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Selling Options on Futures?
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Selling Options on Futures?

  #1101 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
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Raven View Post
Ron,
Do you have to pay estimated taxes quarterly for your regular accounts? If so, is there a program or method to do so?

Thanks,
r

I don't pay any estimated taxes. I just pay the penalty for not paying estimated taxes.

I consider it a low cost loan from the government. It's only a 3% penalty that is calculated from the date each estimated payment is due. So actually it is less than 3%.

Since I make more than 3% profit it is worthwhile to me to not pay. Last year my penalty was only $59.

Besides it is almost impossible to know how much you will make in a year.

Several years ago I made the estimated payments. I then had a bad 4th quarter and got a lot of the estimated payment back. The IRS doesn't pay interest on that.

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  #1102 (permalink)
Trading for Fun
Huntsville AL/USA
 
Futures Experience: Intermediate
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Favorite Futures: Options on Futures
 
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ron99 View Post
I don't pay any estimated taxes. I just pay the penalty for not paying estimated taxes.

I consider it a low cost loan from the government. It's only a 3% penalty that is calculated from the date each estimated payment is due. So actually it is less than 3%.

Since I make more than 3% profit it is worthwhile to me to not pay. Last year my penalty was only $59.

Besides it is almost impossible to know how much you will make in a year.

Several years ago I made the estimated payments. I then had a bad 4th quarter and got a lot of the estimated payment back. The IRS doesn't pay interest on that.

Thank you! That is so helpful and makes so much sense. I am just thankful that paying taxes on gains is even something I have to worry about. Both of my accounts are doing very well.

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  #1103 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,677 since Jul 2011
Thanks: 777 given, 4,652 received
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seemasp View Post
Hello,
I am new to this forum and thread but somewhat experienced trader coming around to using this strategy for part of my portfolio. However I have few questions that I would appreciate help from Ron/others.

(1) What part of account is allocated to one commodity? Assuming account of 100k, and say a position of selling June 75 puts of CL for 5 cent at 300 initial margin - how many contracts will be sold?

I recommend at least 5 different commodities, but it depends on the account size. Smaller ones will have to do with less.

So 300 IM + 600 excess = 900. If 20k per commodity, then 22 CL contracts.


(2) Where do I get delta of option? all free quote services that I know only give prices of options - not greeks...Also is there any screener that one can use (like many stock options screeners) for future options?

OX gives deltas on their option chain pages. The CME gives deltas here.
Daily Bulletin | Build a Report

I don't know of any screeners.


(3) Any adding to positions is done or not when it is going wrong way? If so how much? like after selling June 75 puts at 5 cents, Crude drops 2 dollar and now the same put is selling at 8 cents. The premise behind trade crude holding/going up seasonally is still valid and so why not use better prices? but then there is also higher risk and you are exceeding your allocation....

Only if I have money not being used and the reason the market moved against you is not looking like it will continue. But yes sometimes I do.

(4) Does any one uses rolling over of options taking heat? Rolling to further month/strike?

I definitely wouldn't roll further out in time. Deltas will be higher and movement against you will be stronger. I might be tempted to roll to a further OTM strike same month. But I don't remember ever doing that.

Thanks in advance.

Sam

Welcome.

Be aware that IB charges margin extremely higher than most other places. That reduces your ROI.

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  #1104 (permalink)
Market Wizard
Cleveland, OH
 
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Raven View Post
Thank you! That is so helpful and makes so much sense. I am just thankful that paying taxes on gains is even something I have to worry about. Both of my accounts are doing very well.

Great to hear you are doing well!

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  #1105 (permalink)
Trading Apprentice
west palm beach + Florida
 
Futures Experience: Advanced
Platform: IB
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Thank you

Thank you Ron for prompt reply.

Regarding IB, yes I am aware of very high margin rates and I am in process of moving to other broker (not optionxpress). Once I trade there for few weeks and if everything is good then I would let you know about it. He is promising span margins and less than $2 RT but with some platform charge. I have to see how it works....

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  #1106 (permalink)
Elite Member
NW Florida
 
Futures Experience: Intermediate
Platform: OX and TOS
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ron99 View Post
I don't pay any estimated taxes. I just pay the penalty for not paying estimated taxes.

I consider it a low cost loan from the government. It's only a 3% penalty that is calculated from the date each estimated payment is due. So actually it is less than 3%.

Since I make more than 3% profit it is worthwhile to me to not pay. Last year my penalty was only $59.

Besides it is almost impossible to know how much you will make in a year.

Several years ago I made the estimated payments. I then had a bad 4th quarter and got a lot of the estimated payment back. The IRS doesn't pay interest on that.

Buuuuuut....you're still paying capital gains aye?

I'm lost on why someone would want to pay taxes on a quarterly basis since the year is not 'over'. I don't know what I would do without the OX tax dump file.

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  #1107 (permalink)
Elite Member
milwaukee,wi, usa
 
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ron99 View Post
I don't pay any estimated taxes. I just pay the penalty for not paying estimated taxes.

I consider it a low cost loan from the government. It's only a 3% penalty that is calculated from the date each estimated payment is due. So actually it is less than 3%.

Since I make more than 3% profit it is worthwhile to me to not pay. Last year my penalty was only $59.

Well done Ron99!!!

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  #1108 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,677 since Jul 2011
Thanks: 777 given, 4,652 received
Forum Reputation: Legendary


opts View Post
Buuuuuut....you're still paying capital gains aye?

I'm lost on why someone would want to pay taxes on a quarterly basis since the year is not 'over'. I don't know what I would do without the OX tax dump file.

My tax preparer fills out form 6781. That's for income from futures and options (sec 1256 Contracts). Those numbers go to Schedule D.

What is the OX tax dump file?

I'm guessing people pay quarterly so they don't have to pay the penalty for not making estimated payments. They don't want to give the gov any extra money.

I'd rather the gov give me a low interest loan that I can make even more money with so I can pay them even more money.

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  #1109 (permalink)
Elite Member
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Futures Experience: Intermediate
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ron99 View Post
My tax preparer fills out form 6781. That's for income from futures and options (sec 1256 Contracts). Those numbers go to Schedule D.

What is the OX tax dump file?

I'm guessing people pay quarterly so they don't have to pay the penalty for not making estimated payments. They don't want to give the gov any extra money.

I'd rather the gov give me a low interest loan that I can make even more money with so I can pay them even more money.

Roger that...the GainsKeeper in OX will export all of the years trades into the Schedule D for you. I do my own taxes with HR Block and it gives you the 'option' to import a trade history dump file and the HR Block tax program does it all for you. Very easy....

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  #1110 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,677 since Jul 2011
Thanks: 777 given, 4,652 received
Forum Reputation: Legendary



opts View Post
Roger that...the GainsKeeper in OX will export all of the years trades into the Schedule D for you. I do my own taxes with HR Block and it gives you the 'option' to import a trade history dump file and the HR Block tax program does it all for you. Very easy....

You don't need to keep track of each future and option trade for the IRS. Unless you are talking about stock trades.

You get the total profit or loss number for the year from the 1099 and report it on the 6781 form. Just one number that includes the value of the current open positions.

Have you been using the 6781 form for futures and options?


Last edited by ron99; March 23rd, 2013 at 09:27 PM.
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