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Selling Options on Futures?
Started: by ron99 Views / Replies:597,536 / 5,837
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Selling Options on Futures?

  #1201 (permalink)
Trading Apprentice
Uzbekistan
 
Futures Experience: Intermediate
Platform: QST
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Hi to all!
Trading "selling options" with Vision broker using QST platform.

I have few ideas:
1) sell Calls NG 4.4Strike May aprox 250-270$
2) Strangle for CL 105/86 Strikes June aprox. 500$. Will close strangle before may
3) Sold Put for Euro strike 1.2100 312$ (June)
4) Today i am looking for /CT selling calls

Any thoughts?
Thnx, Reno

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  #1202 (permalink)
Elite Member
NW Florida
 
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opts's Avatar
 
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Reno View Post
Hi to all!
Trading "selling options" with Vision broker using QST platform.

I have few ideas:
1) sell Calls NG 4.4Strike May aprox 250-270$
2) Strangle for CL 105/86 Strikes June aprox. 500$. Will close strangle before may
3) Sold Put for Euro strike 1.2100 312$ (June)
4) Today i am looking for /CT selling calls

Any thoughts?
Thnx, Reno


The crude strangle raises a flag with me. The delta on the 86 is .06 and on the 105 is .10. This is very close to the underlying. A quick move in either direction one side will lose money quick but the other side is going to gain value almost as fast. Keep a close eye on this...

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  #1203 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,419 since Jul 2011
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Reno View Post
Hi to all!
Trading "selling options" with Vision broker using QST platform.

I have few ideas:
1) sell Calls NG 4.4Strike May aprox 250-270$
2) Strangle for CL 105/86 Strikes June aprox. 500$. Will close strangle before may
3) Sold Put for Euro strike 1.2100 312$ (June)
4) Today i am looking for /CT selling calls

Any thoughts?
Thnx, Reno

1 & 2 Too close to ITM and too high delta.

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  #1204 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
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Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,419 since Jul 2011
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britkid99 View Post
Also bearish divergence showing on cummulative delta volume (bottom pane). Currently about 100,000 contracts still holding short from the 1525 push down despite price rising 40 points.

Not saying it is imminent as these things take time to play out, the market may want to push those shorties out before rolling over. Could take till Sell in May, or geopolitical events may force it sooner. Either way I think we soon see 1480 again and then maybe 1380 and we wipe out all of this years gains.

I'm looking at the fundamentals, home sales increasing greatly, retail sales up, car sales up, new hiring, corporate profit up, etc., I think the fundamentals are too strong to see ES < 1500, short term.

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  #1205 (permalink)
Market Wizard
Cleveland, OH
 
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alfredoe View Post
James Cordier wrote in his latest article, talking about mistakes selling options close to the money: “Just select options that are at least 50% out of the money and preferably 75% to 100% out of the money. This means looking for markets with a little more volatility and being willing to write them further out in time. Remember that you can sell options four, five or even six months out and still take profits in 60-90 days.”

I could not find even one commodity where you could apply even the 50% out of the money, much less the 75-100%, to get at least a $200 premium going further out in time as much as you can. I would like to see just one example.

You are correct. There isn't much if any money >50% OTM. There are a few things in his book and newsletters that doesn't make sense. And they also don't match how he traded when I had an account there.

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  #1206 (permalink)
Trading Apprentice
Medellin
 
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kevinkdog View Post
Here are all the trades I have taken this year (I started Feb 1). I didn't calculate the X% out of the money these options initially were (to be honest, I don't even know what this means - maybe someone could provide an example), but all these were around .02 delta.

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When you take all these together, from 2/1 to 5/16 the annualized rate of return is around 36.7%.

Of course, I have to start selling a bunch more soon to keep this rate of return up.

Kevin:

Your Premium column is it showing the money received when you sold or is it the net cashed after you bought it back?
Thanks.

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  #1207 (permalink)
Market Wizard
Cleveland, OH
 
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opts View Post
If anyone watched the video links that Ron posted, and if you have not already...just do so.

But, I am wondering how she determined 56 DTE, 100 points away, then 12% after that???

If she used some backtesting methods then that's fine with me. I'm just curious as to how she came up with these variables.

I've been looking at the ES options and even with these parameters there still looks to be decent premium with less than 56 DTE. That brings up the question of if the market goes against you within the first week or so and you want to sell the other side, would there be enough premium remaining to sell the other side given the shorter DTE if you were looking at options with 40 or 35 DTE? Did I say that correctly....uhhh...yes.

I'm guessing she is using 56 DTE (+/-) for the sole purpose that if the market does go the other way hard in the first 10 days or so there is still a good month left (decent premium) to sell the other side. However, it sounds like this is rarely done either way.

Any thoughts?

I don't know why she picked 100 points and 12% more away. Maybe because SP rarely if ever moves that much in 56 DTE?

I looked at a recent worst case scenario. May 2010. ES was ~1200 5/3/10. It dropped to 1014 7/2/10. Using her formula, (1200-100)-12%=968. So her formula covered that big drop.

Now it wouldn't have covered the 2008 drop. But that is where you overrule your criteria based on current conditions.

For the 56 DTE, I'm guessing that for options with the delta she trades, about .0500, that is the sweet spot where time erosion on the premium hits harder.

If you are selling lower delta then the sweet spot for DTE would be higher.

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  #1208 (permalink)
Market Wizard
Cleveland Ohio/United States
 
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alfredoe View Post
Kevin:

Your Premium column is it showing the money received when you sold or is it the net cashed after you bought it back?
Thanks.

This is the premium minus commissions received initially. I plan to keep until expiration if all goes well.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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  #1209 (permalink)
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edmonton alberta canada
 
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There isn't much if any money >50% OTM.


Observation: cl june 98 calls drop 41 pts this am. 92 puts up 20 pts. Big shift in expectations.

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  #1210 (permalink)
10 out of 10
Sacramento, CA
 
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Reno View Post
Hi to all!
Trading "selling options" with Vision broker using QST platform.

I have few ideas:
1) sell Calls NG 4.4Strike May aprox 250-270$
2) Strangle for CL 105/86 Strikes June aprox. 500$. Will close strangle before may
3) Sold Put for Euro strike 1.2100 312$ (June)
4) Today i am looking for /CT selling calls

Any thoughts?
Thnx, Reno

The Euro Put is a 0.09 delta and the seasonal tendency is down and the current trend is down.

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