Weekly Global Market Update (Feb 13)

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The world never changes and history always repeats itself

One of the best books on how life keeps repeating itself and how everything around us works in cycles is "Cycles: The Mysterious Forces that Trigger Events" by Edward R. Dewey. I am not going to go through the book here but one of the key components of nature and even human behaviour is that we keep repeating everything. We do not realize it because our memory goes back only a few weeks and we like to focus more on the present and also on the future. But the past always comes back to us.

Looking at another bailout of Greece I begin thinking about Germans. Clearly they must know the outcome of this reckless wasting of billions and soon trillions. Yet nobody seams to care. Or maybe they already know that soon we will all get a deja vu fealing when looking at this chart:

Weimar hyperinflation

Throwing hundreds of billions of euros towards a bankrupt country is insane. But they will not stop at that. Given that European politicians have already made their choice then soon ECB will resemble Bundesbank as it was back in the old days when they had to print so much that at one point they did not even bother and just stamped a higher number on the marks. There is no going back now. Of course, Germany could stop this insanity but why haven't then done that already? Well, take a look at what's on the balance sheet of German banks and you will probably get the picture.

I believe one of the best trades of this year will be shorting euros against Swiss francs. The second trade would be to short Japanese yen against US dollar. We all know what the Europeans and Japanese are going to do to ease the pain. They are going to print even more.

Hildebrand is now gone. When talking to smart people on this side and on the other side of the Atlantic I get a feeling that the 1.20 EURCHF peg will not be sustainable. It maybe now but when ECB goes all in then SNB has no chance. They will be forced to run as market as a whole has deeper pockets than the Swiss National Bank. Of course, they could implement some special tax for franc holdings but personally I am willing to pay the tax. Just read a book called "When Money Dies" and you get the picture. Personally I think that EURCHF above 1.20 is a gift right now. I am willing to pay the negative swap rate as when this move will be over then EURCHF will be way below 1.00.

Japanese yen is basically a similar story. Even an idiot can understand that BOJ is just waiting for the moment to jump in and start dumping the yen. Given Japanese government's debt levels then we can be sure that very soon global bond market will show them who orders the music around here. Japanese yen future currently trading at 1.30 could find istelf flirting with 0.80 pretty soon. You can call me an idiot if it will not happen.

WTI crude oil is trading close to 100 dollars a barrel. I believe that anybody looking for a war on Iran will be dissapointed. There is nothing to prove that these guys have anything close to a nuke. Also, we have the Chinese and Russians who clearly will not let this happen. I would not be surpised if they have informed their Western colleagues that a war against Iran would be considered an act of war against Russia and China. But in media US and European can do what they like. Personally I think that Europeans are clearly not keeping their own economy in sight when implementing embargos on Iran. High gasoline prices are going to have a major influence on European economy. Sometimes the bad news just keep coming.

Trade of the week

Every week we make hundreds of trades in commodity futures and futures options. On Friday evening we look back at the week and re-analyze each trade. Among many issues we select the best trade of the week which normally has the best risk/reward ratio.

We shorted on Wednesday Japanese Yen June call options at a strike price of 1.48. On average we shorted the contract for 0.0011 or $137.5 per contract credited to our trading accounts. At the time of the trade Yen future was trading around 1.30.

Japanese Yen

Why short Yen future’s call options? Firstly, we have had a pretty strong rally in Yen futures recently which has taken it near to all time high. As a result, Yen call options prices have now a pretty large volatility premium built-in. Secondly, the stronger the Yen gets the harder it’s going to be for Japanese exporters to generate profits (remember, that most of their revenue comes from exports and as Yen gets stronger, the value of their foreign sales in local currency also collapses). Thirdly, Japanese central bank the Bank of Japan has said it multiple times that it will not tolerate Yen’s further steep appreciation. So it is quite logical to think that Yen’s upside potential will be limited and therefore the call options we shorted should be a quite safe bet.

During the week we also traded futures and options on: Gold, silver, Euro, Yen, US 30-year bonds, natural gas, soybeans and crude oil.

Have a great trading week!

Ingmar Mattus

If you have questions or comments just send me an email: ingmar.mattus[A]spadacapital.com
If you want to know what we trade in real time then follow us on Twitter at: http://twitter.com/#!/SpadaCapital

Information provided herein is for informational purposes only. It is believed to be reliable but we do not warrant its completeness, timeliness or accuracy. The user accesses or uses this website at the user’s own risk. The information on the website is not an offer to sell or to solicit any investment products or other financial product or service, or buy or sell any securities or related financial instruments, or an official confirmation of any transaction, or an official statement of Spada Capital. Losses from commodity investments may be greater than the initial investment(s). Commodity trading is not appropriate for all investors, and a commodity investment must be evaluated in light of the potential risk of loss. Past profits are not necessarily indicative of future results.

Weekly market update and one trade (Feb 6)

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We shorted on Thursday afternoon Japanese Yen June call options at a strike price of 1.48. On average we shorted the contract for 0.0015 or $187.5 per contract credited to our trading accounts. At the time of the trade Yen future was trading around 1.3140.

Japanese Yen Futures

During the week we also traded futures and options on: Gold, silver, Australian dollar, Euro, Yen, US 30-year bonds and crude oil.

What to expect from weeks ahead

After the last FOMC meeting the markets got used to believing that massive money printing party is down the road. Now, with Friday’s stronger than expected nonfarm payrolls report, gold sold off pretty nicely as some market participants thought maybe they got a bit too excited about this printing stuff. Looking at the charts we see that gold could retest the 1700 level and if it holds then we’re headed back towards the 1900 level by the end of April.

Stocks have been on a climbing mode recently with the SP500 coming closer to the 1350 level. We expect it to test the 1350 level this week and then probably overshoot towards the 1365/70 level. As Europe is still a sick patient in the hospital stocks should not fly too high, unless the rules of gravity will cease to exist (as has been the case in recent months!).

A lot of people are watching the developments in the Eurozone, especially what will happen to the Greek debt talks and will Greece default or not. In anticipation of the default, there’s a huge short position in Euro which we believe is a bit of overextended. Even if Greece defaults and we fall back to 1.27/28 level the shorts would have to cover some time and this short covering rally could take us as high as 1.35/1.36 level with euro.

Remember that the bureaucrats in the Eurozone have been able to postpone the inevitable for some time (years) and they might pull it off even this time. So a short-term rise of euro even higher to the 1.39/40 level could be probable. Also, this week take a closer look at the 1.32 dollar level, which if breaks, could make the short really nervous.

Over the coming weeks (if not days) we expect also some action by the SNB (Swiss National Bank) and BoJ (Bank of Japan) to lower the value of their currencies against, euro and the US dollar, respectively. Remember the probable intervention by the BoJ was also one of the reasons behind our this week’s trade of the week we discussed earlier. We believe that the recent strength we saw in Yen was the last stretch and we are going down from here.

With regard to energy markets, we expect natural gas to retrace some of its declines experienced over the last days and it should rise back towards the 2.7/2.75 level which is where the 25 EMA stands. Brent crude oil should also find some support after recent declines due to cold snap in Europe and also on the basis of some headlines over the weekend that Israel has put its global facilities on high alert following warning of rising Iran strike threat (whatever that means!).

So this week, we will continue to short Yen futures call options, March natural gas puts, SP500 March calls, gold April calls and May silver calls. We will also be shorting yen against the dollar and scalping with the EUR/USD with a bias on the upside. Of course we live during interesting times so check our tweets on Twitter where we post real-time our trades.

Have a great trading week!

Illimar Mattus

If you have questions or comments just send me an email: illimar.mattus[A]spadacapital.com
If you want to know what we trade in real time then follow us on Twitter at: http://twitter.com/#!/SpadaCapital

Shorting Mar 2012 Crude Oil Futures (Published Jan 27)

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We shorted on Thursday morning (January 26) on the NYMEX crude oil futures contracts at 101.27. Stop was at 101.97. The trade was closed on the same day at 100.57. Profit per contract was exactly $700.00. Clients are happy.

WTI crude oil

Crude oil has been making lower highs since Jan 4 and we believe that unless the 104 level will get penetrated crude oil will most likely go lower. Seasonal trend is also lower. Also, there is already at least a 10 dollar risk premium built into crude oil price so market really needs something extra to break higher. More about the reasoning lower.

During the week we also traded futures and options on: Gold, silver, Yen and US 30-year bonds, orange juice, natural gas, soybeans, wheat.

What to expect from the weeks ahead

Oh, well. Where shall we start. So FOMC decided to keep rates low until 2014. FOMC is desperate and it clearly shows.

I think Comstock Partners put it as straight forward as possible:

In our view the Fed's new policy is an act of desperation rather than something to celebrate. The FOMC has used all of its conventional weapons and a lot of unconventional ones and is essentially out of ammunition. The banking system is swimming in excess reserves that it is not using - adding more won't make much of a difference. This is a classic liquidity trap where further easing will not be much help. The stock market strength assumes that the economy is getting stronger and that company earnings will remain at elevated levels. We think that this will not be the case, and that the market is subject to substantial downside risk.

In 2008 there were people around who said looking at the debt levels and asset prices that western nations could experience their own lost decade. Majority claimed it would not be the case. Well, Fed started their ZIRP in 2008, now we now that the policy will stay in place at least until 2014. This is already 6 years and counting.

We have been active sellers of crude oil call options recently because the price of oil and also many other commodities should be lower. Much lower. Given the state of global economy and near-term prospect crude should be trading at around 80 and not a cent more. The longer the price remains elevated the uglier the fall will be. And that's common sense.

