to his grain marketing plan goal of being short 100,000 bushels.
With the market movements lately Nick found himself buying in the money call options while he sold at or near the money put options. Net he still collected money and the good thing that Nick has had going for him self is the fact that he is now up about 6.9 million dollars.
Keep in mind the risk that he is taking and the fact that it isn't suitable for many if any; plus past results don't mean the same thing happens in the future.
To get back towards 100,000 bushels Nick made the following trades.
He purchased 500 of the 7.00 July Corn calls and sold 1865 of the July 750 corn Puts.
In CBOT July wheat he Purchased 500 of the 7.50 July Wheat calls and sold 2555 of the July 8.00 puts.
In July Soybeans he purchased 100 of the July 13.00 Soybean Calls and sold 272 of the July 13.80 Soybean puts.
I would note that as I was going threw Nick's trades and possiblities on what to do to get back towards his goal on bushels sold the thought of simply buy back or closing all of his positions cross my mind. After all if you don't go broke making sales that make sense how would he go broke locking in nearly 7 million dollars in profits on his hedge account. Call it fake greed if you will but I decided to adjust in a different manner and ride it out. The good thing that Nick has going for him time value; he is down to just a few weeks.
Below are updated P and L Graphs.
Neutral Nick update
Well we are done to a month to the day.
The day that the options expire that our Mock Grain Marketing Character Neutral Nick has been using; it has been a long rather stressful ride for him in these volatile markets. Nick stil has a chance to make it huge; but he also has a chance to lose the farm in the finally few weeks if he doesn't do a good job managing his very much over leveraged position.
If you remember Nick decided to try a Delta Neutral Style of commoditiy hedging; in particular Nick had a goal of having delta bushels sold of 100,000 bushels each for corn, soybeans, and wheat. He has managed that but along the way he has seen million bushel plus swings; because he is so highly leverage in options plus Nick is always adjusting after the fact which by nature is usually wrong. I.E. when Nick sells puts he does it after the market has already went up; not before it goes up. Same thing for calls that he is selling; he is always selling them after the market has went down. So by nature Nick's system if you will is also losing gamma and going in the wrong direction. Nick has also been short options; and folks we have had some volitale markets so that also hasn't helped Nick along the way. The one option greek that Nick does have working for him is Theta or time value; that has been helping Neutral Nick out alot. So much so that presently his trades have him up over 3 million dollar and potentially as much as 30- 37 million dollars depending on how the markets shake out the next thirty days . His Theta broke down on a per day basis is close to $800,000
Keep in mind that Nick's system has many flaws and things don't have to go easy over the next 30 days; please look over various pages in this blog and you will see many errors or flaws in Nick's game plan. Plus keep in mind the risk that futures and options have; they simply don't work for everyone.
Below are his graphs after updating positions.
Once again he sold July options, in CBOT Wheat, Corn, and Soybeans. He only sold this time; purchased none and mainly used straddles and strangle combinations that where weighed to the side that moved delta bushels closer to 100,000 sold.
One flaw seen in his trading has been how it has exploded going from small lots to more then huge lots.
For Wheat Nick sold 250 of the 7.50 puts, 750 of the 8.00 calls, and 2,000 of the 8.50 calls thus getting his delta bushels back toward a short 103,000.
For Beans Nick sold 500 of the 14.00 July Soybean calls and 195 of the 13.40 July soybean puts.
For Corn Nick sold 1300 of the July 7.50 Corn calls and 100 of the July 7.00 Corn Puts.
The day that the options expire that our Mock Grain Marketing Character Neutral Nick has been using; it has been a long rather stressful ride for him in these volatile markets. Nick stil has a chance to make it huge; but he also has a chance to lose the farm in the finally few weeks if he doesn't do a good job managing his very much over leveraged position.
If you remember Nick decided to try a Delta Neutral Style of commoditiy hedging; in particular Nick had a goal of having delta bushels sold of 100,000 bushels each for corn, soybeans, and wheat. He has managed that but along the way he has seen million bushel plus swings; because he is so highly leverage in options plus Nick is always adjusting after the fact which by nature is usually wrong. I.E. when Nick sells puts he does it after the market has already went up; not before it goes up. Same thing for calls that he is selling; he is always selling them after the market has went down. So by nature Nick's system if you will is also losing gamma and going in the wrong direction. Nick has also been short options; and folks we have had some volitale markets so that also hasn't helped Nick along the way. The one option greek that Nick does have working for him is Theta or time value; that has been helping Neutral Nick out alot. So much so that presently his trades have him up over 3 million dollar and potentially as much as 30- 37 million dollars depending on how the markets shake out the next thirty days . His Theta broke down on a per day basis is close to $800,000
Keep in mind that Nick's system has many flaws and things don't have to go easy over the next 30 days; please look over various pages in this blog and you will see many errors or flaws in Nick's game plan. Plus keep in mind the risk that futures and options have; they simply don't work for everyone.
