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I am a bit anxious of writing calls under 120 and also given the margin requirements it’s not very attractive, either (CLN). Likewise, anything near 80 on the put side seems a bit risky. And given that volatility is mild the premiums seem low, too. Quite a quandary …
Are you doing strangles on the July/August contracts?
Hi,
Many of us reading this thread might be short Sep 3 calls and doing well thanks to attention drawn by Ron.
However the ever lasting bid is back at 8 ticks while Sep 2 calls are selling at 45 ticks or so. For those who are short big quantities, here is a free hedge - buy 1 of Sep 2 call and sell about 6 to 8 (depending on your commissions) Sep 3 calls for even money after commissions.
What that would do is covert the naked shorts in to ration spread (like 1 to 15 or so) and the Sep 2 calls would serve as a good hedge in case coffee decides to come back little. I personally doubt that Sep coffee would go back above 2 before expiration (and truly miracle if go above 3), in case it goes and settles above 2 at expiry than you can also make bundlle on the free hedge...
Margin wise it is about neutral for me - risk wise from my point of view it decreases the risk (though some may argue that now you are short even higher number of Sep 3 calls and hence higher risk).
Again this would work if you are short in size (like 20 plus contracts)...Just my 2 cents...Thanks.
My thoughts exactly. I probably missed any opportunities for strangling in the July contract and August too doesn't seem attractive till this morning. Maybe today's drop might throw something up for the August comtract. A little anxious going to September, just yet.
Don't forget about the hurricane scares that perk up during the summer months...regardless of the NOAA Hurricane forecasts. When a storm starts to form/track into the Gulf of Mex and the oil platforms shut down it's almost a guarantee that prices will jump up. Today's drop made selling puts even more attractive for those months. Charts (Sept) look like they can fall to around 90.
