NaughtyPines
Long

UNG -- COVERED CALL IDEA

AMEX:UNG   UNITED STATES NATURAL GAS FUND
a year ago
Truth be told, I was burned somewhat by UNG             this year, as I was expecting a seasonality bounce which has not come due to mild temperatures associated with El Nino. Moreover, in 20-20 hindsight, a debit spread was probably not the way to go due to inflexibility of the setup if you are just totally directionally wrong or if your timing as to the directionality is off.

In any event, and although volatility in the underlying has diminished somewhat since the making of a significant low around 7.00, there remains sufficient volatility in UNG             to go covered call here.

The setup:

100 Shares UNG             at 7.69
1 Feb 19 8 Short Call
Entire Package: 6.91 debit (meaning your break even for the setup is $6.91/share, excluding fees commissions)
Max Profit: $109 (if called away at $8)

Tips: Look to take off the entire setup in profit before expiry if profit approaches what you would get if called away. Roll out the short call to a later expiry if it is nearing worthless; look to roll to a strike that at least exceeds your cost basis in the underlying.
a year ago
Comment: Filled for a 7.36. Not ideal, but I'm in.
10 months ago
Comment: One of the bright spots in my covered call setups is my UNG covered call; the others, well, they'll just take some time. Naturally I'll keep watching price, but I'm likely to just let the setup run to expiration. I've tried rolling the 8 shortie out to later expirations, but just can't get much credit for it without going wayyy out in time, which I don't want to do, since natural gas is seasonal and we're in the hear of "peak season." If this is the "peak," I don't want to stick around for next year's "bottom."
10 months ago
Comment: Covered the March 18th short call and sold another 45 DTE short 8 for a credit while I can get something decent for it (and by "decent", I'm being generous -- it was like a .40 credit).
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