Selling Options on Futures? - Options on Futures | futures io social day trading
futures io futures trading


Selling Options on Futures?
Updated: Views / Replies:671,881 / 6,238
Created: by ron99 Attachments:729

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 729  
 
Thread Tools Search this Thread
 

Selling Options on Futures?

  #101 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,651 since Jul 2011
Thanks: 770 given, 4,581 received
Forum Reputation: Legendary


alfredoe View Post
Hi Ron, I am new here and wanted to know where can I see your trades? Do you show them any where in this forum?

Thanks,
Alfredo E.

No, I have not shown them on this forum.

Reply With Quote
The following 2 users say Thank You to ron99 for this post:
 
  #102 (permalink)
Elite Member
Qld, Australia
 
Futures Experience: Beginner
Platform: Excel/Hoadley/PC-SPAN
Broker/Data: OX
Favorite Futures: Options
 
Posts: 28 since Mar 2012
Thanks: 6 given, 39 received

Orders

Hi Ron,

I have been looking at some of the chains for OTM options and notice that the Bid/Ask spread is very wide in alot of them.

I have a question - when you are entering an order (say, short put) and the Bid/Ask is showing 0.15 / 1.20, do you tend to enter (using LMT order) it:
a) at the Bid (0.15)
b) slightly inside the Bid (say 0.20 or 0.25)
c) at the midpoint of Bid/Ask
d) very close to the last traded price

I know there is no set answer and it will depend on alot of things - but how do you think I should approach entering orders in markets like this?

Regards
Scott


Reply With Quote
The following 2 users say Thank You to spj77 for this post:
 
  #103 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,651 since Jul 2011
Thanks: 770 given, 4,581 received
Forum Reputation: Legendary


As far as placing orders. That is one thing that takes a lot of experience because each market is different. For ES you can place a bid between the bid and ask and usually get filled if there is enough volume on that option. For most others you have to kinda know that market. And some days you just can't get anything done at a reasonable price. Never chase a bid to just get something on. Some commodities you have to offer less than settlement to get them on. Others you can sometimes get higher than settlement (assuming futures aren't too far from settlement).

Some days there are reasonable bids that you can sell. Some days you place an ask and get filled. Some days you can't get anything done.

Are you familiar with how Delta works to apply it to the changes in futures price? For example if you want to sell crude puts and futures are down 1.50 you take the delta, let's say .0200, and multiply it times the price change for the futures. So 1.50 times .0200 equals .03. So you take the prior day settlement for that option, lets say .06, and add the .03 to get .09. That would be a fair price for that option right then.

Reply With Quote
The following 6 users say Thank You to ron99 for this post:
 
  #104 (permalink)
Elite Member
Milton Keynes UK
 
Futures Experience: Intermediate
Platform: Investor/RT, Sierra Chart
Favorite Futures: Futures Options, CL
 
Posts: 156 since Jun 2009
Thanks: 74 given, 115 received

I am glad this thread has been reactivated. I too have started selling futures options in my pension account this year, after reading the Cordier/Gross book and reading and watching everthing on Optionsellers.com.

I am in the UK and can really only use IB within my pension account. This gives me inferior margin requirements as mentioned before. I have been trading futures on and off for about 10 years with limited success. I only say that to show that I am well aware of the difficulties and risks involved with trading, having wiped out a couple of small accounts in that time.

So far I have successfully written Euro, Wheat, Coffee and Crude oil. I do find it difficult to find suitable ROI for the margins IB requires and I am going out two, three and four months to find decent premium.

I currently have a Crude strangle on the go if anyone is interested I can post details. I am looking at Gold after the latest email seminar from Optionsellers.

Regards all
Brit

Reply With Quote
The following 2 users say Thank You to britkid99 for this post:
 
  #105 (permalink)
Trading Apprentice
Medellin
 
Futures Experience: Beginner
Platform: non
Favorite Futures: options in futures
 
Posts: 32 since Apr 2012
Thanks: 36 given, 12 received

Premiums


spj77 View Post
Hi Ron,

I just checked IB margins on the following contracts:

July Corn 5.00 put 1323
July Crude 75 put 1338
June ES 1000 put 1464
July KC 250 CALL 919
June GC 1300 put 3535

Are you able to check them against your broker?

