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Selling Options on Futures?
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Selling Options on Futures?

  #1011 (permalink)
Market Wizard
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One thing that needs to be pointed out is that only doing deltas <0.0300 is not universal over all commodities. Some like CL you need to be at an even lower delta. Some like SB you need to do higher deltas because there are none worth doing at <0.0300. They are at .01 or .02 and most of the time no bids.

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  #1012 (permalink)
Market Wizard
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opts View Post
Ron..I was wondering why you were in agreement with the 80 puts. The first thing I thought was wow...these are a little close.

Only a few $s movement down and the premium on these can go up very fast. If 90 is broken watch these like a hawk. This is a major support area...

That's what happens when you try to squeeze in an answer to a post when you are pressed for time.

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  #1013 (permalink)
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Thanks for posting that Ron. I'm trying to pick up some 22 calls in Sugar which have a delta of -0.04 but the volume is pretty light. 21s would be easier to pick up but I'm a bit nervous that those may be too close.

I agree the 80s look a bit scary on Crude. I would love to pick up some more at 70 but that may be difficult.

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  #1014 (permalink)
Market Wizard
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eudamonia View Post
Thanks for posting that Ron. I'm trying to pick up some 22 calls in Sugar which have a delta of -0.04 but the volume is pretty light. 21s would be easier to pick up but I'm a bit nervous that those may be too close.

I agree the 80s look a bit scary on Crude. I would love to pick up some more at 70 but that may be difficult.

SBK3 21s at .0700 delta are probably too risky.

When SB is down to 33 DTE there pretty much aren't any low risk options left to trade. You need to move to the next set of options. June SB has no OI for calls above 21. So then you move to July.

SBN3 24 or 25 calls will get you about 3.0% per month ROI depending on your fees and margin. You'll need an up day in futures to get buyers of those options.

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  #1015 (permalink)
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Any thoughts on TYM13 puts? The market has been sideways to up and the seasonals favor the long side for the next few months. Was looking at the 124 and 125 puts. Could potentially get about 3% per month depending on cost and fills.

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  #1016 (permalink)
Market Wizard
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I have never traded TY.

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  #1017 (permalink)
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Interpretations:

I took this info from Barchart.com

Wheat had a nice move up so I watching. If you scroll all the way to the end of the listed options for a certain month you will see the following:

May Contract Options 43 days to expiration close today..call it 725
Call Premium Total: $52,768.75
Put Premium Total: $163,881.25
Call/Put Premium Ratio: 0.32

Call Open Interest Total: 77,813
Put Open Interest Total: 52,600
Call/Put Open Interest Ratio: 1.48

Close today..call it 725. Real quick the 625 puts are at $87.50 and the 625 calls are at $5,068.75. The 830 (not 825's listed) puts are at $5,418.75 and the 830 calls are at $162.50. Calls outnumber Puts 1.48:1 but the put premium total is about 3x the call premium total.

Here is July, close at 720 with the close the same ratios:

July Contract Options 99 days to expiration
Call Premium Total: $36,387.50
Put Premium Total: $165,937.50
Call/Put Premium Ratio: 0.22

Call Open Interest Total: 60,260
Put Open Interest Total: 46,588
Call/Put Open Interest Ratio: 1.29

I am thinking that the call premium total is lower than the put premium total, even with calls having a higher OI, because there are more puts being held closer to the actual contract price. Most of the calls being held are further out. Is this telling me that most of these calls are bought (not sold by 'us') as long shots hoping that price will rise a lot with call buyers getting in the game on the cheap..hoping? And, the better chances are with the puts being held closer to the actual contract price? I just want to tell myself that i am seeing this correctly and if there is a readable trend here. For instance, the smart money is following the down trend. Now that I think about it I can look at my OX chain that shows the OI/VOL for each strike.....and that's what it looks like.

Just looking for an edge....

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  #1018 (permalink)
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ron99 View Post
That's what happens when you try to squeeze in an answer to a post when you are pressed for time.

Roger that...I have forgotten to read directions on more than one occasion....

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  #1019 (permalink)
Market Wizard
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opts View Post
I am thinking that the call premium total is lower than the put premium total, even with calls having a higher OI, because there are more puts being held closer to the actual contract price. Most of the calls being held are further out. Is this telling me that most of these calls are bought (not sold by 'us') as long shots hoping that price will rise a lot with call buyers getting in the game on the cheap..hoping? And, the better chances are with the puts being held closer to the actual contract price? I just want to tell myself that i am seeing this correctly and if there is a readable trend here. For instance, the smart money is following the down trend. Now that I think about it I can look at my OX chain that shows the OI/VOL for each strike.....and that's what it looks like.

Just looking for an edge....

With a commodity like wheat there are a lot of commercial companies hedging wheat. If you are a buyer of wheat, for bread, cereal, etc., you would buy calls to protect yourself from a large price increase. I suspect that is why the calls are still being held even though they are far OTM.

The opposite for puts. If you are a seller of wheat you buy puts to protect against a price drop. If you bought wheat at a fixed price you might buy puts to cover yourself if the price dropped so that your competition, who might not have contracted ahead, doesn't have a large price advantage over you.

So the buyers of options aren't trying to make a profit on the position. They are buying options for insurance against a price movement against them.

The put premium total is higher because the price of wheat dropped and the put buyers are closer to ITM.

I don't know if you can glean any tradeworthy info from that data.

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  #1020 (permalink)
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Yeah I've been checking out wheat as well now that we've had a few up days. The current market is down, the market is in line with seasonals, everything looks good to my eye.

Was thinking WK900 calls would keep me safe even if we go to 850 (about 4% ROI). Not really good with holding any longer than that due to the seasonal tendencies of wheat.

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