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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:570,153 / 5,734
Last Reply:December 9th, 2016 (01:01 AM) Attachments:642

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Selling Options on Futures?

Old March 19th, 2013, 09:09 PM   #1071 (permalink)
Trading Apprentice
Fresno, California
 
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opts View Post
I'd keep an eye on the resistance here...just in case.

The market is right at the resistance point right now in the after hours. It is currently trading at 727.75. So a little bit past that...

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Old March 19th, 2013, 09:10 PM   #1072 (permalink)
Market Wizard
OH
 
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rsb619 View Post
Here a couple of trades I put on recently on my IB demo account. I was using Apex but I switched to IB because I am used to their platform. For the margin, however, I am using OptionsXpress as I plan to be using them when I start trading live.

3/15/13
SOLD 5 115C M-CL May 16th Expiry for 0.08
Delta: 0.02
IM: 465 MM: 930

3/17/13
SOLD 5 1250P K-ES May 17th Expiry for 1.55
Delta: -0.03
IM: 333 MM: 666

3/19/13
SOLD 5 2000C N-GC June 25th Expiry for 0.9
Delta: 0.03
IM: 492 MM: 984

I want to sell some 70 puts for CL-M to turn it into a strangle but haven't been able to get filled at my premium. Also I am looking to sell the 1000 ZW-N Calls and 200 KC-N Calls. What are your guys' opinion on the trades and potential trades?

Thanks!

Nice diversity. Good job.

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Old March 20th, 2013, 08:37 AM   #1073 (permalink)
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rsb619 View Post
The market is right at the resistance point right now in the after hours. It is currently trading at 727.75. So a little bit past that...

This morning:

DJ MARKET COMMENT: EU Wheat Futures Up On Chicago Gains, Weak Euro

1014 GMT [Dow Jones] EU wheat futures are higher, supported by gains in
Chicago and a weak euro. Gleadell says that the USDA stocks report due next
week may well indicate more domestic wheat feeding in the US, which would lead
to lower stocks than the market expected. The grain merchant adds that fund
shorts will be a little nervous looking at this, leading to some
short-covering. Meanwhile, Agritel says that the recent decline of the euro is
improving the competitiveness of European origins. The risk manager adds that
delays are reported in spring planting in western Europe, as well as in the US,
due to heavy rains. May Paris milling wheat trades up EUR2.75, or 1.2%, at
EUR241.25/ton.

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Old March 20th, 2013, 10:04 AM   #1074 (permalink)
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Medellin
 
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ron99 View Post
Were you too close to ITM? I have NGJ3 450 calls. The premium hasn't increased at all.

I had sold Nat gas July 440 calls at $310 (July Nat gas was at $350 Feb 13 when I sold them) and bought them back at $1.050. The previous day they were at $750. Now, they are at $1.300 each.

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Old March 20th, 2013, 10:28 AM   #1075 (permalink)
Market Wizard
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alfredoe View Post
I had sold Nat gas July 440 calls at $310 (July Nat gas was at $350 Feb 13 when I sold them) and bought them back at $1.050. The previous day they were at $750. Now, they are at $1.300 each.

Those calls were at 0.1052 delta that day. Far too high. Especially when you are selling that far out in time. 132 DTE. Also only being 0.90 on your strike away from futures with 132 DTE is too close.

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Old March 20th, 2013, 12:43 PM   #1076 (permalink)
Trading for Fun
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alfredoe View Post
Well MJ888, yes, there is something more frustrating...seeing your premium continue to escalate the next day, like what happened with natural gas last march 15. I waited until next day and the premium went up another 100% in a few hours. I lost what I had done in the 2 previous months....Never again will I let premium go over 100% of what I received, It has happened twice to me. It is called accepting your loses.