Of course, there is the Iran issue. But everybody should understand that even if the price of oil will get some short-term pop then we will still be moving lower.

In terms of crude oil price Europe is an isolated case. And I would not want to imagine what will happen to Europe if the price of Brent moves North and stays there. Because, honestly, Europeans are inviting a monster to their doorstep as Iran's own decision to block any kind of export to Europe could have extremely severe consequences for Europe. European clearly must understand that they are playing with fire here.

Given the state of European economies EURUSD should be trading at 1.0000. It will get there. It's just a matter of time. Of course, we could get a spring rally to somewhere near 1.40 but this would be a suckers rally. Nothing more.

This week illustrated that markets are getting nervous about the future health of Japanese economy. The short-term USDJPY rise was weird to say the least. The pair came down at the end of the week but something is really cooking there. I believe that we could get a final round of JPY strength on the back of risk assets sell-off but from that point onwards JPY is a mother of all sells. The moment the bond market draws the line USDJPY could be trading around 100.00 in a few days.

We are expecting sideways to downward moves in February. It's still a good time to sell call options, gold included. I would skip only soybeans.

Have a great trading week!

Ingmar Mattus

Shorting Mar 2012 Natural Gas Futures 1.70 Put Options (Published January 20)

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Trade initiated: Jan 17
Trade closed: expecting expiration on Feb 24

Trade and analysis: We shorted this Tuesday afternoon on NYMEX natural gas future’s Mar put options with a strike price of 1.70 and with an expiration on the 24th of Feb, at an average price of 0.010 or $100.00 per contract.

Natural Gas

At the time of the trade, natural gas future was trading around 2.53 dollars or down 5.5% for the day. Natural gas has been crashing lately on the back of a warmer than usual weather in North-America and ample supplies. As we write this report today, natural gas is the worst performing commodity in 2012 having declined already 22% YTD. Impressive.

We believe that the shorts have a bit overreacted on natural gas the past weeks. We expect a major short-covering rally in natgas over the coming days which could take it from Friday’s close of 2.39 to the 2.90 area. In a worst case scenario if the decline will continue, then we believe the 2.0 level should be a strong support level. This is also the reason we shorted the 1.70 put options as it is very unlikely the price would fall that far.

With regard to risk management, we would close the short 1.70 put options if natural gas fell to 2.0 level.

Premium collected: $100.00 per contract
Trade closed with: $0 (expecting expiration on Feb 24th)
Estimated gross profit: $100.00 per contract (on expiration)

During the week we also traded futures and options on: Gold, silver, copper, WTI crude oil, Euro, Yen and US 30-year bonds.

Our trading plan for the next week

On the back of 5% rally in silver this Friday we will be looking to short May silver call options above strikes 60 if the rally will have some further legs over the upcoming days. We are also interested to short some Mar/May calls on copper at strikes 4.5 and above.

As Mar calls on WTI crude oil that we shorted in Dec and in the beginning of Jan have now more or less become worthless, we will initiate short position in Apr calls at strikes 150 and above.

Due to limited volatility, we will be avoiding currency and grains markets over the coming days. However, makes sense to sell short soybeans puts on any decline.

As orange juice (OJ) went limit up on Friday and closed at 210.65 it will be most interesting to see what the price is going to do on Monday.

Orange Juice

On Friday after the market close, FDA said that it will allow orange juice from Canda, Mexico, Costa Rica, Honduras and Belize to enter the US market. Remember that last week FDA banned all orange juice imports due to reports of illegal fungicide found in some orange juice samples. If they clear also Brazilian juice for US exports then OJ would crash limit down on at least two consecutive days. OJ is the most interesting market these days, let's keep a close eye on it!

Have a great trading week!

If you have questions or comments just send me an email: illimar.mattus[A]spadacapital.com

If you want to know what we trade in real time then follow us on Twitter at: http://twitter.com/#!/SpadaCapital

Shorting March 2012 Crude Oil Futures (Published January 13)

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Every week we make hundreds of trades in commodity futures and futures options. On Friday evening we look back at the week and re-analyze most of the trades. Among many issues we select the best trade of the week which normally has the best risk/reward ratio.

Trade initiated: Jan 12
Trade closed: Jan 12

Trade and analysis: We shorted on Thursday morning on the NYMEX March crude oil futures at an average price of 102.77 per contract. All contracts were bought back on the same day at an average price of 99.32. Our gross profit per contract was 3450 USD.

On Thursday morning crude oil was trading within a tight price range. After ECB Council's rate decision markets started to move lower slightly but traders were expecting the press conference of ECB president. After the press conference crude oil and other risk assets started to move higher. After stock markets opened in the US crude popped higher with no particular reason. We figured it was a good time to short as markets had gone up for a few days already into the ECB decision. After opening the position we placed a stop to 104.27

Soybeans

Crude oil's recent rise of more than 10 dollars can be entirely blamed on the situation between the US/Israel vs Iran. Fundamentally there are no real reasons why crude should trade at over 100 dollars a barrel. Therefore we have been looking at entry points to short crude oil. However, we do not want to keep positions overnight. We do have shorted call options but their strikes are above 140 and months are March, April, June.

To be honest, the surprising rise of crude oil on Thursday was very similar to the day when there was a rumor that Iran had closed the Strait of Hormuz which turned out to be a false one. During both of these days crude oil popped quickly higher only to drop like a stone a few minutes later.

Our trade was also helped by the EU's decision to postpone the oil embargo move for a 6 month period. Also, seasonality was on our side as crude tends to fall during the second half of January and February. The clever ones of you will also notice a clear pattern on a daily crude oil chart. This pattern was something that called us shorting the crude in the first place.

Futures sold at: 102.77
Bought back at: 99.32
Gross profit: $3450 per contract

During the week we also traded futures and options on: Gold, silver, WTI crude oil, natural gas, SP500, Euro, Yen, orange juice, soybeans, wheat, US 30-year bond.

Our trading plan for next week

EU's decision not to enforce oil embargo on Iranian oil exports was certainly not liked by Washington as without the support of EU it is more than certain that US and Israel will not fire a single bullet at Iran. Not to mention that Turkey, Russia, China and many other countries have outright declared that an attack on Iran is simply not acceptable.

So Standard & Poors decided that a good punishment for the EU would be a major ratings cut. The triple A rating of France is now a history. Ratings of Spain and Italy were also lowered. It think sovereign ratings in Europe should be even lower accross the board. Spain is clearly going to see more pain economically speaking, so will Italy, well, most of the countries in the EU. The crisis is just beginning and 2008 will soon look like a walk in the park.

We are going to rotate out of March to April crude oil options next week should oil climb to 103 or above. Natural gas puts look good but this game should only be considered by professionals.

We sold calls on soybeans this week and will continue to do so on every modest daily uptick. Seasonally prices should go higher from here but the fundamental economic picture is simply too bearish. Our good friend Kevin Kerr has recently been opening call spreads on soybeans. We'll see who is right this time. Kevin has an amazing track record so it will be interesting.

We wrote a chunk of gold and silver calls this week. Should metals move higher even more then we will sell more of them. Gold should go lower from here according to seasonal trends.

SP500 is a strong sell from here. Put spreads would be a nice play. We see no reason why equities should move higher from here other than hope, hope and hope on some central bank QE. Financial stocks are a screaming SELL.

Once or twice a year people get reminded that there is a futures market for FCOJ or frozen concentrated orange juice. This week was a killer in this sense. We sold 250 OJ calls on Tuesday and Wednesday and will be doing the same should this market move any higher. For those OJ traders looking for entertainment then this is your place: LINK.

Have a great trading week!

If you have questions or comments just send me an email: ingmar.mattus[A]spadacapital.com

If you want to know what we trade in real time then follow us on Twitter at: http://twitter.com/#!/SpadaCapital

Shorting May 2012 Soybeans Futures 17 Call Options (Published January 6)

Before we turn to this week’s best trade we want to inform our readers that Spada Capital’s Dec trading result was a gross return of 0.5% and for 2011 we achieved a gross return of 42.2%. As SP500 closed the year unchanged, or zero return, we therefore outperformed the index by the same 42.2%. As on average we target gross returns of 20-30% then 2011 was really an exceptional for us. We thank our readers for continued support and also for trading ideas that a lot of you shared with us during 2011. We have started 2012 on a cautious mode mostly due to ongoing stress in Europe.

Trade initiated: Jan 4
Trade closed: expecting expiration on Apr 20

Trade and analysis: We shorted this Wednesday morning on ECBOT soybeans future’s May call options with a strike price of 17 and with an expiration on the 20th of April, at an average price of 2 5/8 or $131.25 per contract.

At the time of the trade, soybeans future was trading at 12.4 dollars or unchanged for the day. Soybeans and the whole grains complex was rallying recently due to bad weather conditions in South America. These gains resulted in higher volatility in soybeans call options and we thought it would be nice to exploit this situation.

Soybeans

Before opening this trade we looked at the weather maps for Argentina and Brazil and found out that beginning from January 9th most of Argentina and southern Brazil will get as much as 38 mm of rain. We discussed this situation with our brokers in Chicago and were told that this amount of rain should be enough to improve the crop yields. So the recent rally in soybeans seems a bit overdone. Also, one has to keep in mind that the ongoing economic woes in Europe and softening economies in Asia will put a pressure on demand for soybeans, especially when prices would rise further.

Seasonally, soybeans are entering a period of consolidation until mid-February when demand from Asia should pick-up.

