The Money Tree

Safely Generating Income in Retirement

Posts Tagged ‘UNG’

UNG Closeout

Posted by mounddweller on February 14, 2010

Well folks after 7 months of frustration I have thrown in the towel on my UNG trade.  On Friday I BTC my 10 FEB $11 naked put contracts.  I bought them back for $1.08.  I had originally sold this round of puts for $1.11.  My total profit over this 7 month period was a whopping $78! 

I just wasn’t able to ‘find the rythmm’ with this trade.  Early on I kept trying to trade it like any other NP or CC position.  I think this was a mistake.  By that I mean that I was selling the puts on the Monday after expiration and waiting and hoping they would expire worthless by the next expiration date.  Instead, I had to roll them out every month, always at a credit but never really gaining any ground on my overall position.

In the last month or so I finally turned onto the idea that the better way to trade UNG was to be more active and in tune with the daily moves.  I could have BTC my FEB puts multiple times in the last 30 days at a significant profit.  On more than one occasion I could have bought them back for $0.90 or less.  Each time this happened I hesitated, wanting to get just a ‘few pennies more’.   If, and when, I choose to try my hand again with UNG it will be with this strategy in mind.

Below is a complete history of my UNG trade.  I will update the information on my open positions and historical results pages after expiration on February 20th.

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Rollout on UNG

Posted by mounddweller on October 15, 2009

I rolled out my UNG puts again this morning.  However, this time I did it with a different strategy in mind.  As you know I originally sold UNG $13 several months ago.  Since then UNG has never come close to getting back above $13.  For the past several months I have been able to buy back the prior months puts and sell re-sell the $13 puts one month further out. 

Unfortunately, for whatever reason, this month that strategy wasn’t going to generate a very profitable trade.  I was only going to be able to generate a $0.15 credit.  So, instead I decided to bite the bullet and roll down and out for a net debit.  Here’s the trade I made:

BTC – OCT $13 puts for $1.80

STO – JAN ’10 $11 puts for $0.95

As you can see this resulted in a net debit of $0.85 ($850.00) coming out of my account.  Why did I do it?  Well, first off in looking at the chart it appeared UNG had hit the lower leg of its Bollinger band on Wednesday and bounced higher today.  Thus, my thought was if I rolled down and sold the $11 put I would be able to profitably buy it back later this month as UNG went back up towards $12.  Secondly, if that doesn’t happen I will still be in a much nicer position to manage the trade going forward.

I was able to execute this trade and still maintain a small overall profit on my UNG position.  Below is an updated version of my transaction summary.  As you can see I still have a $1.20 profit.

Blog UNG Position

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Rollout on UNG

Posted by mounddweller on September 17, 2009

Guys,

First my apologies for not having much to say lately.  With the market up so much I haven’t been trading any CC/NPs.  I’m still waiting on that long overdue pullback.

However, with expiration coming up tomorrow I did go ahead and rollout my NP position in UNG another month.  Specifically I bought back the SEP $13 puts for $1.25 and sold the OCT $13 puts for $1.75.   This generates a 3.85% ROIC.  This is my 3rd month of rolling out for a net credit.   Below is a listing of my transaction history for this trade.  Note, my net cost is now down to $10.93.

UNG - Transaction History

Regards,

Troy

PS.  I’ll be running my VISIONS screen and will post anything that catches my eye.

Posted in Portfolio Updates | Tagged: , , | 4 Comments »

Rollout on UNG

Posted by mounddweller on August 23, 2009

I executed a rollout on my NP position in UNG on Friday.  You’ll recall I did the same thing last month.  However, last month I was able to get a net credit of $0.70 on my roll from the JUL $13 puts to the AUG $13 puts.  This month due to UNG being well under $12/share I was only able to roll for a $0.30 credit.  This gives me a ROIC of 2.31% (.3/13).  If all goes well natural gas prices will recover in the next month or so and I’ll either be able to exit the position or roll again for a much better net credit. 

The chart below summarizes all of my NP trades in UNG todate.  The net sum of these transactions is around $1,276 generated over a 3-month period, thus giving me a cumulative ROIC of almost 10%.