Alfredoe,

I am not trying to make light of the possibilities of big losses when it comes to option selling. Just to be clear, when I wrote that I will not exit at double premium received and wait until the next session, I am ONLY referring to when I am in a strangle trade. I made this decision after reviewing about 4-5 years of my previous strangle positions. My data revealed that there were several strangle trades every year where I would exit WHENEVER the premium doubled on one side only to watch the premium quickly go back down, some instances on the SAME day. In fact, I found many instances where I exited at the highest point the premium traded during the time that I was in the trade. Very frustrating indeed.

With that said, I have been burned for additional losses by waiting until the next session. It is a calculated risk that I am willing to take based on the fact that I am far out of the money plus with a strangle, I am hedged on the opposite end. Should the premium on one side of the strangle double, the premium on the opposite side will have eroded quite a bit thus providing some cushion for the losing side.

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Old March 20th, 2013, 01:01 PM   #1077 (permalink)
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opts View Post
This morning:

DJ MARKET COMMENT: EU Wheat Futures Up On Chicago Gains, Weak Euro

1014 GMT [Dow Jones] EU wheat futures are higher, supported by gains in
Chicago and a weak euro. Gleadell says that the USDA stocks report due next
week may well indicate more domestic wheat feeding in the US, which would lead
to lower stocks than the market expected. The grain merchant adds that fund
shorts will be a little nervous looking at this, leading to some
short-covering. Meanwhile, Agritel says that the recent decline of the euro is
improving the competitiveness of European origins. The risk manager adds that
delays are reported in spring planting in western Europe, as well as in the US,
due to heavy rains. May Paris milling wheat trades up EUR2.75, or 1.2%, at
EUR241.25/ton.

Seems like a news driven event. It's interesting how these spikes can temporarily drive premium through the window which can be a good place to sell. Even though prices are still up from yesterday's close premium is down on calls across the board.

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Old March 20th, 2013, 05:11 PM   #1078 (permalink)
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Newbie Update

I have not posted here for a while, but I am enjoying the conversation...

My little test account with this method is doing well. I think today was the first time everything I sold is valued at 1!

Easy to get complacent and bored with this method, but it is working.

Right now, I'm on pace for >40% annual return. But, there is a lot of the year to go, and it is hard finding suitable candidates. Plus, if I add $ to this account, selling volume might also prove tricky.

Thanks again to Ron for initially offering up such a neat trading approach, and to everyone else who has contributed!


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Old March 20th, 2013, 07:19 PM   #1079 (permalink)
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opts View Post
This morning:

DJ MARKET COMMENT: EU Wheat Futures Up On Chicago Gains, Weak Euro

1014 GMT [Dow Jones] EU wheat futures are higher, supported by gains in
Chicago and a weak euro. Gleadell says that the USDA stocks report due next
week may well indicate more domestic wheat feeding in the US, which would lead
to lower stocks than the market expected. The grain merchant adds that fund
shorts will be a little nervous looking at this, leading to some
short-covering. Meanwhile, Agritel says that the recent decline of the euro is
improving the competitiveness of European origins. The risk manager adds that
delays are reported in spring planting in western Europe, as well as in the US,
due to heavy rains. May Paris milling wheat trades up EUR2.75, or 1.2%, at
EUR241.25/ton.

Like eudamonia said, looks like short term the prices could go up especially if there is short covering. Good time to sell puts considering that it doesn't look like major market moving news. I am trying to sell the 1000 July Calls. I noticed that the market settled at 1.5 and I had an limit order placed from a couple of days ago at 1.5 but it didn't get filled. Any idea why that is?

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Old March 20th, 2013, 07:32 PM   #1080 (permalink)
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rsb619 View Post
Like eudamonia said, looks like short term the prices could go up especially if there is short covering. Good time to sell puts considering that it doesn't look like major market moving news. I am trying to sell the 1000 July Calls. I noticed that the market settled at 1.5 and I had an limit order placed from a couple of days ago at 1.5 but it didn't get filled. Any idea why that is?

Just because it settled at 1.5 does not mean that any traded there. Until the bid hits 1.5, you won't be filled at all. And even then, if there are 1.5 orders in front of you, you'll have to wait your turn.

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