Premium collected: $131.25 per contract
Trade closed with: $0 (expecting expiration on Apr 20th)
Estimated gross profit: $131.25 per contract (on expiration)

During the week we also traded futures and options on: Gold, silver, WTI crude oil, natural gas, SP500, Euro, Yen, Australian dollar and corn.

Our trading plan for next week

We are keeping a close eye on developments in and around Iran. Over the last weeks we have suspended trading WTI crude oil and other energy products due to heightened risks of military escalation in the region. If Iran, for example, decides to close the Strait of Hormuz as has been speculated recently, then we could see crude oil skyrocketing to the 130-150 level within days. Let’s keep that in mind!

If volatility returns, we plan to continue shorting soybeans and corn May / July call options, and initiate a short position in wheat put options.

Regarding gold and silver, we’d like to see some more volatility premium being built into call options prices. Right now the premiums are a bit low.

Over the last week, we were cautiously shorting Yen futures March call options at strikes 1.40 and above. We’ll try continue doing that over coming week as we expect no gains in Yen against the dollar. In fact, we believe that Japan will face some significant debt financing issues if not over the coming months then most definitely during 2012.

We’ll be avoiding shorting puts on euro, although recent falls have made shorting put options quite attractive.

Have a great trading week!

If you have questions or comments just send me an email: illimar.mattus[A]spadacapital.com

If you want to know what we trade in real time then follow us on Twitter at: http://twitter.com/#!/SpadaCapital

Shorting Feb 2012 Crude oil futures 145 Call Options (Published December 16)

Every week we make hundreds of trades in commodities futures and futures options. On Friday evening we look back at the week and re-analyze each trade. Among many issues we select the best trade of the week which normally has the best risk/reward ratio.

Trade initiated date: Dec 13
Trade closed date: expecting expiration on Jan 17

Trade and analysis: We shorted this Tuesday morning on NYMEX crude oil future’s February call options with a strike price of 145 and with an expiration on the 17th of Jan, at an average price of 0.12 or $120.0 per contract.

At the time of the trade, crude oil future was up 2.5% trading at 100.6 dollars. This rally was the result of rumors circulating on the market that Iran had closed the Strait of Hormuz which is the only sea passage to the open ocean for large areas of the petroleum-exporting Persian Gulf. You should remember that 33% of the world's seaborne oil shipments of crude oil pass through the strait on an average day, making it one of the world's most strategically important choke points.

Crude Oil

Rumors have lately become a way of life on the markets as not a single day passes without market moving rumors which later are denied. This happened also to the Hormuz’ rumor and following its denial crude oil receded quickly from its day’s high of 101.45.

Recently, Iran has been making headlines almost daily. Wether it is about an imminent Israeli attack on Iranian nuclear facilities, downing of US spy drone, Iran’s military excercises and now about closure of Strait of Hormuz. The result of these unfounded rumors is higher price of crude oil and elevated volatility in the prices of crude oil options. We have been trying to exploit this situation by shorting far out of the money call options on crude oil, at strike prices of 140 and higher.

Now keep in mind, that we are only shorting the front month’s future options as these contracts offer the best risk/reward ratio. And by risk, in this case, we mean any actual market moving event happening in Iran.

Premium collected: $120.0 per contract
Trade closed with: $0 (expecting expiration on Jan 17th)
Estimated gross profit: $120.0 per contract (on expiration)

If you have questions or comments about this trade, send me an email: illimar.mattus[A]spadacapital.com

During the week we also traded futures and options on: Gold, silver, WTI crude oil, natural gas, coffee, cocoa, SP500, Euro, Yen and US 30-year bonds.

Our trading plan for the next week:
If crude oil retraces some of its recent decline, then we’ll be actively shorting Feb call options 140 strike, and also Mar 150 strike and above. With regard to recent weakness in gold/silver, we would be shorting Feb gold put options strike 1200 and below. Shorting May wheat put options strike 450 and below is also attractive. Continuing weakness in euro would prompt us to short Mar put options strikes 1.10 and 1.05. As we believe Japanese yen is unlikely to gain significantly, we would be exploiting any strength in yen to short Mar call options strikes 1.4250 and above.

If you want to know what we trade in real time then follow us on Twitter at: http://twitter.com/#!/SpadaCapital

Shorting Dec 2011 Australian Dollar Futures 0.995 Put Options (Published December 9)

Trade initiated date: Dec 9
Trade closed date: expired on Dec 9

Trade and analysis: We shorted on Friday early morning on the CME Globex Australian dollar future’s December put options with a strike price of 0.995 and with an expiration on the same day, at an average price of 0.14 or $140.0 per contract.

At the time of the trade the Aussie future was trading at 1.0050 having declined for more than -1% from previous close. As a result of this decline put options premiums were rallying and we decided to look into shorting out of the money puts.

Gold

Over the recent months we have been trading last day options quite acively. However, one should always use caution when implementing such strategies. When we sell options expiring on the same day then we usually are prepared to take the delivery should any of the options end in-the-money.

Christmas time is only two weeks away now. Normally the year-end can be described as a low volatility and volume trading environment. Anybody wanting to sell some option premium should wait no more as option premiums tend to decline very rapidly as the holiday season approaches.

Premium collected: $140.0 per contract
Trade closed with: $0 (expired)
Gross profit: $140.0 per contract

During the week we also traded futures and options on: Gold, silver, WTI crude oil, natural gas, SP500, DAX, Euro, Yen, Australian dollar, US 30-year bonds and Euro-bund.

If you have questions or comments about this trade, send me an email: ingmar.mattus[A]spadacapital.com

If you want to know what we trade in real time then follow us on Twitter at: http://twitter.com/#!/SpadaCapital

Shorting Mar 2012 Silver Futures 65 Call Options (Published December 2)

Trade initiated date: Nov 28
Trade closed date: expecting expiration on Feb 23

Trade and analysis: We shorted on Monday evening on Comex silver future’s March call options with a strike price of 65 and with an expiration on the 23rd of Feb, at an average price of 0.025 or $125.0 per contract. This trade was repeated on Friday, 2nd of Dec at the same price.

At the time of the trade on Monday, silver future was trading at 32.2 dollars having rallied more than 3% from Friday’s close. As a result of this rally March silver call options premiums were also rallying and we decided to look into shorting far out of the money calls.

Gold

As this year silver has traded as high as 49.5 and considering that there are talks of ECB potentially engaging in Fed-like money printing lunacy, we decided that shorting Mar 65 silver call options would provide a nice cushion if things indeed turned bad (and price of silver would take off), yet would also provide us the potential of earning a nice profit.

We are somewhat contrarians in the silver/gold market as we believe that despite Fed, ECB and other central bankers likely engaging in another printing euphoria, the price of silver/gold should not increase significantly. We believe that all the s_it that is likely to hit the fan has already been priced in. We also believe that the delevering that is currently ongoing in European and the US banking system will put a ceiling on any rally in commodities. We believe that over the next 6 months, gold will not surpass the 2050 dollar and silver the 55 dollar level.

Premium collected: $125.0 per contract
Trade closed with: $0 (expecting expiration on Feb 23rd)
Estimated gross profit: $125.0 per contract (on expiration)

During the week we also traded futures and options on: Gold, silver, WTI crude oil, natural gas, coffee, sugar, SP500, DAX, Euro, Yen, Australian dollar, US 30-year bonds and Euro-bund.

If you have questions or comments about this trade, send me an email: illimar.mattus[A]spadacapital.com

If you want to know what we trade in real time then follow us on Twitter at: http://twitter.com/#!/SpadaCapital

Shorting December 2011 Gold Futures 1720 Call Options (Published November 25)

Every week we make hundreds of trades with commodities futures and futures options. On Friday evening we look back at the week and analyze each trade. Among many issues we select the best trade of the week which normally has the best risk/reward ratio.

Trade initiated date: November 22
Trade closed date: November 22 (expired worthless)

Trade and analysis: We shorted on Tuesday evening on the Nymex gold future’s December call options with a strike price of 1720 and with an expiration on the same day, at an average price of 1.80 or $180.0 per contract.

At the time of the trade, gold was trading at 1700 dollars. On the previous day gold dropped to as much as 1667.

Gold

Why short a strike only 20 bucks away from underlying price? It's simple. When trading options then one thing we always watch is what strikes have the most action going on. Open interest of any option indicates how many participants in general are involved with a strike. The more contracts open, the more there are chances that some fellows would like to pin the market at expiration. Pinning means that some market participants want the market to close either above, below or at a certain price level. With gold and silver options pinning is a fact of life in recent years.

Of nearby options 1700 strike had the largest open interest. So we figured that makes sense to short the 1720 strike as 1700 would most likely be protected by some fellows. Bingo! Gold went as high as 1711 on that day but then backed off to end the day at basically exactly 1700. Very natural markets, indeed.

We also bought futures on that day at 1691 but that trade involved more risk and therefore we did not choose that as a trade of the week. Anyway, trading options on expiration day has become one of our favorite strategies recently.

Premium collected: $180.0 per contract
Trade closed with: $0 (expired worthless)
Gross profit: $180.0 per contract

During the week we also traded futures and options on: Gold, silver, crude oil, sugar, soybeans, SP500, Euro, Yen, US 30-year bonds.

If you have questions or comments about this trade, send me an email: ingmar.mattus[A]spadacapital.com

If you want to know what we trade in real time then follow us on Twitter at: http://twitter.com/#!/SpadaCapital

Shorting January 2012 WTI Crude Oil Futures 140 Call Options (Published November 18)

Every week we make hundreds of trades in commodities futures and futures options. On Friday evening we look back at the week and analyze each trade. Among many issues we select the best trade of the week which normally has the best risk/reward ratio.

