Update to our UNG Trade

• stevenplace
• June 16th, 2009

I’ll just keep this one out in the public since the trade is after the fact. Last Monday this was the trade I suggested:

Sell UNG Jul 14 Puts for 1.25 or better

The post is now open to the public– click here.

Well the trade is doing alright but price has been shooting up, so it might be prudent to take a little off– but instead of closing out the position, let’s delta hedge by buying puts.

Well we’re going to adjust the position slightly. Since there is unlimited risk in the trade currently, we want to cap that off by purchasing a little insurance:

Buy UNG Jul 13 Puts for .25 or better

I wrote this before the market open so I don’t know what the opening print is going to be.

So your risk is now capped off at 100 for each contract you sold. The breakeven for the trade moved up .25, and it cut your delta in half– so you’re effectively selling half of your position.

Now if we do reverse and turn lower, we can keep our emotions in check knowing that it can’t go against us too hard; furthermore, we can sell the put insurance we bought for a profit and ride our original position out.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus