How to Stop Worrying and Start Living

Last night we learned about "discipline, persistence, and psychology" being the key factors of any trading strategy. Let me try to apply these to my large UNG/HNUZF position. I think cutting it now would violate psychology. Adding too quickly on the way down would violate discipline. So I need to plan ahead my strategy for adding to it, so as not to stray away and add too much too early on.

In the light of the above thoughts, here is my strategy for handling further downside in UNG. Do nothing until it hits $6.70 (if it NEVER hits $6.70 this Fall then it must go way up, in which case I'll be a happy camper in the light of my large position). If UNG drops below $6.70 in the next few days/few weeks, then I'll sell 10 October $7 puts on it for around $1 and will have a cost basis of $6 if the shares are put to me. Then, if UNG drops below $5 and I'll be WAY underwater on this position, I'll wait for the inevitable rally during the winter that should easily take UNG back to $6 and will then sell 10 $6 covered calls for around $1. So I think it will be *REALLY* hard for me to lose money with this strategy.

Also, if UNG drops below $5 (which should place front month futures at around $2.95 -- a real bargain that can't last for long), then I'll double down on HNUZF. In fact, I'll buy a little of HNUZF at $3.40 on the futures, a little more at $3.20 and then a lot more at $3, so as to make sure that it doesn't run away from me.

Now that I have the above strategy outlined, I suddenly feel that all my worries about my large position have evaporated, since I now have a PLAN for handling the future possibilities.

So Dale Carnegie was right in his classic book "How to Stop Worrying and Start Living" when he wrote that we worry only because we treat the future uncertainty like a heavy formless cloud, which can give us any possible surprise. His suggestion is to think about the worst that can happen (NG futures dropping below $3) and make a plan for handling that case. After a plan for handling the worst possibility is generated, all worries go away.