Trade initiated date: November 16
Trade closed date: expecting expiration on Dec 15th

Trade and analysis: We shorted on Wednesday evening on Nymex Crude Oil future’s January call options with a strike price of 140 and with an expiration on the 15th of December, at an average price of 0.17 or $170.0 per contract.

At the time of the trade, Crude Oil was trading at 102.5 dollars having strongly breached the psychologically important 100 dollar level. At the same time, the Brent Crude contract fell sharply and the spread between Brent and WTI narrowed to less than $10. Remember, that the spread stood at $25 less than three months ago.

Gold

Crude Oil prices diverged from overall risk sentiment trends on Wednesday following news that Canada’s Enbridge Inc intended to pipe supplies to the Gulf of Mexico, mostly for shipment overseas. As we shorted the Jan Crude Oil 140 call options we assumed and wrote also on our Twitter account (www.twitter.com/spadacapital) that it is likely WTI will test the key 100 level over the coming days.

Well, on Thursday WTI was down 3.6% falling exactly below the 100 level and the value of call options we shorted evaporated. On Friday, the closing price of these 140 call options was just 0.04 or $40.0 which means that our unrealized profit was $130.0 per contract delivering a 76.5% return in just 2 days. We do not intend to close this short position and will hold it until expiration. We view it is very unlikely that Crude Oil will reach 140 level by expiration day and the short position should therefore expire worthless.

Premium collected: $170.0 per contract
Trade closed with: $0 (expecting expiration on Dec 15th)
Estimated gross profit: $170.0 per contract (on expiration)

During the week we also traded futures and options on: Gold, silver, crude oil, natural gas, cocoa, coffee, sugar, SP500, Euro, Yen.

If you have questions or comments about this trade, send me an email: illimar.mattus[A]spadacapital.com

If you want to know what we trade in real time then follow us on Twitter at: http://twitter.com/#!/SpadaCapital

Shorting December 2011 Silver Futures 53.00 Call Options (Published November 11)

Every week we make hundreds of trades. On Friday evening we look back at the week and analyze each trade. Among many things we select the best trade of the week which normally has the best risk/reward ratio.

Trade initiated date: November 8
Trade closed date: expecting expiration on Nov 22nd

We shorted on Tuesday evening, on Comex, December silver future’s call options with a strike price of 53.00 and with an expiration on the 22nd of November, at an average price of 0.020 or $100.0 per contract.

Gold

At the time of the trade, Silver was trading at 35.00. Metal prices were supported at the time of the trade by hopes that Italy would get a new prime minister. Any sharp price moves have recently been followed by even more severe volatility blowouts when looking at options prices. So did the call prices when we started to look for this particular trade.

We decided to short the December 53.00 call options as it was very unlikely that silver would gain 18 dollars in 14 days and thus hit our strike price. If Silver would, however, hit 53.00 level by Nov 22, then we will most likely go short Silver at 53.00 with futures.

But anyway. Would you believe that somebody would be willing to by such a call option for $100 a piece? The answer is Yes. To be honest, if silver trades at 35 then I personally would never by a call option that has a strike price of 53 and expires in 14 days. Every time you see these kind of opportunities then you just have to press the Sell button and give those guys the calls they so desperately want. Easy money in some sense.

Premium collected: $100.0 per contract
Trade closed with: $0 (expecting expiration on Nov 22nd)
Estimated gross profit: $100.0 per contract (on expiration)

During the week we also traded futures and options on: gold, silver, crude oil, Euro, Yen, soybeans, eurodollars.

If you have questions or comments about this trade, send me an email: ingmar.mattus[A]spadacapital.com

If you want to know what we trade in real time then follow us on Twitter at: http://twitter.com/#!/SpadaCapital

Shorting December 2011 Gold Futures 2000 Call Options (Published November 4)

Trade initiated date: November 3
Trade closed date: expecting expiration on Nov 22nd

Trade and analysis: We shorted on Thursday evening, on Comex, November Gold future’s call options with a strike price of 2000 and with an expiration on the 22nd of November, at an average price of 2.20 or $220.0 per contract.

Gold

At the time of the trade, Gold was trading at 1765 having gained around 2% for the day. Gold was supported by the news that European Central Bank lowered its benchmark interest rate.

Due to such a strong rally, prices of Gold’s call options expiring in November had a large volatility premium. We decided to short the Dec 2000 call options as it was very unlikely Gold would gain 235 dollars in 19 days and thus hit our strike price. If Gold would, however, hit 2000 level by Nov 22, then we will most likely go short Gold at 2000.

Premium collected: $220.0 per contract
Trade closed with: $0 (expecting expiration on Nov 22nd)
Estimated gross profit: $220.0 per contract (on expiration)

During the week we also traded futures and options on: Copper, gold, silver, crude oil, coffee, sugar Euro, Yen.

If you have questions or comments about this trade, send me an email: illimar.mattus[A]spadacapital.com

If you want to know what we trade in real time then follow us on Twitter at: http://twitter.com/#!/SpadaCapital

Shorting Euro Futures (Published October 28)

Every week we make hundreds of trades. On Friday evening we look back at the week and analyse what went wrong and what went right. Among many things we select the best trade of the week which normally has the best risk/reward ratio.

Trade initiated date: October 27
Trade closed date: October 28

We shorted on Thursday, on Globex, December euro futures at an average price of 1.42120.

So we have another bailout! I am not sure if I should be happy or sad about this ongoing political comedy. On Wednesday evening Europeans came out and said that Greece will need to pay back only 50% of their outstanding debt. And somehow private debt holders "VOLUNTARILY" agreed to this!!! Even more, ISDA declared that this is not a credit event and therefore all those credit default swaps can be thrown out of the window as you can be 100% sure that all future sovereign haircuts will be "VOLUNTARY". What a total joke this is. You ask why? Well, it is simple. In the future there is no way a sovereign creditor can hedge his positions with CDS. Therefore European sovereign yields will most likely rise, not fall. Europe won a battle but will most likely lose the war. Well done!

The euro short we opened on Thursday, October 27 was not based on the last paragraph but rather on a technical view. Euro was up around 300 pips at the trade opening moment and we felt this was a right thing to do. On a relative basis crude oil and gold were already starting to turn south when we decided to short euro.

We made $850 dollar per each contract we shorted as the trade was closed at 1.41440 the next day. Stop-loss was at 1.4266 if the market would have moved against us.

Ok, for some time Greeks were the smelliest guys in the room. Now that Greece is no longer holding the bag our focus turns to European banks and other "financially stable" sovereigns like Italy, Portugal, Ireland, Spain, France until the last domino falls.

Authorities are telling us that only just a bit over 100 billion euros are needed to get the banks balance sheets in good shape. Accordingly this should take capital adequacy ratio of European banks to a minimum of 9% by June 2012. Well, tell this to Dexia shareholders as the bank capital adequacy ratio was at 12% just a few weeks before its collapse. With the CDS market now officially gone and Germans keeping a close eye on the "price stability" then we can pretty much say that the capital adequacy ratio should be much, much more higher. Unless a massive economic growth drops down from the sky and all debts will just vanish.

You are free to think that after the decisions made this week Europe is unsinkable but unfortunately the reality is very ugly. It looks like a division between Merkozy and Berlusconi has widened. Also, Ireland and other countries have now every right to demand their debt forgiveness. And they will. By the time we get through the France credit rating cut and some kind of similar debt forgiveness then Germans will most likely have their deustche mark back and will sit on the only chair left in the room when the music stops.

Some are saying that 2012 will be a good year - US presidential elections, London olympics etc. This should make a happy atmosphere as Obama needs to pull an elephant-size rabbit out of his hat to get re-elected. Many need a miracle to get back on the track. Miracles happen. But in trading one should never rely on miracles.

However, we expect a moderate year-end rally to continue. We have been selling put options in recent weeks on almost everything as Christmas will most likely come early this year. But be prepared as each storm that comes by from now will be more severe and demand even more casualties. The end of debt supercycle can only be ugly and to many lethal.

Trade opened at: 1.42120
Trade closed at: 1.4144
Gross profit: $850.0 per each contract

During the week we also traded futures and options on: SP500, gold, silver, crude oil, coffee, euro, Japanese yen, soybeans, US 30-year bond.

If you have questions or comments about this trade, send me an email: ingmar.mattus[A]spadacapital.com

If you want to know what we trade in real time then follow us on Twitter at: http://twitter.com/#!/SpadaCapital

Shorting November 2011 Silver Futures 20.0 Put Options (Published October 21)

Trade initiated date: October 20
Trade closed date: expecting expiration on Oct 26th

Trade and analysis: We shorted on Thursday, on Comex, October Silver future’s put options with a strike price of 20.0 and with an expiration on the 27th of October, at an average price of 0.028 or $140.0 per contract.

At the time of the trade, Silver was trading at 30.1 having fallen from Thursday’s high of 31.37. Silver has traded in a corridor recently, not being able to break the 32.5 resistance level and support at 30.0 has also been protected.

Despite trading in a corridor, Silver options still have quite a bit of volatility premium in prices. So, as on Thursday afternoon Silver was under selling pressure, we took a close look at Nov put options and found that 20.0 strike has the best risk/reward ratio. We viewed it to be very unlikely, that Silver would fall from 30.1 to 20 (our strike price) in just the 4 remaining trading days. If it did, however, we would be quite comfortable taking the delivery of the futures, thus going long the underlying.

Silver closed the week at 31.193. We estimate that the Nov 20.0 put options will probably expire worthless on Wednesday and the $140 we collected on each contract will be realized as profits.

