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Selling Options on Futures?
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Selling Options on Futures?

  #1041 (permalink)
Trading for Fun
Houston, Texas
 
Futures Experience: Advanced
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mackg867 View Post
I think I may actually listen to the more experienced traders (and more successful!) and trade at lower delta. I thought I needed to go for the big premium to get solid returns, but as someone pointed out earlier it's all about ROI.

Mac

Options selling is a risk vs reward game. The closer you sell to the money, the bigger the reward in terms of higher premiums but your risk also increases quickly.

And no, you absolutely do not need to go after the higher premium to achieve solid returns. You can sell a tiny strangle (only ONE put and ONE call) with strikes that have delta's below 0.10 on many markets and be able to make good money. The other thing is in order to get decent premium at far out strikes with low delta's, you must be willing to wait longer or be willing to trade farther out months where the way out of the money strikes have plenty of time premium.

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  #1042 (permalink)
Market Wizard
Cleveland, OH
 
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MJ888 View Post
Funny! I was absolutely thinking of you Ron99 when I set my order to buy back the CLK375 puts at 0.07. The next time I cover my shorts, I will post here first so be on the lookout.......Hmmmm, I wonder if that would be considered some sort of collusion trading by the CFTC?

As long as the order is not hit instantaneously, it is legal.

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  #1043 (permalink)
Market Wizard
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kisskais View Post
After reading all the posts and seeing crude up on early Friday, I decided to close both trades with a $600 profit less commission and will be watching on Monday and see if I can get back at a lower strike when crude dips again.

The trading gods are are with you since CL is way down today.

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  #1044 (permalink)
Market Wizard
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Today is a good time for another lesson.

Jun CL puts. 60 DTE. As I write this Jun futures are down 1.06.

70 puts settled at delta .0071 friday and at a premium of .03. Right now it is .03 bid .04 ask. Not much movement. You can sleep well even though futures are down.

80 puts settled at .0458 delta and at .19. Right now .24 bid .26 ask. It has moved .06 against you. You are not feeling well about this.

85 puts settled at .1196 delta and at .53. Right now .64 bid .71 ask. It has moved .15 against you. Pain is being felt.

Jul CL puts. 92 DTE.

70 puts settled at .0154 delta and at .08. Right now .09 bid .11 ask. A little movement but not too bad.

80 puts. .0781 delta. .43 premium. Right now .50 bid .57 ask. .54 last. Current delta .0909. Pain.

85 puts. .1625 delta. .96 premium. 1.10 bid 1.21 ask. 1.17 last. delta is up to .1793. Major pain and now very close to ITM.

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  #1045 (permalink)
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Interesting how CL has rallied back to being only down 0.30 as I type this.......

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  #1046 (permalink)
Market Wizard
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I started following Dominick Chirichella @dacenergy on Twitter last week. He seems to have a good handle on the markets.

Here is what he posted last night when the markets opened lower.


Quoting 
I am not sure Cyprus warrants a global sell-off. This is a market to watch closely could be some buying opportunities in short term


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  #1047 (permalink)
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Happy Monday everybody,

well looks like the Cyprus news may not be so bad as everybody thought---so far at least. Futures opened yesterday down 20 and as I write this only down 3.5

Anyways, was wondering an opinion on a trade:

/ES April 1350 Put. DTE is 32. Credit 475 and it reduces my buying power (as per TOS) by 7500 ?

thanks and any critique would definitely be welcome

V

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  #1048 (permalink)
Market Wizard
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vmaiya73 View Post
Happy Monday everybody,

well looks like the Cyprus news may not be so bad as everybody thought---so far at least. Futures opened yesterday down 20 and as I write this only down 3.5

Anyways, was wondering an opinion on a trade:

/ES April 1350 Put. DTE is 32. Credit 475 and it reduces my buying power (as per TOS) by 7500 ?

thanks and any critique would definitely be welcome

V

Based on that credit I'm assuming you are doing 10 contracts.

Delta .0230. ROI based on my fees is 2.0% per month.

They're OK. ES may drop but I doubt it will drop enough in 32 days to force you out.

I sold 1250s on Friday.

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  #1049 (permalink)
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Thanks for the quick reply Ron,

Im sure this has been posted before so I apologize in advance but how did you get 2 % ? If i take the credit received and divide by my buying power reduced I get a 5 % ROI ? obviously im doing something wrong so if you could please elaborate?

thanks

V

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  #1050 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
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vmaiya73 View Post
Thanks for the quick reply Ron,

Im sure this has been posted before so I apologize in advance but how did you get 2 % ? If i take the credit received and divide by my buying power reduced I get a 5 % ROI ? obviously im doing something wrong so if you could please elaborate?

thanks

V

SPAN margin is $700 each. It looks like TOS is adding more to that.

I add 2X the margin for cash excess. So in your case if I use 475/(7500+15000)/32*30 I get 1.979% monthly without fees.

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