/CLH6 short strangle

The details of this trade are as follows:

Date Inst. Mark. # L/S Strike C/P Price Δ Days Max profit Comm. Reason P/L
1 1/4/2016 /CLH6
(mar)
37.68 1 short 31 P 0.30 0.09 44 $590 $3.71 open
1 short 49 C 0.29 0.10 $3.71
2 1/11/2016 /CLH6
(mar)
32.38 1 short 28 P 0.60 0.15 37 $410 $3.71 adjustment
1 long (close) 31 P 0.29 0.30 $3.71
1 short 26 P 0.32 0.09 $3.71
1 short 43 C 0.25 0.10 $3.71
1 2/3/2016 /CLH6
(mar)
31.35 1 long (close) 28 P 0.51 0.20 14 $120 $3.71 adjustment
1 short 26 P 0.22 0.10 $3.71

Trade reasoning

OVX is up, there are tensions between Saudi Arabia and Iran. They have severed diplomatic ties. Unless there is some sort of supply disruption, this is actually bearish, since it’ll cause increased production from Iran and the Saudis.

OVX jumped back above 50 again, so I think this is a good time to open the trade, especially since the DTE is ideal as well. $31 is below the 2008 crisis lows, and $49 is very far away, so my strangle is pretty “safe”, or at least as safe as a strangle can be.

The oil glut is still strong, and some say the spring refinery maintenance season will bring new lows. We’ll see. Again, my position size is small, so I can manage the trade if needed, without worrying about an increased position size.

clh6-risk

clh6-chart

clh6-iv

clh6-options-chain

 

Adjustment 1: 01/11/2016

Oil has been falling pretty much since I opened my strangle. China economic worries have caused the worst year opening in history, which is pulling everything down.

I was thinking of how to adjust it, and decided to sell another call option lower than the original call, and also roll down the put leg, plus write an extra put option. I had to lower my max profit a bit, but that’s life. I’m thinking this leg down will stop at around $30-31, and hold there for about a month before falling lower. This is based on what CL has done in the recent past.

I was also considering going short on the futures contract, but since CL is very oversold, it could bounce at any time, so I decided against it.

clh6-mod-option-chain

clh6-mod-option-chain-02

 

Adjustment 2: 02/03/2016

Oh man, I just don’t get what’s happening with CL nowadays. It has been whipsawing all over, OVX is at 68, and so is my anxiety level. We just had a pretty bad EIA report, and what does oil do? Rallies 6%!??!?!?

I don’t want to be part of this trade any more, even though oil has probably bottomed. I moved my 28 put down to the 26, not doubling. My max profit has moved down a lot, but I truly don’t care, I want to be a far away from this market as possible.

clh6-mod2-option-chain

clh6-mod2-risk

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