I'll make one suggestion. You do need to stay with deltas <.0300 or even better for new traders <.0200.
There weren't any May NG calls with a delta that low that were trading for more than $10 before today. So you should be scared if you are selling options with higher deltas because they will jump up and wipe you out. What strike were you looking at?
One thing I will mention is that I highly doubt you will be able to ride this option until 4.8 futures. The margin increased about 76% for this option on Friday ($360 SPAN), the premium increased by $50 and the futures are only at 4.160.
I do think that the NG price rise on Friday was more due to the markets reacting to the employment report than fundamentals. I have seen many times in the past when CL, RB & HO are down NG is up. I suspect there are a lot of specs that get long CL, RB & HO and short NG.
OI for NG has been growing at a huge rate lately. So probably the NG shorts were bailing to help cover their losses in CL, RB & HO. We'll see next week.
Last edited by ron99; April 6th, 2013 at 12:43 AM.
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I don't believe Karen's method has any similarities to Cordier's book. Cordier is looking at optiops with about 100 days away with premiums of no less than $300 in various commodities. Karen specifically trades index options (mostly puts) about 56 DTE, 100 points away then 12% further out. Cordier's book is a good primer for selling options but there are a considerable amount of different approaches to selling premium. Karen introduces another one of those methods.....
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I was wrong on that delta. Tonight I went back and looked at the May ES puts. On Thursday March 21st, day before the 56th DTE, ES settled at 1539. If you subtract 100 then remove 12% you get 1266. Delta for the 1265 ES May put on Mar 21 was .0170 not the .0500 I mentioned above.
She was using the TOS calculation of % chance ITM. That number was 5% for puts. 10% for calls.
So Karen is selling the same delta I have suggested in this thread.
I also like her idea and have done it myself of selling right before the weekend to quickly get weekend time erosion of the premium and margin.
I wish there was an easy way to calculate the different commodities over time and see if selling options in some commodities with a delta < .0300 go in the money or move far enough to force you out more often than other commodities. I suspect some do it more often than others.
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thanks for the reply Opts
and clarifying Karen's method
Ok putting the book aside, i haven't completed reading this thread and given there is little documented about Karen's method can you/ron discuss what the main differences are between Ron & Karen's method please so i can update the summary page
i wanted to try a non directional method on Ozzie stocks but as Karen states it too hard dealing with all the incidentals so i gave it a miss and went onto learning daytrading & TA, I've found that doesn't really suit my overall objective but I've become fascinated with the challenge, (got my arse handed to me)
point being i wanted to continue trading options and only recently discovered you can sell futures options (i've been under a rock)
so pleased i found this thread many thanks to all the contributors & owner
the more i browsed the web the less impressed i was about the purchase, maybe i'll use the book as an end,,
"If you believe you CAN, or, you believe you CAN'T, you're RIGHT!"
Ron: What software/data are you using to look back in time for the historical options info? I wrote OX and suggested the possibility of listing the options for a given contract and the probabilities of them expiring ITM along with various user inputs and there response was "this is an excellent idea" so I am hoping they will expand on their current format.