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Diary of a WTI options market maker

GL

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I have been a trader since 1980. I started trading options in late 1983. I lost every penny of a $1.6 million portfolio in the crash of October 1987. What doesn't kill you makes you stronger. I have a undergraduate degree in Finance. I have a Masters degree in Economics. I have completed about half the requirements of a PhD in Financial Economics. I don't advise pursuing a PhD unless you want to be a teacher. It will not make you a better investor/trader. I developed a trading strategy involving shorting calls against GUSH in 2015 that I managed for a trucking firm to alleviate the strains of high fuel prices. Early in 2019 the owner of the trucking company sold the company and devoted his time to managing just the strategy itself. He said that he expects to make more profit in 2020 from writing calls against GUSH and writing puts and calls against his WTI contracts than his 32-truck transportation company ever did...all from his home...in his pajamas.

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My current WTI portfolio is long and drawn out. I am new to the site and I'm not sure of the interest in options trading from the market makers perspective. If anyone is interested just let me know and I'll post it.

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a bachelor's degree in finance and a master's degree in economics are also complete shit for trading ... I laugh when morons from banks and companies require this garbage from workers ... a trader with a system is a gift from Godūüėć

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Very few Wall St firms will even interview an applicant without a business-oriented degree. I utilize my education on a daily basis in my trading. You seem jaded. I've never met an upper-level manager of a trading floor that only had a high school degree. If nothing else it gets you an interview and levels the playing field. No degree equals no interview. Simple as that.

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Ok. This is my current portfolio in WTI Options Stategy. All these trades and positions can be verified for transparency on Investingdotcom. Search the "OVX" board which is the Oil Volatility Index board that I adopted as my own.

 Had 2 Oct contracts and 2 Nov contracts where the 2 Oct 54 puts and 2 Oct 58 calls along with the same for the 2 Nov contracts all were Bought to Close and the contracts were sold. When the Oct contracts expired I shorted 2 March contracts at $55.88. The Nov contracts expired a month later and WTI was still in the upper 57s and I sold the 2 Nov at 57.50 and I shorted 2 more March contract at 57.50 giving me 4 short March contracts at 56.69. Since that time a trailing stop kicked in at 56.50 for a miniscule profit and repositioned 4 short March contracts at 56.75. The target for these contracts is 52.50. When I cover them I will then go long 2 March contracts and 2 April contracts. The reason I am skipping Jan and Feb because I am already long 2 each of those with 2 Jan 54 puts Sold to Open at 2.86 and 2 Jan 58 calls Sold to Open at $3.00. I Sold to Open 2 Feb 54 puts at 4.22 and Sold to Open 2 Feb 58 calls at 3.00.

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Nov 26 2019

Today WTI is currently $58.38. Up about 40 cents. My 2 Jan 54 puts which I "Sold to Open" at $2.86 are now trading at 39 cents. The 2 Feb puts which I "Sold to Open" at $4.22 are now trading at 1.00. I will "Buy to Close" both positions. I will do both trades at approximately 10:30 EST. The trading logic behind doing this is I've captured 80-85% of the original premium and by closing these short-put positions it allows me to put the same trade on if an opportunity arises. I am by no means obligated to close these trades out at this point. The 58 short-call position for both months caps my profit on the contracts at $58.00, but remember I collected $3.00 for each call so if the contracts get called away due to being above $58.00 my net sell price will be $58.00 + 3.00 but that's a few weeks away. Good luck trading today. If you are thinking of buying WTI puts or calls I would highly advise against doing that, because you'll be on the opposite side of me and my kind ( traders with 40+ years experience )

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Nov 26 2019

Bought to Close 2 Jan 54 puts at 40 cents that I had Sold to Open at $2.86. This netted $4,920 in profit and allows me to Sell to Open Jan puts against the position in the future at my discretion. Also Bought to Close 2 Feb 54 puts at $1.05. I had Sold to Open these puts at $4.22. This trade netted me profit of $3.17/contract or $6,340. Other than my WTI contracts I am also short 4 March WTI contracts at 56.75. Target: 52.50. Short 11,500 shares of RIG at $4.80. Target: 3.01. Long 3,000 shares of DWT at 5.30. Target: 5.95. Happy Trading

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Nov 27 2019

 EIA reported their production figures today. US crude production hit a record 12.9 mbd on the fewest rigs since March 31,2017 at 664 rigs. Production has increased from 9.2 mbd in the week ending 3/31/2017 to 12.9 mbd currently on the same number of rigs. So for those that think a lower rig count means lower production that is the data to refute that hypothesis. 

