Jeff 9:11 am on Wednesday, November 25, 2015
Tags: ContangoETFs ( 446 ), ReverseRoll ( 144 ), Rolling ( 447 )

BOIL up

#ContangoETFs STO $BOIL Jan 25 calls for 1.10.

STO $BOIL Jan 30 calls for .50

Any rally in Nat Gas is worth selling

#reverseroll, #rolling

vxxkelly 9:35 am on Wednesday, November 25, 2015

Pretty interesting that last week the build was less than expected, but Nat Gas plunged. This week the build was a little more than expected and Nat Gas actually shows some strength. But selling into it I think is the right thing since we still haven’t started to draw down the inventories yet, still building and it is almost December.
sarbinson 11:00 am on Wednesday, November 25, 2015

How do you position size on those BOIL calls? i.e, if you got assigned, what % of your account would be short BOIL? It certainly does tank almost every single day.
- Jeff 11:23 am on Wednesday, November 25, 2015
  
  Percentage is an imperfect measurement in a portfolio margin account. I try to limit the number of contracts on any one side of an ETF to total no more than a 25% of my account size, in terms of cash outlay if assigned on all positions. So with a $100K account, 50-dollar short calls, I would say no more than 5 contracts (total 25K if assigned). At times, I approach closer to half my account-size using this metric.
  
  Most importantly, however, I would not get to the point where all contracts are assigned. I would be #Rolling, and sometimes use the #ReverseRoll (convert calls to puts, as I have been doing with $KOLD).
- Jeff 11:44 am on Wednesday, November 25, 2015
  
  Another key is to balance out both sides of the trade… this can be done by selling the puts against the calls, or selling calls in the opposite ETF. So $BOIL calls are offset by $KOLD calls. If Nat Gas rockets up or plummets, you will only have issues with one side. This maintains your margin level if broker takes into account opposing ETFs.