Premium collected: $140.0 per contract
Trade closed with: $0 (expecting expiration on Oct 26th)
Estimated gross profit: $140.0 per contract (on expiration)

During the week we also traded futures and options on: SP500, gold, silver, copper, crude oil, coffee, Euro, Japanese yen, corn and soybeans.

If you have questions or comments about this trade, send me an email: illimar.mattus[A]spadacapital.com

If you want to know what we trade in real time then follow us on Twitter at: http://twitter.com/#!/SpadaCapital

Shorting December 2011 Corn Futures 740 Call Options (Published October 14)

This week the best trade was shorting December 2011 corn futures 740 call options.

Trade initiated date: October 11
Trade closed date: October 12

Trade and analysis: We shorted on Tuesday, on the Globex, December corn future’s call options at the strike price of 740, at an average price of 2.0 or $100.0 per contract.

At the time of the trade December futures contract was limit-up at 645. Massive short-covering took place on that day as USDA was sceduled to release its monthly WASDE report which to many is the most important grain report of any month. Previous WASDE report convinced us that fundamentally there was no reason for wheat or corn to rally, report or not. Therefore we decided that the move was simply a short-covering event.

Should the trade have started to move against us we would have closed the position if December corn future would have breached the 700 level. However, the trade was closed just a day later as we were right in our forecast that the October WASDE would not give much help to all those bulls out there.

Premium collected: $100.0 per contract
Trade closed with: $25 per contract
Gross profit: $75.0 per contract

Talking about the medium term then I guess we are one of few bears in this market. Majority believe that even from these levels corn, wheat and soybeans have a long way of going higher. We believe that slow global economic growth, ongoing budget cuts and other factors will certainly keep these markets calm. In general who cares what the price of cotton, orange juice, palladium or Bank of America stock is doing. Food prices, however, are something that even the politicians monitor very carefully to eliminate potential tensions. Of course, in the current environment market dynamics change faster than anything. So that the expected error margin should be quite wide.

One of our readers emailed us and asked if our strategy of shorting uncovered options was risky? Of course, it is risky as these options can potentially become in-the-money options costing you even hundreds of times more than the initial premium collected when buying them back. Therefore risk management is something that you have to be really good at. Writing uncovered options is only suitable for professional investors. However, did you know that majority of options bought on futures or stocks expire worthless. Then why would you want be a buyer of options?

This trade was in real-time posted to our twitter account. So those who follow us had a chance to enjoy this nice short-term trade. If you have questions or comments about this trade then send me an email: ingmar.mattus[A]spadacapital.com

During the week we also traded futures and options on: SP500, gold, silver, crude oil, coffee, Japanese yen and soybeans.

Please follow our Twitter feed for real-time thoughts on market moves and trading ideas.

Shorting October 2011 Euro Futures 1.38 Call Options (Published October 7)

This week the best trade was shorting October 2011 euro futures 1.38 call options.

Trade initiated date: October 5
Trade closed date: October 7 (expiration)

Trade and analysis: We shorted on Wednesday, on the Globex, October euro future’s call options with a strike price of 1.38 and with an expiration on the 7th of October, at an average price of 0.00090 or $112.5 per contract.

At the time of the trade, EUR/USD was trading at around 1.3320 having rallied from Tuesday’s low of 1.3140. There were rumours that European Union will get its act together regarding the debt crisis, and also that Belgium’s problems-ladden Dexia bank will be recapitalized. So there was some optimism in the market (which we thought not to be substantiated) and Euro calls were getting good pricing.

Despite the market optimism and rallying stock markets, we thought that euro would have hard times getting above its 1.36 resistance level and definitely wouldn’t hit 1.38 level by Friday’s close of trade. So we decided to short the 1.38 October calls that expired this Friday.

Should the trade have started to move against us we would have closed the position if Euro would have breached the 1.36 resistance level.

Euro moved higher on Wednesday, Thursday and also early Friday, but its high for the week was just at 1.3518, far away from our strike price of 1.38. On Friday evening, euro Dec futures closed at 1.3381 therefore our short call options expired worthless and we thus collected the full premium.

Premium collected: $112.5 per contract
Trade closed with: $0 (expired worthless)
Gross profit: $112.5 per contract

If you have questions or comments about this trade then send me an email: illimar.mattus[A]spadacapital.com

During the week we also traded futures and options on: SP500, gold, silver, crude oil, coffee, US 30-year bond, Euro, Japanese yen, British pound and soybeans.

Shorting December 2012 Silver 200.0 Call Options (Published September 30)

This week the best trade was shorting December 2012 Silver 200.0 call options.

Trade initiated date: September 27
Trade closed date: not yet closed

Trade and analysis: Before going to this week's trade I would just like to say that the December 2012 silver 100.0 calls we shorted last week at 0.300 ($1500) were this week bought back at 0.175 ($875). Nice profit of $625 per contract.

But now to this week's trade which was again shorting silver. This time we shorted not the December 2012 100.0 calls but 200.0 calls. The average price of the trade was 0.065 (equals $325) per contract.

Please notice that expiration of these option contracts is almost 14 months away! However, we do not expect to hold them until expiration. My best quess is that we will no longer have these contracts in our accounts by the end of October. As these are very illiquid markets then the trading pit on the Nymex floor is basically the only place you can get fills.

Silver futures closed at 29.98 on Friday. So in terms of risk management we would be in trouble if silver rose from 29.98 to 200 before the close of trading on November 2012 expiration day. I am not saying that I am 100% certain that it will not reach the 200 level but this is quite unlikely.

Should the trade start moving against us then we will hedge the position with March 2012 calls.

Premium collected: $325.0 per contract
Trade closed with: (still open)
Gross profit: (to be announced once we close the trade)

If you have questions or comments about this trade then send me an email: ingmar.mattus[A]spadacapital.com

During the week we also traded futures and options on sugar, SP500, copper, gold, silver, crude oil, coffee, US 30-year bond, Euro, Japanese yen, British pound and soybeans.

Shorting December 2012 Silver 100.0 Call Options (Published September 23)

Trade Initiated Date: September 23
Trade Closed Date: not yet closed

Trade and analysis: We shorted on Friday, on the Comex, December 2012 Silver future’s call options with a strike price of 100.0 and with an expiration on the 27th of November 2012, at an average price of 0.300 or $1500.0 per contract. Please notice that expiration of this option is almost 14 months away!

At the time of the trade, Silver was trading at around 30.50, down 17% for the day (unbelievable!) and there was panic everywhere. Based on our pricing models, the actual market price of this option contract was somewhere between 0.160 / 0.170 but clearly somebody had margin calls and was buying this contract at extremely ridiculous price – that is at 0.300. On Thursday, the day before our trade, Silver future settled at 35.578 and Dec 2012 call option with strike 100.0 settled at 0.305.

What this means is that, our Silver 100.0 call option trade price of 0.300 on Friday was basically the same as Thursday’s closing price, but the actual Silver future’s price was 17% lower on Friday compared to Thursday. The Silver 100.0 call option settled on Friday evening at 0.157 which means that we made a one day gain of 0.143 points or $713.0 per each contract shorted.

This is one of our favorite trading strategies - shorting something at a price that is much much higher than the actual market price. These trades can be done only at times of extreme market volatility – and the last days have exactly been like this. Over the last couple of days, we have employed this strategy not only on Silver market, but also on Gold, Crude oil, Coffee and Copper markets. We use sophisticated real-time market pricing and scanning technologies to discover these amazing trading possibilities.

What are we going to do next with this short Dec 2012 Silver 100.0 call option? Well, if we can, we’ll try to buy it back on Monday. Why do we say, “if we can”? Well, this is a very illiquid option strike level, it’s expiration is more than 1-year away and we might face difficulties finding a counterparty. So if we can’t close this position on Monday, we will lock-in this profit by buying Dec 2011 Silver call options at strikes 50.0 and above. By doing so, we will buy time to find counterparty for the Dec 2012 calls and also we will open up an opportunity to earn good profits on these long Dec 2011 calls should the Silver market turn and make a jump.

Premium collected: $1500.0 per contract
Trade closed with: (still open)
Gross profit: (to be announced once we close the trade)

If you have questions or comments about this trade then send us an email: illimar.mattus[A]spadacapital.com

During the week we also traded futures and options on SP500, copper, gold, silver, crude oil, coffee, US 30-year bond, Euro, Japanese yen, British pound and soybeans.

Shorting October 2011 Euro Future’s Put Options (Published September 16)

Trade Initiated Date: September 12
Trade Closed Date: September 15

Trade and analysis: We shorted on Monday, on the Globex, October euro future’s put options with a strike price of 1.21 and with an expiration on the 7th of October, at an average price of 0.00170 or $212.5 per contract.

At the time of the trade, EUR/USD was trading at around 1.3570 and there was panic everywhere. Markets were and are still worried about possible Greek default. Bank stocks were deep in the red in Europe. There were rumors that French banks could be downgraded etc. It looks like rumors are a big part of market moves in recent weeks.

At around 1.3500 euro has fallen approximately 1000 pips from its recent equilibrium. We believe that EUR/USD will be trading at 1.0000 soon but this will most certainly not happen overnight. Therefore even in a downtrend you should take the opportunity to sell puts from time to time. There is no premium left in the OTM call prices, so puts are essentially the only choice to collect some premium.

We bought these puts back on Thursday at 0.00020 or $25.0 which means that our profit was $187.5 per each contract traded. Not bad at all so much out-of-the-money options.

