CL/Call

Discussion in 'Energy Futures' started by oldtime, Jul 15, 2011.

  1. I wanted to get long CL, but it was too volatile for my account. So I paper traded QM and it was still to volatile.

    So I got the bright idea to go long CL and sell a covered call. But in this move down, that has been almost exactly the same as just going long QM.

    So now I have an even brighter idea of going long QM and covering it with a CL call.

    The only thing I haven't figured out is what I will do if the market moves up the way I hope it will and the call goes into the money.

    I guess I could add another QM and hope the time premium wears out on the call.
     
  2. rmorse

    rmorse ET Sponsor

    Maybe you should implement the original position you want, but trade smaller so the risk level is reduced, rather than complicating a simple approach? You want to be long CL, buy it, set a stop. If that is still to risky for you, don't trade futures, your not ready.
     
  3. I don't want to get stopped out because I'm fundamentally bullish. If I got stopped I would just buy again.

    I sold the CL at 97.5 and had to pay 97.60 for the QM.

    For a brief moment I looked smart.

    So now I have the QM covered by a CL 101 call I sold for 2.12.

    But thanks for the advice.
     
  4. hi
    please note that QM is 500 barrels and option of CL corresponds to 1000 barrels. if oil price soars and your short option's delta exceeds .50, you will begin losing money.
    if you are bullish and want less volatility, you can buy bull call spread or sell bear put spread.

    say CL is 96, you buy 97 call and sell 99 call. this is buying bull call

    say CL is 96, you sell 95 put and buy 93 put . this is selling bear put

    regards
    etem
     
  5. right, it's certainly not something you can put on and forget about.

    If the short call goes in the money I can buy another QM and put myself in the awkward position of hoping the mkt moves against me enough to get back out of the money and collect the premium.

    But no doubt about it, even though I'm bullish, I'm net short.