BLOG - UNG Position

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Rollouts on FRX and UNG

Posted by mounddweller on July 14, 2009

Guys and gals,

I executed two rollouts today against my open positions in FRX and UNG.  Those of you who have been following my trades know that I’ve been in FRX since January.  I originally entered the position by buying 200 shares at around $25 and change.  I then sold the February $25 calls.   Since then I’ve acquired an additional 200 shares after having shares put to me at $22.50.  I’ve also been able to sell the $25  calls almost every month.  This month, like last month, I decided to rollout my position rather than wait for expiration day on Friday.  However, my reasoning this month was different than last month.  Last month you’ll recall I wanted to roll early because I felt there was an opportunity for the stock to go ITM prior to expiration.   Not wanting to take a chance on getting assigned I decided to take advantage of a decent premium on the rollout.  This month my reasoning was just the opposite.  The market has rallied sharply the past couple of days but I fear we may have a sell-off before Friday expiration.  Thus, I wanted to capture the relatively high premium tied to today’s price rather than chance having to sell another round of calls after expiration at a much lower premium.    The bottom line result is I was able to rollout to the AUG $25 calls for a net credit of $0.75.   My net cost basis is now $20.50 while my ROIC is now 18.71% (31.19% annualized). 

For those of you who don’t yet own FRX, it isn’t too late to get into this high quality stock.  With a market cap of $7B FRX has $2B in bare cash!  Below is a current VISIONS chart of FRX.

VISIONS - FRX Chart

 

Now, let’s talk about my NP position in UNG.  Those of you who follow the natural gas market know there is currently a glut.  Thus, prices are very low.  Since UNG is an ETF whose price is determined by the price of natural gas futures it too has continued to fall.  When I originally initiated my position in UNG naked puts UNG was trading over $15/share.  It had never closed below $13 so I felt reasonably safe in writing the JUL $13 naked puts.  Well, never say never.  Over the past couple of weeks UNG sliced through $13 on its way to setting a new 52-wk low of $12.03.  It has since recovered and moved back up to around $12.50.  Seeing this I decided to take advantage by rolling to the AUG $13 naked puts for a net credit of $0.70.  If UNG remains below $13 at expiration in AUG and I choose to allow the stock to be put to me I will have a net cost basis of $12.00.  If unassigned my ROIC will be 7.69% for two months.  That sure beats the interest Schwab is paying me on my cash reserves!

Best of luck to y’all in your trading. 

Regards,

Troy

PS.  My NP trades in O and TK remain open.  I’ll be updating you on them after expiration Friday.

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Update – UNG NPs

Posted by mounddweller on June 19, 2009

All,

Was able to sell the remaining 7 contracts on my UNG NP trade today for $0.35.  Now have 10 open contracts on the UNG JUL $13 puts.

Regards,

Troy

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New NP Trade – UNG

Posted by mounddweller on June 18, 2009

Guys & Gals,

I executed a new trade today; well, OK partially executed.  I entered a trade to sell 10 JUL $13 puts at $0.35 or better.  By the end of the day I had only gotten a partial fill on 3 of my 10 contracts.  It was very frustrating to say the least.  UNG went down all day but yet I couldn’t get filled.  Never mind the fact that others were periodically getting filled at $0.35.   Yesterday, the JUL $13 contracts traded at $0.35 when UNG was as high as $15.80.  Today, I got my partial fill at $0.35 while UNG was trading around $15.45.  UNG closed right at its low of the day of $15.29 and yet still noone wanted to pay $0.35.  The bid on the option closed at $0.25.

While I was very much wanting to blame the market makers I know that’s not the real reason.  It’s all about supply and demand.  We’ll wait and see what tomorrow brings.  Hopefully I’ll get filled on my remaining 7 contracts.

Anyway, enough about that.  Here’s why I like this trade. 

(1) UNG has never closed below $13.  It’s intra-day trading low is $12.69.  Thus, low probability of being assigned at this price.
(2) UNG is currently attracting a lot of attention. Look at the increase in volume in just the past few months. I think this means the ‘smart money’ knows the bottom is in for natural gas and thus are ‘placing their bets’.
(3) UNG closed today at $15.29.  That gives me 15% of downside protection.
(4) My ROIC is 0.35 / 13 = 2.69%.  That’s 32.76% annualized.

Note: When studying the below price chart you’ll notice this NP trade does not have a TA (i.e., ‘take action’) rating.  Rather, the stock is still trading well below the bottom leg of the VISION V and thus only rates a GR (i.e., ‘get ready’). 

So why did I go ahead with the trade? Well, primarily because as I get more comfortable trading NPs I’m finding that, depending on your objectives, many good NP trades can be found on GR rated stocks.  My objective in these type of trades is to NOT have the stock put to me.  Thus, I’m looking for stocks that have bottomed and ‘turned the corner’ so to speak but haven’t gotten very far away from their 52-wk low.  Other criteria I look for are a minimum of 15% downside protection, and a strike price near, preferably less than the 52-wk low.  I also look for trades that give me a decent ROIC even though I’m selling a put with a strike price > 15% below the current price.  My target is 2.5 – 3.0% for the near month expiration.

VISIONS - UNG Price Chart

Posted in Troy's New Picks! | Tagged: , , | 2 Comments »