   EIA also reported that refinery run rates at 16.334 mbd. This is a decrease of 1.22 mbd from the same time last year. This decline in US consumption coincides with a 4thQ GDP estimate constantly being revised downward. The current 4thQ estimate is .5%. Despite what you may read the US is heading towards a recession if this trend doesn't reverse.

Jan WTI closed today at $57.94. The 2 Jan 58 calls ( Sold to Open at $3.00 ) shorted against my 2 Jan contracts ( bought at $54.86 ) closed at 1.56. Target to Buy to Close on the 2 short Jan 58 calls is 75 cents. Feb WTI closed at 57.88.  The 2 Feb 58 calls ( also Sold to Open at $3.00 ) shorted against my 2 Feb contracts ( bought at 53.00 ) closed at 2.38. Target to Buy to Close on the 2 short Feb 58 calls is 75 cents. I currently have no short-put position against either months'  contracts. 

   My short 4 March contracts at $56.75 closed at $57.70. Down $3,800 on the trade overall. My 11,500 share short position closed at $5.02. Down $2,530 on the trade overall. My 3,000 share short position of DWT closed at 4.27. Down $3,090 on the trade overall. Losses on all these positions. Lets see what happens by the end of Dec. 

  I will calculate the profit/loss on the Jan and Feb options strategies on the close of Friday Nov 30th. 

Edited by Gary LeBlanc

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There are a few traders on Investing.com WTI and OVX boards that are seriously missing my trading posts. I got banned for pointing out the deception and fraud of dozens of posters on the WTI board. The OVX board is the Oil Volatilty Index. All my trades are posted there up until a week ago. Post that Gary LeBlanc is at OilPrice.com. I can't. The wolfpack will appreciate it. 

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Nov 29 2019

    Jan WTI closed down $2.67 to 55.42 today.  My 4 short March contracts at $56.75 closed at 55.42 turning a $3,800 loss into a $6,120 gain overnight. The 3,000 share- position of DWT closed up 55 cents ( 12.88% ) to $4.82. The trade is currently in loss of $1,440 which is a reduction of more than half in one day. Very pleased. My 11,500 short position in RIG was down 4 cents to 4.98. I expected more to the downside. The current loss on the RIG trade is $2,070. 

  This portion of my portfolio is $2,610 in profit. If all three targets for these financial instruments are achieved the profit will be $39,535. Dividing my current profit by my target profit $2,610÷39,535 = 6.6%. So...my score on this portfolio is a 6.6. Flunking. But it went profitable today. Baby steps.

 

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sU

(edited)

ūüėÄ

On 11/26/2019 at 5:37 AM, Gary LeBlanc said:

Ok. This is my current portfolio in WTI Options Stategy. All these trades and positions can be verified for transparency on Investingdotcom. Search the "OVX" board which is the Oil Volatility Index board that I adopted as my own.

 Had 2 Oct contracts and 2 Nov contracts where the 2 Oct 54 puts and 2 Oct 58 calls along with the same for the 2 Nov contracts all were Bought to Close and the contracts were sold. When the Oct contracts expired I shorted 2 March contracts at $55.88. The Nov contracts expired a month later and WTI was still in the upper 57s and I sold the 2 Nov at 57.50 and I shorted 2 more March contract at 57.50 giving me 4 short March contracts at 56.69. Since that time a trailing stop kicked in at 56.50 for a miniscule profit and repositioned 4 short March contracts at 56.75. The target for these contracts is 52.50. When I cover them I will then go long 2 March contracts and 2 April contracts. The reason I am skipping Jan and Feb because I am already long 2 each of those with 2 Jan 54 puts Sold to Open at 2.86 and 2 Jan 58 calls Sold to Open at $3.00. I Sold to Open 2 Feb 54 puts at 4.22 and Sold to Open 2 Feb 58 calls at 3.00.