Below are his graphs after updating positions.
Once again he sold July options, in CBOT Wheat, Corn, and Soybeans. He only sold this time; purchased none and mainly used straddles and strangle combinations that where weighed to the side that moved delta bushels closer to 100,000 sold.
One flaw seen in his trading has been how it has exploded going from small lots to more then huge lots.
For Wheat Nick sold 250 of the 7.50 puts, 750 of the 8.00 calls, and 2,000 of the 8.50 calls thus getting his delta bushels back toward a short 103,000.
For Beans Nick sold 500 of the 14.00 July Soybean calls and 195 of the 13.40 July soybean puts.
For Corn Nick sold 1300 of the July 7.50 Corn calls and 100 of the July 7.00 Corn Puts.
Sunday, January 12, 2014
Neutral Nick Update June 1st; Russia smacking our wheat price put's Nick .....
The news of Russia back opening exports really has hurt our Mock Marketing Character Neutral Nick hard; as he found himself very out of whack on wheat today. His corn and bean situation wasn't that bad nor out of whack with his goal.
Here are his trades to get back to a goal of staying delta short 100,000 bushels each of corn, soybeans, and CBOT wheat.
For corn he sold 107 of the 7.50 puts; once again July options...........which reminds me that he is down to only 3 weeks before all of his options expire.
In soybeans he sold 400 of the 13.80 puts.
In wheat he purchased 300 of the 7.00 puts, sold 2500 of the 8.00 calls, purchased 2500 of the 8.50 calls, and sold 5,000 of the 7.60 puts.
Ok I admit it; his plan sucks as he simply gets over leveraged; the good thing is that even though his plan has some many flaws hence so much that he has learned he is up over 5.0 million dollar any way you cut it and now has a chance to end up nearly $40 million. While it is unreal that he would have had enough margin money to complete this plan; it looks good if he can find a bank with an unlimited account.
Keep in mind that futures and options are not suitable for many and past performance doesn't mean similiar future results; bottom line futures and options are very risky.
Here are his trades to get back to a goal of staying delta short 100,000 bushels each of corn, soybeans, and CBOT wheat.
For corn he sold 107 of the 7.50 puts; once again July options...........which reminds me that he is down to only 3 weeks before all of his options expire.
In soybeans he sold 400 of the 13.80 puts.
In wheat he purchased 300 of the 7.00 puts, sold 2500 of the 8.00 calls, purchased 2500 of the 8.50 calls, and sold 5,000 of the 7.60 puts.
Ok I admit it; his plan sucks as he simply gets over leveraged; the good thing is that even though his plan has some many flaws hence so much that he has learned he is up over 5.0 million dollar any way you cut it and now has a chance to end up nearly $40 million. While it is unreal that he would have had enough margin money to complete this plan; it looks good if he can find a bank with an unlimited account.
Keep in mind that futures and options are not suitable for many and past performance doesn't mean similiar future results; bottom line futures and options are very risky.
Saturday, January 11, 2014
Neutral Nick update up over 18 million; not bad on 300,000 bushels
Neutral Nick updated his position on a day when he probably should have simply exited everything with a rather nice 18 million or so gain.
Mr Neutral did do something a little different today as he took some off the top and took a little risk away; but still if he would have simply closed his positions he wouldn't have had any risk going to the bank and cashing in. The reason why Nick didn't do the right thing is because it wasn't in his plan; perhaps next week or in the next few days he will change and get out like he should?
Today's trades where as follows in soybeans he bought 190 of the 14.00 July soybean calls; which got him back to around 100k bushels of sold in delta terms.
For corn he sold 2000 of the 7.80 puts, sold 670 of the 8.00 calls, and purchased 1750 of the 7.50 calls. Once again all July; and if one recalls his marketing plan will end in 12 days one way or another as that is when all of the July options expire.
