Option Selling Update

A little while ago I decided it was time to go really go all out with my option selling. After 8 months of trading a fairly small portfolio, I felt I now had a pretty good feel for trading these markets. I'd experienced some dramatic moves in my positions, got exposure to a fairly diverse number of commodities, and confirmed my trading rules of thumb that help guarantee me a good chance of 50-100+% returns per year.

So at the end of July, I started increasing my account size considerably and now trade a very large account. I made some really good trades in the first month (especially Natural Gas, Gold, and Soybeans). I made 5% in the 1st month, and that was while gradually ramping up the size of the account. That makes my 10-month portfolio performance equal to about 82% (due to compounding), and so I'm on target to reach about a 100% one year portfolio gain -- we'll see though. That works out to about a 6% monthly gain, and I hope to continue that average going forward.

I'm currently in trades on Gold, the Canadian Dollar, and Oil. Here's what I'm keeping my eye on for potential upcoming trades:

Sugar:

One of my first trades was with sugar when it was crazy high at 26 cents or so, and I was selling calls at 38 cents at really high premiums since everyone thought it could keep rising. Well it eventually dropped to 14 cents or something after that and there have been no good premiums at safe distances in price. But recently it's risen above 20 cents again. I have to look at what people are saying and if the fundamentals really justify the price, but usually fears of shortages are overblown, just like last year. So I may look at selling some calls.

Cotton:

I have never traded cotton, and I don't really know anything about it. But it is reaching crazy all-time highs. World-wide stocks are at the lowest since 1990, demand is high, crops have been disappointing everywhere, and Tropical Storm Hermine is threatening more US crops. So Cotton is around 92 cents, and it looks like the highest it ever reached was close to 120 cents in 1995. There are some really good call options at 120 cents with only 66 days to expiry that I'm looking at selling. I don't know if that strike price is too risky though. I probably need to look into it more.

Natural gas:

Believe or not, I'm actually looking to buy call options on NG. It's the same story as last year: storage levels are very high and demand is really low, and so the price has been plummeting. Spot price has gotten below $3.70 and it is getting about time for a rebound. In history, 70% of the time, natural gas prices rise in September and October. This is what happened last year -- of course the price first dropped like a rock to the $2 range, and then proceeded to rise to $5 before the end of October. This week would historically be the perfect time to buy options that expire at the end of October, but it's really hard to time this right. The bottom could drop out of the price and we could see the $2 range again. Who knows. Also, the futures already price in some expected autumn gains, and so prices really need to rise to be profitable in a call-buying scenario.