 

Edited by A/Plague

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Nov 30 2019

Evaluation of the Jan WTI Options Strategy. 

Bought to Close my 2 Jan 54 puts on Tuesday Nov 26th at 40 cents. These 54 puts were Sold to Open at $2.86 at the time the 2 Jan contracts were purchased at $54.86. The profit from the short-put trade ( $2.46/barrel ) reduces the purchase price of 54.86 by 2.46 to $52.40. Eventually I Sold to Open 2 Jan 58 calls at $3.00 each. A Buy to Close order on the 2 Jan 58 calls at 75 cents executed Friday Nov 29 2019.  The profit from the trade ($2.25/barrel/contract) is deducted from the current purchase price of 52.40 making the new purchase price of $50.15. The current 2 Jan contracts currently have no puts or calls shorted against them. The closing price on Friday for the Jan contract was $55.42. My original purchase price was 54.86. Based on that, my profit on a buy and hold strategy would for my 2 Jan contracts would be 55.42 - 54.86 or $1,120 profit on the 2 Jan contracts. However, utilizing a short-option strategy I was able to lower my net purchase price significantly and thus increase my profit to 55.42 - 50.15 or $10,540...almost 10 times the profit of a buy/hold strategy. 

So as of now my 2 Jan WTI contracts have zero options shorted against them. I have used the Black-Scholes calculator to calculate the price of the Jan 54 put should WTI get down to my target of 52.50 by Dec 4th as $2.00 and I've placed an order to Sell to Open 2 Jan 54 puts at $2.00. Should this order execute I will place a Buy to Close order at 50 cents thus profiting $1.50 and lowering my net purchase to $50.15 - 1.50 or $48.65. First things first though. Sixteen days until the options expire. A lot will happen between now and then.

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(edited)

Interesting. Seems very profitable compared to a buy and hold strategy. How does it compare to scalping WTI contracts ? 

Edited by Gary LeBlanc

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95% of WTI "scalpers" wash out within 6 months of beginning. I would say my strategy of shorting puts and calls against WTI contracts compares favorably. In the 14 months that I've been utilizing this strategy my portfolio has gone from one contract to 8 contracts. Could a trader scalp and produce a higher return on the same number of contracts ? Probably. It's not rocket science. I get asked that question all the time. And those that ask the question are scalpers...and they eventually disappear. What they attempt to do is to outtrade me. Fine by me, but like I said they all disappear. I "know" how to scalp. I am better at it than 90% of them. They don't know options trading so they have no other choice. I have a choice. Traders that do as I do no longer scalp. No need to regress once you experience it in action.

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Evaluation of Feb WTI Option Strategy:

Bought to Close my 2 Feb 54 puts on Tuesday Nov 26th at $1.05. These 54 puts were Sold to Open at $4.22 at the time when the Feb contracts were purchased at $53.00. The profit from the short-put trade ( $3.17/ barrel ) reduces the purchase price to $53.00-3.17 or 49.83. I Sold to Open 2 Feb 58 calls at $3.00 which are still active. The Feb 58 calls closed at 1.27 on Friday 29. The target is 75 cents and a Buy to Close order has been placed at 75 cents for the 2 Feb 58 calls. I have also placed a Sell to Open for 2 Feb 54 puts at $3.00. They closed at $2.06 on Friday.  The Feb WTI contract will have to be close to $52.50 for this trade to execute. The Feb WTI contract closed at $55.37 on Friday the 29th.

Edited by Gary LeBlanc

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Dec 3 2019

Calculation of the Jan Options Strategy Profit :

Sold to Open 2 Jan 54 puts at $2.86

Bought to Close 2 Jan 54 puts at .40

Profit: $2.86-.40= $2.46

Sold to Open 2 Jan 58 calls at $3.00

Bought to Close 2 Jan 58 calls at .75

Profit: $3.00-.75 = $2.25

Combined Premiums Received:

$2.46+2.25=$4.71

Deduct this from the purchase price of $54.86 to get the Net Purchase Price of $50.15.

