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Selling Options on Futures?
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Selling Options on Futures?

  #1021 (permalink)
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Thanks Ron.....

The higher than expected export data along with a slightly lower bu/acre estimate boosted prices for now. Will keep an eye on it.

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  #1022 (permalink)
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Decent daily ICE soft market commentary.

Jack Scoville

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  #1023 (permalink)
Market Wizard
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Interesting comment by decarleytrading about her brokerage firm and option sellers.


Quoting 
Because we like the long-term prospects of an option selling strategy, we cater to this group. In our opinion, option selling accounts have the potential to be trading with us several years down the road, whereas futures traders are less likely to be doing so.

https://futures.io/brokers-data-feeds/26309-decarley-tradings-carley-garner-seni...ything-2.html#post310428

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  #1024 (permalink)
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Since I was bored this weekend and playing with new options software, here are some historical vols and implied volatility smile:

Corn

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Crude

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ES

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Sugar

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  #1025 (permalink)
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Futures Edge on FIO
MJ888,

I wonder if you would be willing to comment on the return profile of your strangle strategy. I have been selling options on futures for the past few months but I am finding my skills in picking market direction lacking.

Mac

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  #1026 (permalink)
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Also check out the new CTS T4 options sheet:

https://futures.io/cts-t4/26475-cts-option-sheets.html#post311887

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  #1027 (permalink)
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Also will briefly mention that in this live AMA session w/CTS we talked about the new options stuff some:

https://futures.io/brokers-data-feeds/25772-cts-t4s-brian-murphy-director-busine...ything-4.html#post310897

But a full webinar is scheduled for early May where a proper overview can be given of the final release version.

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Need help?
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  #1028 (permalink)
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mackg867 View Post
MJ888,

I wonder if you would be willing to comment on the return profile of your strangle strategy. I have been selling options on futures for the past few months but I am finding my skills in picking market direction lacking.

Mac

Mac, thanks for asking. To begin with, I do not try to pick market direction nor do I "know" how to. On any given day, I honestly do not know if any certain market will trade higher or lower, the best I can do is GUESS. Will CL be higher on Monday? No idea. How about wheat? Haven't got a clue. In all honesty, there is way too much "noise" or "news" to keep up with. The great thing about option selling is one does not need to be able to guess market direction. You can sell a OTM option and be wrong market direction and still make money.

With that said, looking at seasonal charts, one can take a chance and say that "likely" something will trade in a certain direction given the same time frame of the year. But does it ALWAYS follow it's 5, 10, or 15 year pattern? No it does not. Look at sugar or SB, seasonal charts indicate that between now and mid June, the trend is lower. But SB has been trying to rally the past two sessions. Last Thursday, I sold some SBN322C or July 22 calls for a premium of 0.12 and a delta of 0.11. You can say that I "timed" my entry to the rally in SB but who is to say that SB will not rally even higher next week? No one knows. Yes, I keep reading that there is a ton of resistance in the $19.00 and $19.20 area but will it hold? Again, who knows! But being far out of the money with the 22 calls, I have some room to be temporarily wrong. In an earlier post I mentioned that in the past I would feel "naked" or "exposed" if I do not sell some puts to create a strangle to hedge this trade but I will not do that with sugar, do not want to fight the seasonal chart.

Another market is CL. The seasonal charts and many on this thread say that CL "should" be trending higher during this time until about May. In fact, the past two years I was burned holding some short calls around this time. But so far, CL has remained in the $90-$95 range. About a week ago, I did exit my short CLK375P or May 75 puts at 0.07 locking in a profit of 0.12 since I sold at 0.19. This is one trade where I was "wrong" market direction virtually the entire duration of the trade but still made solid profits. When I sold these May CL 75 puts, CL futures were trading at around $98 but sold off to $91, yet my short 75 puts continued to make money due to time decay. So this is a perfect example of me being totally wrong market direction yet I still was able to make good money.

During the past year or so, my trading style has changed. In the past, I sold strikes with a delta of around 0.20 but thanks primarily to Ron99 here, I have learned that I can be even more successful by choosing strikes with much much much lower deltas. In the past, every one of my positions were strangles but I have learned that I do not and should not trade that way. I am looking at seasonal charts more and more to make my decisions.

Only selling options for a few months? Hang in there and I highly recommend reading this entire thread. It is possible you are trading strikes too close to the money. BTW, what are you trading?

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  #1029 (permalink)
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MJ888, the next time you want to get out of CL puts at .07 let us know. I'm sure we can help you get out of them

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  #1030 (permalink)
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Ron, have you ever been using COT data to measure market sentiment and base your options strategy from there?

do you combine volatility, seasonals, volume & open interest, and COT data to get better timing on selling options at all?

thanks in advance for your input

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