Also, I just confirmed with IB by phone that you are 100% correct with the auto liquidation of your position instead of issuing a margin call....that's not good at all.

Regards
Scott

Hi SPJ77, could you tell us what kind of premiums did you get from selling those puts and calls?
According to what I know, you got very small premiums because your options were only 30 -60 days away. In order to collect more premiums and to be more out of the money, less risk, you have to get farther away in time. Am I correct?

Thanks, for your information.

Reply With Quote
The following user says Thank You to alfredoe for this post:
 
  #106 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,651 since Jul 2011
Thanks: 770 given, 4,581 received
Forum Reputation: Legendary


britkid99 View Post
I am glad this thread has been reactivated. I too have started selling futures options in my pension account this year, after reading the Cordier/Gross book and reading and watching everthing on Optionsellers.com.

I am in the UK and can really only use IB within my pension account. This gives me inferior margin requirements as mentioned before. I have been trading futures on and off for about 10 years with limited success. I only say that to show that I am well aware of the difficulties and risks involved with trading, having wiped out a couple of small accounts in that time.

So far I have successfully written Euro, Wheat, Coffee and Crude oil. I do find it difficult to find suitable ROI for the margins IB requires and I am going out two, three and four months to find decent premium.

I currently have a Crude strangle on the go if anyone is interested I can post details. I am looking at Gold after the latest email seminar from Optionsellers.

Regards all
Brit

Hi Brit,

I would be interested to see the details of your crude strangle. It's always interesting to see what others are trading.

Ron

Reply With Quote
The following 2 users say Thank You to ron99 for this post:
 
  #107 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,651 since Jul 2011
Thanks: 770 given, 4,581 received
Forum Reputation: Legendary


alfredoe View Post
Hi SPJ77, could you tell us what kind of premiums did you get from selling those puts and calls?
According to what I know, you got very small premiums because your options were only 30 -60 days away. In order to collect more premiums and to be more out of the money, less risk, you have to get farther away in time. Am I correct?

Thanks, for your information.

I think he just picked out those contracts to check on the margin rates. I don't think he traded them.

Being more out of the money and further out in time is not necessarily less risky. It is harder to predict where future prices will go 4-5 months out than it is 2-3 months out. Look at the Delta numbers to determine the risk of an option.

Also don't get too greedy with premium. It just puts you too close to ITM and disaster in your account.

Reply With Quote
The following 3 users say Thank You to ron99 for this post:
 
  #108 (permalink)
Elite Member
Milton Keynes UK
 
Futures Experience: Intermediate
Platform: Investor/RT, Sierra Chart
Favorite Futures: Futures Options, CL
 
Posts: 156 since Jun 2009
Thanks: 74 given, 115 received

Hi Ron,

First a quick explanation of why I chose this trade. My broker IB uses 1.5x margin within UK pension accounts. So for Crude I am looking at around $2000 margin per contract. Then I am looking for around 10% ROI, so $200 per contract per month.. At the time of the trade Oil was around $100 and I was looking to go 20% OTM. I am biased to the long side on oil.so sold the following using the layering technique suggested by the Liberty guys.

Date 9th April 2012
AUG12 80P for 0.52 $520
SEPT12 77.5P for 0.64 $640
SEPT12 80P for 0.87 $870
OCT12 77.5P for 0.94 $940
OCT12 80P for 1.22 $1220

Then to create a margin free strangle I sold the JUN12 120C for 0.23 or $230 on 11th April. As many as possible without pushing up margin. I chose the next month as it had only 6 weeks remaining and offered a reasonable premium. I was of course concerned about the geopolitical situation with Iran but talks were starting so I felt OK about it.

Over the 3 weeks duration of this trade so far, Crude has maintained a narrow range of $100-105. This has greatly aroded all positions and on Friday I closed out half of my AUG12 80P for 0.22 generating a profit of $300 per contract (minus commissions). This was a return of 15% in 3 weeks!