For wheat he used July CBOT options and sold 1310 of the 7.80 calls, purchased 1000 of the 7.50 puts, purchased 500 of the 7.30 puts and purchased 550 of the 8.00 calls.
Below is a consolidated view of all of his trades as well as profit projected and present.
A couple things that really stick out are the amount of trades needed or done for corn and wheat versus soybeans. In the beans he has had to trade far less quanity and he is up more.
Keep in mind that futures and options are risky and not suitable for all and past performance doesn't mean similiar future results nothing in this blog is a trading reccomendation.
Mr Neutral did do something a little different today as he took some off the top and took a little risk away; but still if he would have simply closed his positions he wouldn't have had any risk going to the bank and cashing in. The reason why Nick didn't do the right thing is because it wasn't in his plan; perhaps next week or in the next few days he will change and get out like he should?
Today's trades where as follows in soybeans he bought 190 of the 14.00 July soybean calls; which got him back to around 100k bushels of sold in delta terms.
For corn he sold 2000 of the 7.80 puts, sold 670 of the 8.00 calls, and purchased 1750 of the 7.50 calls. Once again all July; and if one recalls his marketing plan will end in 12 days one way or another as that is when all of the July options expire.
For wheat he used July CBOT options and sold 1310 of the 7.80 calls, purchased 1000 of the 7.50 puts, purchased 500 of the 7.30 puts and purchased 550 of the 8.00 calls.
Below is a consolidated view of all of his trades as well as profit projected and present.
Keep in mind that futures and options are risky and not suitable for all and past performance doesn't mean similiar future results nothing in this blog is a trading reccomendation.
Monday, January 6, 2014
Grain Comments with charts and strategies
Markets had another rather choppy price action ride today as outside markets where stable and a big on going concern remains out there in regards to our potential tightening of our balance sheets.
Our bull markets kept going despite the weakness we showed in the overnight session. When all was said and done we seen corn up 5-7 cents, beans where up 10-11 cents, KC wheat was off 7 cents, MPLS wheat was off 6-7 cents, CBOT wheat was down 4-7 cents, the US dollar was firmer, equities showed a slight balance with the DOW up 21 points, and crude was up about 1.50 a barrel.
Goofy price action today in that yesterday we had rather supportive information with the decreased crop conditions but last night we seen weakness in the markets as we did for most of the session; but about mid day things changed around lead by the row crops and we see corn and beans both put in new high closes to end the day. Technically that is great price action and could lead to even more technical buying.
As for new news out there we really seem to be light on the headlines as of late; main focus has been the idea’s that mother nature is taking away yield and yield reduction along with a tight balance sheet gives us bullish fundamentals; at least until we see that projected supply and demand change. Eventually high price are suppose to cure high prices; defining “high prices” remains a challenge and as long as end users can make money buying an end product such as corn the price probably shouldn’t be considered high. Are we near those levels? Perhaps as some industries are challenged and we have seen a lag in the exports; but the latest reports have been good profits for ethanol plants and they are the big dog when it comes to who’s buying our corn.
One negative that has happened lately has been the basis trends for corn and spring wheat; both of those commodities have saw plenty of basis pressure as of late; indicating a lack of end user demand. The spreads between some of the markets and months also have shown bear market signs such as the Sept-Dec corn spread which has went from a big inverse to near full carry as our carry on corn today is very similar to what it was last year despite our balance sheet showing nearly ½ the carryout for old crop as it did last year. That to me doesn’t add up and says there is some risk that we have under stated our 2010-2011 corn crop or overstated our demand? Perhaps we have improved our ethanol effectiveness more then we realize thus we have been grinding less then what we think would be needed to get the type of ethanol production that we have seen reported?
Bottom line is our markets are scary and in more then one way. Potential is out there for prices to continue to see strength because of the supply and demand along with the fact that it seems like the funds want to own grains many days. If we are actually going to run out of corn the price should be the sky; and that is scary because things like basis could really get out of whack. Also scary is the fact that it wouldn’t take much to see some of the mentioned possible negative factors happen thus we see our balance sheets get ugly in a hurry.
Technically we seem to have broken out of some markets; such as Nov beans. But many of our markets still have a sideways technical picture painted on their charts.
I have attached a few charts.
Please give us a call if there is anything we can do for you.
Subscribe to:
Posts (Atom)