Nevertheless, when looking ahead all traders should carefully manage their risks during coming weeks as there is simply too much uncertainty in the air. We wrote about it in our recent article (LINK). We believe that markets will be disappointed on September 21 when FOMC will announce their next moves to fight unemployment.

Premium collected: $212.5 per contract
Trade closed with: $25.0 per contract
Gross profit per: $187.5 per contract

During the week we also traded futures and options on gold, silver, crude oil, coffee, US 30-year bond, Euro, Japanese yen, British Pound and soybeans.

Shorting Dec 2011 Yen Future’s Call Options (Published September 9)

Trade Initiated Date: 9 Sep
Trade Closed Date: …. (expecting expiration)

Trade and analysis: We shorted on Friday, on Globex, Dec Yen future’s call options with a strike price of 1.4650 and with an expiration on 9th of Dec, at an average price of 0.0030 or $375.0 per contract.

At the time of the trade, Yen Sep future was trading around 1.2930. In 2011, we have had already 2 major intervention attempts by the Bank of Japan to lower the price of Yen against the dollar. In these interventions BOJ has failed. Nonetheless, as Yen is still overpriced against USD (according to BOJ), we think that it is only a matter of time when BOJ makes an SNB-like intervention. Remember, what SNB did to Swiss franc?

So, we figured that it should be fairly safe shorting the out of the money calls on Yen, thus betting against further appreciation of this currency. We usually like to short the most distant out-of-the-money calls and this was the reason we decided to short the 1.4650 Dec calls. This trade was just the beginning and we expect to short more Yen calls (also Oct and Nov) over the coming weeks.

Premium collected: $375.0 per contract
Trade closed with: not yet closed, expecting expiration
Expected gross profit: $375.0 (at expiration)

During the week we also traded futures and options on: SP500, VIX, gold, silver, crude oil, coffee, US 30-year bond, Euro, Japanese yen and franc.

Shorting December 2011 Coffee Future’s Call Options (September 2)

Trade Initiated Date: August 29
Trade Closed Date: not yet closed, expecting expiration

Trade and analysis: We sold on Monday on the pit December 2011 coffee call options with a strike price of 450.0 with a sales price of 0.40 or $150.0. This means that by selling short these call options our trading account was credited with $150.0 per each contract sold.

At the time of the trade, December coffee was trading at 284.0 and was higher for the day. The call options we sold have an expiration on the 11th of November and we expect them to expire worthless. Having gained quite a bit during recent weeks we concluded that the price of coffee has had a nice run, the volatility has increased and so have the option prices. This trade was an initiation trade in coffee, as seasonally, the price should go down in September and we expect to sell more far out 2011 December and 2012 March strikes within the coming weeks.

In terms of risk management, we would close the position if the market would move 200% against us and the option price would rise from 0.40 per contract to 1.20, resulting in a potential loss of $300.0 per contract. In general coffee price would have to rise over 58% to make this trade unprofitable at expiration.

Premium collected: $150.0 per contract
Trade closed with: not yet closed, expecting expiration
Expected gross profit: $150.0 per contract

During the week we also traded futures and options on: wheat, soybeans, crude oil, gold, US 30-year bond, euro, Japanese yen and Swiss franc.

Please follow our Twitter feed for real-time thoughts on market moves and trading ideas.

Shorting September 2011 Silver Future’s Put Options (August 26)

Trade Initiated Date: 25 Aug
Trade Closed Date: 25 Aug (contract expired)

Trade and analysis: We shorted on Thursday morning (US time) on Globex Sep Silver future’s put options with a strike price of 37.0 and with an expiration on 25th of Aug, at an average price of 0.025 or $125.0 per contract.

On Thursday morning, both Gold and Silver continued to be under pressure after previous day’s major selloff. Therefore Silver put options expiring on Thursday evening had a large volatility premium written into prices. So as the selling pressure was abating in Gold and Silver, we decided to start selling short Silver put options expiring the same evening.

On Thursday, the lowest tick on Silver future was at 38.76, so we decided to short Sep Silver put options with a strike price of 37.0 . We assumed, that even if the Silver futures would crash and our naked put options would be in-the-money at expiration, we would feel comfortable going long Silver futures at 37.0 . We received on average 0.025 or $125.0 per contract for these 37.0 naked put options and at the time of the trade Sep Silver future was trading at 39.8 or 2.8 points away from our stikes. As Sep Silver future closed on Thursday at 40.745 far off our 37.0 strike price, therefore our options expired worthless and we collected in full the premium of $125.0 per contract.

Premium collected: $125.0 per contract
Trade closed with: $0 per contract (contract expired)
Gross profit earned: $125.0 (expected at expiration)

During the week we also traded futures and options on: corn, soybeans, coffee, gold, US 30-year bond, Euro, Japanese yen and franc.

Please follow our Twitter feed for real-time thoughts on market moves and trading ideas.

Shorting December 2011 Gold Futures (August 19)

Trade Initiated Date: August 19
Trade Closed Date: August 19

Trade and analysis: On Friday morning we shorted COMEX December gold futures at the price of 1869.

Some of the best traders we know have recently stated that markets are broken and only reckless people are left trading. When looking at the charts of recent gold price moves then this could very well be the case unless traders use radical risk management rules. As some might say: trading is one of the toughest ways to make money. We are not the only ones who tend to agree on this last statement.

We believe that the price of gold has fundamental reasons to continue climbing higher. When the political agenda is to print your way out of trouble then after SNB's latest comments we believe that gold is one of the last options to protect your wealth. The other one we like is real estate, of course. But not every kind of real estate.

People are emotional and price moves are often emotional, too. When we looked at the gold price on Friday after it had reached 1881 then our immediate idea was to hit the SELL button. And so we did but only after we were sure that the flow had changed. Gold's price move on Friday was very similar to the price move of the Swiss franc when all hell broke loose after the recent FOMC statement. Some of the best moments to make money is when majority of market participants are panicking. However, even then risks have to be managed very seriously.

Our profit target was at 1851.00 and we would have closed the trade with a stop loss at 1881.00. When markets are panicking then you are proven right or wrong very fast. We had to wait only 20 minutes to take the profit home and start the weekend early. However, next time it could take 20 minutes to prove us wrong. Therefore stops have to be in place every time.

Opening price: 1869.00
Closing price: 1851.00
Gross profit earned: $1800.0 per contract

During the week we also traded futures and options on: sugar, coffee, soybeans, crude oil, gold, US 30-year bond, Japanese yen.

Please follow our Twitter feed for real-time thoughts on market moves and trading ideas.

Shorting Sep 2011 Swiss Franc Future’s Call Options (August 12)

Trade Initiated Date: 11 Aug
Trade Closed Date: - (expecting expiration)

Trade and analysis: We shorted on Thursday early morning (US time) on Globex Sep Swiss franc call options with a strike price of 1.46 and with an expiration on 9th of Sep, at an average price of 0.0087 or $1087.5 per contract.

On Thursday morning, the bullish tone in Swiss franc was fading, there were also talks of possible SNB intervention. Also, after Tuesday’s wipe-out of most of the spot Franc shorts, we decided that it is time to take a contrarian view on Franc and bet on its weaking. At this time, Franc Sep future was trading at 1.3750 and we decided that shorting the 1.46 strike Sep call options is a good trade.

After we initiated the trade, Franc future continued its decent and closed on Friday at 1.2898. The high of the week was at 1.4167 on Tuesday evening. The call options we sold short on Thursday at 0.0087 or $1087.5 per contract were valued at 0.0017 or $212.5 per contract. We intend to hold this short position until its expiration on 9th of Sep. In terms of risk management, we would close this position if Franc futures would touch the 1.4000 level before options expiration.

Premium collected: $1087.5 per contract
Trade closed with: $0 per contract (expecting expiration)
Gross profit earned: $1087.5 (expected at expiration)

During the week we also traded futures and options on: corn, soybeans, crude oil, gold, US 30-year bond, German 10-year bond, Japanese yen and franc.

Please follow our Twitter feed for real-time thoughts on market moves and trading ideas.

Information provided herein is for informational purposes only. Losses from commodity investments may be greater than the initial investment(s). Commodity trading is not appropriate for all investors, and a commodity investment must be evaluated in light of the potential risk of loss. Past profits are not necessarily indicative of future results.

Selling Spot EUR/USD (July 29)

Trade Initiated Date: 27 July
Trade Closed Date: 27 July

Trade and analysis: We shorted on Wednesday morning on the interbank foreign exchange market EUR/USD spot rate at 1.4479.

On Wednesday we did not see any continuation to Tuesday's rally when 1.4500 resistance level was crossed. Also, we continue to think that Europe has much more serious fiscal, political and economic problems than the US does. Therefore we have been only short-term sellers in EUR/USD lately.

The technical picture of the EUR/USD chart was a screaming sell on Wednesday morning. Therefore we initiated a sell position at 1.4479. Our stop loss was at 1.4563 and target at 1.4379.

100-pip profit target is not much. Our target was reached already 3 hours later and we managed to walk away with a profit of $1000.0 per contract.

Over the next couple of weeks and maybe even longer we will be going only short EUR/USD when we see a high potential for profitability. We could be wrong but a higher EUR/USD will most certainly make the situation for European exporters even worse than it is today. Add to the mix Southern European debt problems and you understand that Jim Rogers could be right again this time when he is saying that the sentiment towards the US dollar has become too negative. Crowds are always wrong in their expectations.

Opening price: 1.4479
Closing price: 1.4379
Gross profit earned: $1000.0 per contract

During the week we also traded futures and options on: 30-year US bonds, sugar, wheat, soybeans, crude oil, gold, euro, Japanese yen and franc.

