MikeL 10:30 am on Monday, June 24, 2019
Tags: ContangoETFs ( 446 )

Would it make sense to…

Would it make sense to sell DUST puts at this time?

thomberg1201 10:49 am on Monday, June 24, 2019

I don’t know but you have me looking at it, thanks for the idea.
Jeff 11:32 am on Monday, June 24, 2019

I never sell puts in #ContangoETFs anymore. I got killed in them in the past. It is still possible to do if your timing is right, but because these 3x-levered instruments are always drawn toward zero due to compounding, it can be a tough position to back out of once the tide turns. If you do it, look to remain short-term.

A quick look at the monthly chart on both NUGT and DUST will show you what you’re up against. These ETF’s are built for being short.

When the prices get low, there are competing factors. You are not in danger of big losses with short puts because you’re pretty close to zero. But also, it means there is not very big premium available in such low-numbered strikes.
Jeff 11:36 am on Monday, June 24, 2019

Here’s my webinar from a few years back that explains this. It also shows you the danger we can get into by being short. A few months ago, with the NAT-GAS price explosion, many of us had to deal with $BOIL calls going ITM. But if we were able to wait it out, it collapsed again pretty quickly, as they always do.

[video src="https://optionsbistro.files.wordpress.com/2016/01/contangoetf_webinar-jan20_2016.mp4" /]
- MikeL 11:41 am on Monday, June 24, 2019
  
  Thank you Jeff
- fuzzballl 11:42 am on Monday, June 24, 2019
  
  I sold a few BOIL call spreads that were in the money during that nat gas spike. No doubt that one was going to implode sooner or later. Don’t want to be caught on the wrong side for sure!
  - Jeff 11:43 am on Monday, June 24, 2019
    
    That adventure doesn’t even register on the monthly chart today!
    - fuzzballl 11:45 am on Monday, June 24, 2019
      
      Some weren’t so lucky. Here was the cause of the madness. Ouch!
      
      https://www.bloomberg.com/news/articles/2018-11-19/hedge-fund-s-accounts-liquidated-amid-energy-market-volatility
    - fuzzballl 11:46 am on Monday, June 24, 2019
      
      LOL
      
      https://www.barnesandnoble.com/w/the-complete-guide-to-option-selling-james-cordier/1124322096?ean=9780071837620&pcta=n&st=PLA&sid=BNB_New+Core+Shopping+Textbooks&sourceId=PLAGoNA&dpid=tdtve346c&2sid=Google_c&gclid=Cj0KCQiA28nfBRCDARIsANc5BFDzrASLdRJH5XEyHcNgc0PSXh0IrypwHq1uipaR_H2FE9x7DuhN0kIaAkCsEALw_wcB
  - Jeff 12:32 pm on Monday, June 24, 2019
    
    They should have watched my webinar.
Option Iceman 12:37 pm on Monday, June 24, 2019

DUST – check the 3-year chart. High of 72.47 and the Low TODAY.
If it gets below 10 for any length of time they will reverse split it.
The July strike 10 monthly Puts are at 0.60 with the stock at 11. Seems like a pretty good premium.

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