Calendar Spread on UNG (Date 10/16/2009)
Technical: UNG goes sideway (btw $11 and $12) in the last month. Implied volatility is low.
Expectation: UNG will go sideway, with slight bullish bias.
BTO JAN 11 strike 12 call at 2.34
STO Nov 09 Strike 12 call at 0.42
Net Debit 1.92
PE: Let the short call expired worthless, and sell another call for the coming month.
SE: Roll the short call up and out when it is ITM. Might need to roll the long call if the stock gets too bullish.
Return: 20%+ in a year.
This a long term play. Since we 13 months that we can sell call on UNG, if we can sell call for only $0.15, we will not lose on this trade. If we can sell $0.20 each month, we’ll have 30-40% gain for one year.
The Sep 09 strike 11 call option price on 9/1/2009 was $0.1 where the stock was at $9.01. It is high possible that we can get $0.2/share per month by selling the call.
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Made the following adjustment:
ReplyDeleteBTC 2009 Nov 12 call at 0.08
STO 2009 Nov 11 call at 0.41
Net credit 0.33
Now the cost base of the whole trade is 1.92-0.33=1.59.
The trade is losing money now. However, there are still 12 months to go. If we can get 0.15 premium each month, we'll still making money in the end
correction on last adjustment: STO 2009 Dec 11 call at 0.41.
ReplyDeleteToday I close the Dec 11 call at 0.08. Now the cost base of this trade is 1.67.
Currently UNG is testing last support around $9. I'll wait a few days to see if the support holds. If it gets more bearish, will consider to buy put.
Joseph,
ReplyDeleteI close my put today too.
Similarly, if there is no support at 8.5, I will add back the put. I believe it is at a temporary bottom.
By the way, the Baltic Index is moving showing shipping activities. So this rally should have some leg into the end of the year.