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Shorting August 2011 Wheat Future’s Call Options (July 22)

Trade Initiated Date: 22 July
Trade Closed Date: 22 July

Trade and analysis: We shorted on Friday early morning (US time) on Ecbot Aug wheat call options with a strike price of 7.00 and with an expiration the same evening (on Friday) at an average price of 1 1/2 or $75 per contract.

On Friday morning, the bullish tone from Thursdays Eurozone Greece deal started to wear off and the financial markets were feeling some pressure. So grain markets were also quite weak following their Thursday’s selloff. When wheat future was trading around 6.80 on early Friday morning we decided to sell Aug 7.00 call options at an average price of 1 1/2 or $75 per contract. As these contracts were expiring in the evening, our bet was that Sep wheat future would not reach our strike price of 7.00. If it had reached our strike price, we would have closed our short options position.

As the grain pits opened in the US on Friday morning, grains were feeling some added selling pressure so the call options we sold earlier on overnight session were practically becoming worthless. Sep wheat future was basically trading in a corridor all Friday, yet just before the close of the market made a jump and closed at 692 ¼, far away from our strike price of the options.

Premium collected: $75 per contract
Trade closed with: $0 per contract (expiration)
Gross profit earned: $75.0 per contract

During the week we also traded futures and options on: silver, sugar, orange juice, coffee, crude oil, gold, US 30-year bond, German 10-year bond, Japanese yen and franc.

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Selling Short August 2011 Crude Oil Future’s Put Options (July 15)

Trade Initiated Date: July 14
Trade Closed Date: July 15 (expiration)

Trade and analysis: We sold on Thursday afternoon (US time) on Globex August 2011 WTI crude oil put options with a strike price of 92.0 with an average sales price of 0.15 or $150.0. This means that by selling short these put options our trading account was credited with $150.0 per each contract sold.

At the time of the trade, August WTI crude oil was trading around 95.0 per barrel having been pushed down by about 3 dollars per barrel. The put options we sold had the expiration on the following day so we were not intending to buy them back. We expected them to expire worthless. Later on Thursday and Friday crude oil did not trade lower than 95 dollars. Therefore the premium we sold turn out to be our profit - 150 dollars per each contract we sold.

In terms of risk management, we would have closed the puts if crude oil August future had fallen through 93 dollar price level.

During the weekend we had a chat with some other traders who claimed that selling naked options with such a small premium is pointless. We don't agree. If selling options for a 100 dollar profit was your only strategy then we might agree. But such trades account for only a fraction of our overall trading activities. Also, one could claim that such trades were the cause behing LTCM's collapse. Not true either. The problem with LTCM was that their premium collection engine worked fine. The directional trading approach on the other hand played a major role in the collapse of the fund.

Premium collected: $150.0 per contract
Trade closed with: $0.0 (expired worthless)
Gross profit earned: $150.0 per contract

During the week we also traded futures and options on: sugar, coffee, crude oil, gold, US 30-year bond, euro, eurodollar, soybeans and corn.

Please follow our Twitter feed for real-time thoughts on market moves and trading ideas.

Shorting Jul 2011 Swiss Franc Future’s Call Options (July 8)

Trade Initiated Date: 6 July
Trade Closed Date: 7 July

Trade and analysis: We shorted on Wednesday morning (US time) Swiss franc July call options with a strike price of 1.21 and with an expiration on Friday, July the 8th at an average price of 0.0011 or $137.5 per contract.

On Wednesday morning, the Franc future was trading 1.1950 and we figured that technically it is very unlikely that it will breach the 1.21 level by Friday. There was also some speculation that Friday’s non-farm payrolls number could be better than expected so we figured that this should give some support for the dollar. So, after our short position in the 1.21 July call option was initiated, dollar started appreciating agains the Franc and our options price started to decline.

On Thursday, July 7th, as the ADP jobs number came in better than expected, dollar made a strong move against the Franc and we closed fully the short position by buying back the call option at a price of 0.0001 or $12.5 per contract.

Premium collected: $137.5 per contract
Trade closed with: $12.5 per contract
Gross profit earned: $125.0 per contract

During the week we also traded futures and options on: silver, sugar, coffee, natural gas, crude oil, gold, US 30-year bond, German 10-year bond, australian dollar, franc and euro.

Please follow our Twitter feed for real-time thoughts on market moves and trading ideas.

Buying December 2011 Corn Futures (July 1)

Trade Initiated Date: July 1
Trade Closed Date: July 1

Trade and analysis: On Friday morning (US time) we bought corn December 2011 futures for a short-term profit with an average price of 5.82 7/8 per contract.

Thursday's USDA estimates of planted acreage was a surprise for corn at 92.3 million acres, more than the March prospective plantings report and more than what all of the trade had estimated. U.S. corn growers increased the planted acreage by 4.1 million acres from last year. This is a third consecutive year of increased corn acreage and is the second-largest corn acreage in more than 60 years, following only 2007 with its 93.5 million acres.

Following the news corn futures ended limit-down on Thursday. On Friday when corn was also close to limit-down we decided to open a short-term long as weather could still have some negative surprises left and market clearly over-reacted. We did not have to wait for a long time.

The market went straight up after we opened the position. We closed the position a few minutes before the close on Friday with an average price of 5.97 1/2.

Long initiated at: 5.82 7/8
Long closed at: 5.97 1/2
Gross profit earned: $731.25 per contract

During the week we also traded futures and options on: sugar, coffee, orange juice, crude oil, US 30-year bond, German 10-year bond, gold and euro.

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Shorting September 2011 Euro futures (June 24)

Trade Initiated Date: 22 June
Trade Closed Date: 23 June

Trade and analysis: We shorted on Wednesday evening (US time) Euro futures at an average price of 1.4339 per per contract.

On Wednesday after Bernanke’s interest rate press conference we shorted Euro futures since Bernanke was saying that deflation doesn’t seem to be a problem anymore and the current economic situation is not similar to August 2010. He was pretty straightforward on QE3, meaning that this won’t happen. In a situation where there will be no QE3 and deflation risk is not there anymore (according to Bernanke) we figured that USD should appreciate.

On Thursday, we closed the position at an average price of 1.4211 per contract, thus making profits of 128 points per each contract. The reason for the closing was the recent elevated volatility on the FX and other financial markets so we wanted to take the profits home.

Short initiated at: $1.4339
Short closed at: $1.4211
Gross profit earned: $1600.0 per contract

During the week we also traded futures and options on: cotton, silver, live cattle, coffee, orange juice, crude oil, US 30-year bond, German 10-year bond, yen, franc and euro.

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Buying spot EUR/USD (June 17)

Buying spot EUR/USD

Trade Initiated Date: June 16
Trade Closed Date: June 17

Trade and analysis: Thursday was an overly positive day with stocks and many commodities finishing the day higher after an early sell-off. Only crude oil managed to close deep in the red. EUR/USD had a very volatile trading week. On Thursday the situation changed as there were rumors that Merkel and Sakrozy had agreed on some new terms beneficial for the new Greek bailout. We seldom trade sport FX but this was one of those days.

Just a few minutes before the closing bell at New York stock exchange we bought EUR/USD at 1.4189 as it was clear that market participants were committed to break the 1.42 barrier. The 1.42 barrier was broken just a few minutes later.

Large figure barriers are often crossed during overnight sessions as there are less participants around who are willing to take the other side of the trade. Remember recent silver or cotton overnight massive moves?

We opened the long position in EUR/USD because momentum was positive across many markets and major risk events were on the horizon that the bears were forced to take into account. Our stop was 100 pips lower at 1.4089.

The next day EUR/USD dropped slightly and our position was for a while in the red. However, markets then turned and soon the position was in a nice profit and was closed at 1.4231, making a profit of $420.0 per lot.

Buy open price: 1.4189
Sell close price: 1.4231
Gross profit earned: $420.0 per lot

During the week we also traded futures and options on: wheat, soybeans, coffee, crude oil, natural gas, US 30-year bond, gold, yen, euro and eurodollar.

Please follow our Twitter feed for real-time thoughts on market moves and trading ideas.

Trade of the Week (June 10) - Shorting Aug 2011 WTI – Brent crude oil futures spread

Shorting Aug 2011 WTI – Brent crude oil futures spread

Trade Initiated Date: 8 June
Trade Closed Date: 8 June

Trade and analysis: We shorted on Wednesday morning (US time) WTI – Brent crude oil futures spread at an average price of 17.03 per one spread. The trade was executed by buying WTI crude futures on Nymex and selling short Brent crude futures on ICE exchange.

Wednesday was the time of the OPEC meeting and most of the market participants had for couple of days been buying Brent crude on expectations that OPEC would not raise their production quotas. With such a strong buying of Brent crude, Nymex WTI crude, on the other hand, was mostly flat. So by Wednesday, the spread between WTI and Brent had gone up from just 14 points on Monday to 17 points. We figured that market had clearly overreacted and initiated our short position at an average price 17.03 per one spread, which means that we sold short Brent crude oil futures at a price that was 17.03 dollars higher per barrel than WTI crude oil futures.

And just as the OPEC news came out that the production quotes indeed were not raised, the spread jumped to 17.70 points but then as Saudis issued a statement that they would supply the market with any oil required, the spread started collapsing and allowed us to close the trade at 16.12 points. So on average we made a profit of 0.91 points of $910 per each spread.

