Tuesday, June 19, 2012

Neutral Nick update booking more profits.

Well we are nearing July option expiration; so it is time for our mock trading character Neutral Nick to update some positions.  Take profits on some positions and add some more positions in his attempt to collect premium and dollars.

So to start with today our trading character is updating his July bean positions; pulling them off a few days ahead before they expire.  The good news is he is up about $250,000; minus about $12,000 in commissions he is net up about $238,000 after he pulls his positions.  The bad news is that if he where to leave his positions on and July beans stay where they are to up just slightly he could add nearly $150,000 more to his bottom line.  So why not leave positions until things expire.  One word

Gamma; his delta position could swing big time if we have more volatile days like today in the next couple of days.  With today's strong market he is up much more then he hoped so he doesn't feel like risking exposure should we have two or three more days like today.

Here is a look at his profit and loss graph and it shows he is giving up a little potential income; but it also shows that should we move out of the range show (plus or minus 40 cents) he would be worse off then he is today.   Bottom line he is taking risk off the table as his game plan isn't and never really has been to try and out guess the market but to sell volatility and time premium.

For July corn he is taking off all of his positions as well; spending about 16,000 in commissions but locking in profits of 166,000 or net $150,000.

You can see by the below graph that there is not much left to gain and still plenty to lose should corn come under pressure in the next few days and that risk is once again why he is locking in profits.  No reason to get greedy.

A couple weeks ago Neutral Nick locked in his profits for wheat which can be found here http://grainmarketingplans.blogspot.com/2012/06/neutral-nick-update-as-he-locks-in-more.html

With the above beans and corn trades he has now locked in net after commissions of profits over $500,000 off of the July options and another 200,000 or so off of the May options.  So net he is up over $700,000

His remain positions are currently up about 154,563; but it is now time to add some adjustments and try to do more of the above in the future.

For his trades to keep things simple he is selling 40 of each of the following

6.50 Dec corn calls
5.00 Dec corn puts

6.50 March corn calls
5.00 March corn puts

15.00 Nov bean calls
13.00 Nov bean puts

15.00 Jan bean calls
13.00 Jan bean puts

6.50 CBOT Dec Wheat puts
7.50 CBOT Dec Wheat calls

6.00 CBOT March Wheat Puts
8.00 CBOT March Wheat Calls

Generic theme of the above that he sold is we are close to the middle with the present price; so he is trying to continue to sell time and volatility premium without having a strong market direction bias.

The below screen shots show all months for the various commodities with the new trades included

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