Morning Thoughts – Shorting LABU vs Long LABD

So Natgas is the same story, different day.  Supply is not reducing enough, LNG is on the fence still and India and China are shutting in again due to a confirmed second wave of the Wuflu that is here to stay.  The market’s only hope is that power burn will give some relief and maintain storage.  All the while producers are going to be dropping like flies, and for us traders, it’s all taking/going to take so much longer than we can sustain for negative roll yield in ETFs.  Oh, and it’s boring Friday, don’t expect much.  Maybe next week will throw me a bone to reduce.  As for today, I’m not planning on making any moves.  I can’t imagine there is going to be a move higher or lower enough to excite me to make such a move.

How about something a little different today?

Keep in mind I am still an amateur trader and am not giving advice here.  I’m going to share some trades I’ve made and ideas I’ve had.  I’m not recommending these trades and certainly can’t provide confidence these trades will lead to a successful life of wealth. 

Also keep in mind I’m going to work on this post throughout the day since it might be rather large and I haven’t even thought of how to present it.  I’m also home taking care of my wife (she is ill with Epstein Barr), and hanging out with my 6 year old son.  I hope to finish this post by this evening.  Check back for updates.  

This is quite simple. Decay in some leveraged ETFs is stronger than others. LABU and LABD seem a set of of ETFs where decay is more amplified. I can’t say why these decay more than say SPXL/SPXS. I know that UGAZ is the king of decay due to negative roll yield, thanks to constant contango. I don’t really need to know why LABU/LABD decay so bad, I just accept it and plan for it to continue.

I guess first I will walk through some covered put trades I made

NOTE:  I found how to make this image clickable and it will open the full size image to be viewed!

I’m testing this image here, It is a series of covered calls on LABD.  With the right amount of time given, I can organize these trades to be read more clearly.  I don’t generally share the actual trades except for my UNG trades in my example account, today I’m making an exception.  I really made these trades and I really lost money.  I exited the entire trade, it wasn’t worth rolling and 3xETFs make me more nervous than they used to.  And I would be down much further today had I not exited when I did.  

So with that in mind, let me see if I can go organize these to be a little more presentable.

I think I’m just setting myself up for failure with some posts.  I just don’t have time to dedicate to this with everything else.

One of my key thoughts is to make longer term trades, by shorting LABU and selling Like November expo puts vs selling weekly puts and adjusting the strike price as LABU moves around.  The I simply wanted to compare an example of what Theta might look like comparing weekly vs 3 months out. 

Selling a 60-90 day put, I wouldn’t collect as much premium per week vs selling a good weekly put.  Weeklies though may not always be that easy to land on the right trade so some weeks may collect a good amount of premium and some weeks may not.  I’ll get to this eventually.