Spread initiated at: $17.03 (short sale)
Spread closed at: $16.12 (bought back to close)
Gross profit earned: $910.0 per spread

And here’s an example that all trades don’t end with profit. On Friday, as WTI – Brent spread was again going up, we initiated a short spread at 17.85. As the US stock market was hammered down, the WTI crude was also under pressure and the spread started growing. So we decided to close the spread at 18.40 and made a loss of $550 per each spread. We generally don’t like to have short term trades open during the weekend so this was the reason for closing this trade at a loss.

During the week we also traded futures and options on: wheat, corn, coffee, orange juice, crude oil, natural gas, US 30-year bond, German 10-year bond, yen, franc and euro.

Please follow our Twitter feed for real-time thoughts on market moves and trading ideas.

Trade of the Week (June 3)

Selling June Swiss Franc Futures

Trade Initiated: June 3
Trade Closed: June 3

Friday was the day when non-farm payrolls (NFP) data was released. As usual markets are very volatile before and after the release and there are often good opportunities for those who are quick enough. Among other instruments our focus was on the Swiss franc futures June contract which had seen tremendous upside lately. ADP data released on Wednesday showed a very negative picture in the labor front. Therefore we anticipated that a dollar sell-off was likely.

NFP did dissapoint and the franc jumped higher with good short-term momentum. As it was Friday then we figured that there are players around who would want to take some profits off the table. Technical indicators were also pointing to a very over-bought condition. Therefore we shorted the futures 5 minutes after the release with an average price of 1.1962. As there are fundamental reasons for the franc appreciating against the dollar then we did not want to hold very long to this position. Six minutes later the position was closed with an average price of 1.1932. Our profit per contract was therefore 375 USD. Nice way to finish the week.

During the week we also traded futures and options on: wheat, soybeans, corn, sugar, coffee, orange juice, crude oil, natural gas, cotton, gold, euro.

Trade of the Week (May 27)

This week we present again 2 trades, both in silver.

1. Buying Jul silver futures

Trade Initiated: 26 May
Trade Closed: 26 May

On Thursday early morning (US time) we bought Comex Jul silver futures at a price of 36.3 and closed the trade couple of minutes later at 36.7. So, per contract, we made a 400 points or $2,000 profit. We bought silver at this level since all our technical indicators started flashing buy signals. We closed the position in short time because silver is quite volatile these days and we wanted to lock in the profits.

2. Selling short Jun 2011 Silver 38.5 call options on expiration day

Trade Initiated Date: 25 May
Trade Closed Date: 25 May

Trade and analysis: We sold on Wednesday morning (US time) on Comex Jun 2011 Silver call options with a strike price of 38.5 with a sales price of 0.60 or $300.0. This means that by selling short these call options our trading account was credited with $300.0 per each contract sold.

At the time of the trade, Silver future was trading around 37.6 dollars being up already 3% for the day. Since Jun silver options were expiring in the evening, we figured that it is very unlikely that futures price would gain an additional 3% for the day. So we thought that being short 38.5 calls was a safe bet and the short options would expire worthless. As silver Jun futures expired at 36.73 that evening, the 38.5 calls indeed expired worthless.

In terms of risk management, we would have closed the position if silver future would have touched our strike price of 38.5 dollars.

Premium collected: $300.0 per contract
Trade closed with: $0.0 (expired worthless)
Gross profit earned: $300.0 per contract

During the week we also traded futures and options on: wheat, coffee, orange juice, crude oil, cotton, gold, live cattle, US 30-year bond, German 10-year bond, yen and euro.

Trade of the Week (May 13)

Selling short Jul 2011 WTI Crude 65.0 put options

Trade Initiated Date: 12 May
Trade Closed Date: 12 May

Trade and analysis: We sold on Thursday morning (US time) on Globex Jul 2011 WTI crude oil put options with a strike price of 65.0 with a sales price of 0.18 or $180.0. This means that by selling short these put options our trading account was credited with $180.0 per each contract sold.

At the time of the trade, Jul crude was trading around 96.0 per barrel having been pushed down in the Asian and European trading. The put options we sold had the expiration on 16th of Jun but we expected to buy them back shortly. The whole commodities complex was hammered down on Thursday, with no clear news whatsoever. So we concluded that there was a bit of panic on the market with options prices showing enormous volatility premium. As the pits were opened on Thursday, crude moved 4 points up close to the 100.0 point level, and the price of the option we sold short declined significantly and we decided to close the trade at a price of 0.06 or $60.0 having earned in couple of hours $120 of gross profit per each contract sold short.

In terms of risk management, we would have closed the position if the market would have moved 100% against us and the option price would have risen from 0.18 or $180.0 per contract to 0.36 or $360 per contract, resulting in potential loss of $180.0 per contract.

Premium collected: $180.0 per contract
Trade closed with: $60.0
Gross profit earned: $120.0 per contract

Trade of the Week (May 6)

Selling June 2011 Crude Oil 75.00 Put Options

Trade Initiated Date: May 6
Trade Closed Date: May 6

Trade and analysis: We sold on Friday morning June 2011 crude oil 75.00 put options at a price of 0.20 or $200.0. This means that by selling short these put options our trading account was credited with $200.0 per each contract sold.

At the time of the trade June crude oil futures price dropped below 95 dollars a barrel and the market was in a panic mode. Within 30 minutes before the trade the price of the June contract dropped over 4 dollars per barrel. Market participants began running for the doors which was exactly the moment where we stepped in.

The logic behind the trade was that it was meant to be a short-time trade. As the day before crude oil price dropped over 10 dollars we thought the market was getting ahead of itself for a second day in a row with no major news supporting the move. Also, we were willing to wait with closing until Monday to let the time decay work for us. However, later when US session had started we were able to close these contracts at a price of 0.05 or $50.0. So we made $150.0 of profit per each contract.

Premium collected: $200.0 per contract
Trade closed at: -$50.0 per contract
Gross profit: $150.0 per contract

Trade of the Week (Apr 29)

Trade of the week

Selling Sep 2011 Coffee 500.0 call options

Trade Initiated Date: 29 April
Trade Closed Date: -

Trade and analysis: We sold on Friday evening on the pit Sep 2011 coffee call options with a strike price of 500.0 with a sales price of 0.70 or $262.5. This means that by selling short these call options our trading account was credited with $262.5 per each contract sold.

At the time of the trade, Sep coffee was trading at 302.0 or flat for the day. The call options we sold have an expiration on 12th of August but we expect to buy them back within the coming 60 days, probably in June. Having gained more than 13% in April, we concluded that it has had a nice run, the volatility has increased and so the option prices, and expected consolidation period should allow us to buy the contract back very shortly at a decent profit. This trade was an initiation trade in coffee, as seasonally, the price should go up in May, we expect to sell more far out Sep and Aug strikes within the coming weeks.

In terms of risk management, we would close the position if the market would move 100% against us and the option price would rise from 0.70 or $262.5 per contract to 1.40 or $525 per contract, resulting in potential loss of $262.5 per contract.

Premium collected: $262.5 per contract
Trade closed with: -
Expected gross profit: $262.5 per contract

Trade of the Week (Apr 21)

Selling May 2011 Silver futures for a quick profit

Trade Initiated Date: 20 April
Trade Closed Date: 20 April

Trade and analysis: We sold on Wednesday afternoon May 2011 silver futures at 45.340. We closed the position just a few minutes later by buying the futures back at 45.090. The gross profit per contract on this trade was therefore 0.250 points which equals 1,250.00 US dollars per contract.

The trade was opened because rumors were circulating that COMEX margin hike is imminent. Following the rumor silver dropped fast and made a bottom at 44.215. Later when it was known that COMEX raised only crude oil products margins silver started to move consistently higher.

We seldom open trades for couple of minutes only but this was a case where it was possible to get a nice profit for a few minutes work. Thank you, Mr Market!

Sell open price: 45.340
Buy close price: 45.090
Gross profit: $1,250.00 per contract

Trade of the Week (Apr 15)

Selling May 2011 Silver 50.0 call options

Trade Initiated Date: 14 April
Trade Closed Date: 15 April

Trade and analysis: We sold on Thursday night May 2011 silver call options with a strike price of 50.0 with a sales price of 0.050 or $250. This means that by selling short these call options our trading account was credited with a $250 per each contract sold.

At the time of the trade, silver was trading at 42.20 having gained 3.5% for the day. The call options we sold had an expiration on 26th of April, thus the expiration was 7 trading days away. Having gained more than 5% in just 2 days, we concluded that it is highly unlikely that the price would gain a further 20% in the next 7 trading days.

Nonetheless, as the markets (silver especially) have become extremely volatile these days, we decided that we'll close the trade as soon as possible with a target profit rate of 50%. We would have also closed the position if the market would have moved against us and the option price would risen from 0.050 or $250 per contract to 0.075 or $375 per contract, resulting in potential loss of $125 per contract.

On Friday, as the silver market was moving lower before the US market opened, we managed to close our position at 0.025 or $125. Thus on gross, we made a profit of $125 per contract.

Premium collected: $250 per contract
Trade closed with: $125 per contract
Gross profit: $125 per contract

Trade of the week (April 8)

Our best trade this week was with cotton options. As expected volatility picked up this week due to option expiration. We sold naked cotton calls every day of the week carefully keeping in mind where the prices could potentially rise according to daily limits. The strikes of these calls where higher than the underlying price could reach due to price limits. Therefore one could say that these trades were in fact risk-free. Of course, there is always the possibility that someone takes a delivery of an option that is out of the money but this happens very rarely. The calls that we sold were at 225, 230 and higher. The future itself closed at 201.75 today so all our options expired worthless and we kept the premium. Happy trading!