As of Friday the JUN 120C were 0.08 so up $150 per contract with 20 days to expiry. Depending on what Crude does today I may start to thin these out to reduce risk

Brit

Reply With Quote
The following 3 users say Thank You to britkid99 for this post:
 
  #109 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,651 since Jul 2011
Thanks: 770 given, 4,581 received
Forum Reputation: Legendary

Hi Brit,

Interesting. I would have done a few things different, but this has worked for you so far.

I would have sold lower strikes on the puts farther out in time. Maybe try to keep the premium the same as your Aug puts when you moved to Sep and Oct by moving to lower strikes. If the market goes against you the Oct would feel the most heat. Currently the delta on the Oct is twice as high as the Aug 80. 0.0348 Delta for Aug vs 0.0691 for Oct.

So if today crude dropped $3.00 then the Aug 80 would move at least 0.10 (3.00 times 0.0348) while Oct 80 would move 0.21 against you. The Oct 80s are twice as risky as the Aug 80. An Oct 72 put is the same risk as an Aug 80 today. On Apr 9th it settled at 0.58.

What percent of your account are you using for margin? Cordier mentions 50%. I have found that 66% works better. You are pushed out of positions less quickly with more excess. By being able to ride more positions out to expiration you are able to make up for the less contracts put on by having less losers. Of course if the market has a major fundamental reason for going against you, you need to get rid of the positions and not try to ride them out.

Just so everybody is clear, I'm guessing you are calculating the ROI by just using margin and not the excess you are carrying for the trade. Right?

If you are worried about the 120 calls, you could buy a call above the 120 to turn your possible unlimited loss into a limited loss. That will also reduce the margin required to put on the 120s. It also makes FCMs happier.

I sell further OTM options than you did. After a couple of blowups in 14 years of trading I learned that lesson the hard way.

Be aware that crude has crashed hard in early May the last 2 years. While what it did last year isn't always a good predictor of what it will do this year, keep that in the back of your mind and use that to determine whether to bail or not on positions.

I suspect that this Friday's monthly employment number will have a strong bearing on where crude will go later in May.

I need to get back to my own trading. Good luck.

Ron

Reply With Quote
The following 2 users say Thank You to ron99 for this post:
 
  #110 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,651 since Jul 2011
Thanks: 770 given, 4,581 received
Forum Reputation: Legendary


Here is an excellent, excellent website for an economic calendar.
Economic Calendar - Bloomberg

It gives you current week reports, consensus prior to the reports, actual numbers after the report and historical charts of that report. All things that greatly affect futures and options.

Here is a website for some of the agricultural reports.
NASS - Publications

Reply With Quote
The following 4 users say Thank You to ron99 for this post:

Reply



futures io > > > > Selling Options on Futures?

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

July Journal Challenge w/$1100 in prizes from TopstepTrader

July
 

An Afternoon with FIO member Softsoap

Elite only

Battlestations: Show us your trading desks and win $750 in prizes

August
 

Extended Ask Me Anything w/Brett Steenbarger

Elite only

Prototyping Python Strategies (part 3) w/Ran Aroussi

Elite only

Brannigan Barrett w/Axia Futures

Elite only

Introduction to Phillip Capital futures brokerage services

Aug TBD

How Monte Carlo Analysis Can Help Your Trading w/Kevin Davey

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Crude Oil (CL) futures inverse pairing options Big Mike Commodities Futures Trading 8 December 12th, 2013 11:00 AM
Recommend futures, options Broker? sam1197 Reviews of Brokers and Data Feeds 17 March 27th, 2013 12:42 AM
Trading Futures with options as protection Gooffy2010 Commodities Futures Trading 6 October 2nd, 2012 04:55 PM
Selling Njniatrader sam1197 NinjaTrader 22 June 28th, 2012 12:40 PM
Zen-Fire Futures options tici88 Reviews of Brokers and Data Feeds 1 July 30th, 2011 09:16 AM


All times are GMT -4. The time now is 12:56 PM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-07-26 in 0.09 seconds with 19 queries on phoenix via your IP 54.198.244.0