The current price of the Jan contract is $56.30. Current profit is $56.30-50.15 = $6.15/barrel/contract or $12,300 for the 2. No options are currently shorted against the Jan options. There is a Sell to Open 2 Jan 54 puts at $2.00 order waiting to execute if it sells off. There is a Sell to Open 2 Jan 58 calls at $1.25 waiting also. Both are trading around 70 cents currently.

 

 

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I can't say I miss Investing.com. Too distractive and unproductive. Moving on. Two weeks ago RBOB posted a build of 1.8 mb for the week on production of 10.1 mbd. Last week RBOB's build was 5.3 mb for the week on the same production of 10.1 mbd. You may have noticed prices at the pump went down over that time. WTI was in the 57-58 range. Why buy WTI to process into gasoline if it won't get sold. Bleed off gasoline inventories and restrict WTI purchases as a result. Price of WTI goes down because production can't just slow down pumping. Supply continues.Expecting 54s before Friday's close.

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Dec 4 2019

Calculation of the Feb Options Strategy Profit:

Bought 2 Feb contracts at $53.00

Sold to Open 2 Feb 54 puts at $4.22

Bought to Close 2 Feb 54 puts at $1.05

Profit per contract: $4.22-1.05= $3.17

Sold to Open 2 Feb 58 calls at $3.00.    Target: 75 cents. Currently $1.82

Feb contract currently $56.89

Purchase Price - Put trade profit= Net Purchase Price. 

$53.00-3.17= 49.83

Subtract the unrealized profit from the short-58 call of $3.00-1.82 that is still working and the Net Purchase Price becomes $49.83-1.18 or 48.65 The Feb contract is currently at $56.89 so the profit per contract at this time is $56.89-48.65 or $8.24/barrel/contract or $16,480 for both Feb contracts so far.

 

Edited by Gary LeBlanc

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Dec 4 2019

Order to Sell to Open 2 Jan 58 calls at $1.25 executed when the Jan contract got to $57.75. Target to Buy to Close: 25 cents.

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Do you currently have a position in WTI ? My Jan and Feb contracts both have 58 calls written against them. My 4 short March contracts at $56.75 are hedged against any loss up until about $57.75 on the March. All contracts have plenty of time left. I sell time. I'm very patient. My orders are placed. If you're drawing a conclusion of where WTI will be just by looking at the current price you're looking in the wrong place. You have to be in it to win it. If Jan contracts expired today at 58.35 my 2Jan contracts would get called away at $58.00 but I would keep the $1.25 I received today from Selling to Open the 2 Jan 58 calls. My net sell price would be $58.00 + 1.25 or 59.25. The net Purchase Price is 50.15 so my profit is $9.10/barrel/ contract or $18,200. I would have $118,500 in my cash account. I am currently short 4 March contracts at 56.75. The March contract closed today at $57.95. I would short 2 March contracts at this price giving me 6 short March contracts at avg of 57.15. Remember I still have 2 long Feb contracts at $53.00 with 58 calls written against them at $3.00 with a target of 75 cents. Feb contracts are about 58.15. I'm not that tied in to contract prices as I am in my strategy. This is not retail trading. I hold my contracts all the way to expiration. So obviously the price of the contract is not that relevant. Retail traders find it nearly impossible to comprehend that. It's all about the options. If WTI continues up and the Feb contract expires at, lets say for example $60, then my Feb contracts get called away from me at $58 but I keep the $3.00 from the 58 call I received giving me a sell price of $58.00 + 3.00 or $61.00. The net purchase price for the Feb contracts is 48.65. The profit on the trade would be $61.00-48.65= $12.35/barrel/contract or $24,700. I would then short 2 more March contracts giving me a total of 8 short March contracts somewhere in the high $57s for an average. If my target of 52.50 is achieved the profit will be in excess of $40,000.

Edited by Gary LeBlanc

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I don't have a position in anything now.

Unfortunately I'm a newbie and I only trade futures for now. I only understand your strategy partially, sufficient to understand that you make $$$ in a much safer way than me and most others. I knew about your strategy before I ran into you on investing. My intent is to one day do what you do but cannot at the moment due to lack of options understanding. I looked for educational material, institutions where I could learn options but have not found anything yet. I inquired with Online Trading Academy but they did not provide me enough confidence that they could teach me what I want. 

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