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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,836 / 5,734
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Selling Options on Futures?

Old March 20th, 2013, 08:29 PM   #1081 (permalink)
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Now it's the too prolonged of cold temperatures that may be hurting the wheat crop here. We'll see. Gotta wait on my GC opts to expire Monday before considering anything....

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Old March 21st, 2013, 12:53 AM   #1082 (permalink)
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@ron99

I'm still trying to get familiar with my likely give up points on these trades. Right now I calculate that if wheat goes to 790 in the next 2 weeks (April 3) and assuming volatility remains constant (hard to say) that would be my give up point on this trade - WK13 870 calls (starting margin was 600 per call with 1200 of additional buffer). I don't anticipate this as being too likely but I also like to be prepared.

Typically when I've traded stock options doing a covered call can be a viable way to reduce some exposure. But when I enter a long call at say 880 in the OX trade calculator it actually increases my margin. That just seems weird. Adding say a single bought call for every 2 sold calls would cut my delta in half (getting me back to less than 0.02) so not sure why this would increase risk. Does this have anything to do with OX miscalculating margin on the first contract as you mentioned earlier in the thread?

Edward

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Old March 21st, 2013, 01:23 AM   #1083 (permalink)
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eudamonia View Post
@ron99

I'm still trying to get familiar with my likely give up points on these trades. Right now I calculate that if wheat goes to 790 in the next 2 weeks (April 3) and assuming volatility remains constant (hard to say) that would be my give up point on this trade - WK13 870 calls (starting margin was 600 per call with 1200 of additional buffer). I don't anticipate this as being too likely but I also like to be prepared.

Typically when I've traded stock options doing a covered call can be a viable way to reduce some exposure. But when I enter a long call at say 880 in the OX trade calculator it actually increases my margin. That just seems weird. Adding say a single bought call for every 2 sold calls would cut my delta in half (getting me back to less than 0.02) so not sure why this would increase risk. Does this have anything to do with OX miscalculating margin on the first contract as you mentioned earlier in the thread?

Edward

Yes. Write down what the margin is for a quantity of one each. Then change the quantity to two each. Recalculate. Subtract the margin for one from the margin for two. The difference should be the correct margin.

As far as the point to bail out of a position. You have 1200 excess. If the increased margin plus the increased premium passes $1200 it is time to get out.

The 880 call is only 12.50 less than the 870. Buying the 880 and paying fees to buy it wipes out the profit from one of the short options. I'm not sure if it is worth it to buy 880s rather than just bailing out and moving on.

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Old March 21st, 2013, 02:09 AM   #1084 (permalink)
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Thanks I think that makes sense. Part of the challenge is figuring out where things will be when.

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Old March 21st, 2013, 09:48 AM   #1085 (permalink)
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eudamonia View Post
Thanks I think that makes sense. Part of the challenge is figuring out where things will be when.

Or when things will be where...

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Old March 21st, 2013, 07:39 PM   #1087 (permalink)
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Got filled in my Wheat Calls today. Here is the trade I put on:

3/21/13
SOLD 5 1000C N-ZW June 21th Expiry for 1.5
Delta: 0.03
IM: 362 MM: 724

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Old March 22nd, 2013, 11:41 AM   #1088 (permalink)
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Another new OI record for the CME NG contract. OI has gained 178k in only 16 trading days! 15%

When the weather turns and the new longs head for the exits it will be fast and hard.

I'm looking to sell calls when it turns.

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Old March 22nd, 2013, 12:40 PM   #1089 (permalink)
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ICE Softs opinion and news.
Cocoa moves higher on speculation of shortages

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Old March 22nd, 2013, 12:48 PM   #1090 (permalink)
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Someone got lucky today...

1 CTK36700P sold at .10 today. Yesterday it was at .01.

I guess sometimes it pays to have some "hope" limit orders to sell out there - monthly ROI on that option was 108% !!!

Do the exchanges sometimes wipe out these bad trades (I'm guessing someone slipped a decimal point)?

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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