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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:567,971 / 5,727
Last Reply:22 Hours Ago (12:40 PM) Attachments:642

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Selling Options on Futures?

Old April 8th, 2013, 09:56 AM   #1271 (permalink)
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Counter-trend option selling

Good morning

@Big Mike introduced me to this thread; I haven't gotten a chance to go all the way through it but I can see there are some high quality ideas and posts.

We advocate option selling strategies to our brokerage clients (which is a far different stance than most brokerage firms take). However, I like the idea of selling options against the trend in highly volatile situations. When a market move becomes over-extended, speculators tend to assume "the trend will always be their friend" and they bid up the value of OTM options. We look at this as an opportunity to sell option premium at what we hope are over-valued levels.

For instance, on Friday, we were selling June ZB (30-year bond) 152 calls for about 30 ticks. The options were trading near 6 ticks less than a week prior. The quadrupling of the value suggests to us that if ZB futures stablize, this option stands to lose value quickly. In a perfect scenario, we would be able to buy this option back for a quick profit in the coming sessions.

*There is substantial risk of loss in trading futures and options.

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Old April 8th, 2013, 11:41 AM   #1272 (permalink)
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Angelo1 View Post
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

Cheers Angelo

the more i browsed the web the less impressed i was about the purchase, maybe i'll use the book as an end,,

Angelo,

Trading futures and options takes long hours of research and studying. It appears you are unwilling to do that. You haven't read the thread. You are asking us to give you "brief outlines" and summaries of things we have already posted.

If you are unwilling to put in the hours required then you will not be a successful trader. This is not a get rich quick and easy scheme.

Ron

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Old April 8th, 2013, 12:11 PM   #1273 (permalink)
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opts View Post
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.

I'm getting the deltas from CME Group Daily Bulletins. It is the only place I know that has them. I don't have any software data that has them. Does anybody else have charting that shows deltas?
http://www.cmegroup.com/tools-information/build-a-report.html?report=dailybulletin

I am using QST for my historical option charts.

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Old April 8th, 2013, 12:20 PM   #1274 (permalink)
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Option deltas, Greeks, charts


ron99 View Post
I'm getting the deltas from CME Group Daily Bulletins. It is the only place I know that has them. I don't have any software data that has them. Does anybody else have charting that shows deltas?
http://www.cmegroup.com/tools-information/build-a-report.html?report=dailybulletin

I am using QST for my historical option charts.

@ron99 @opts I'm also using QST for option charting/trading. They have various packages, I subscribe to the most expensive which might not make sense to the average retail trader, but with this version they offer a premium option chain which includes live deltas, Greeks, and vol readings. However, I keep things simple...and tend to not put too much into the Greeks. I look at the option price chart, delta (which is a rough probability estimate of an option expiring ITM) and a futures chart. KISS (Keep It Simple Stupid)

*There is substantial risk of loss in trading futures and options.

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Old April 8th, 2013, 12:37 PM   #1275 (permalink)
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Futures Edge on FIO
Opinions on NG.


Quoting 
For now, strong investor cash points to higher prices, analysts said. "The
rally continues to be fueled by a thrust of speculative money chasing yield,"
analysts at the Schork Group said in a report Monday.

Addison Armstrong, analyst at Tradition Energy, noted that money managers
hold the biggest net-long position in gas futures, or a bet on higher prices,
since July 2006.

Natural Gas Builds on 20-Month Highs as Supply Tightens | Fox Business

So this spec led price rise will have to come down at some time. I have no clue when. But the 8-14 day forecast is not favoring the bulls. http://www.cpc.ncep.noaa.gov/products/predictions/814day/814temp.new.gif


Quoting 
The Nat Gas futures market ended the week on a firm note on news of Southern Companies largest utility unit… Georgia Power experiencing an explosion and subsequent shut down of its 3,166 megawatt coal fired power unit. The explosion occurred late Thursday afternoon and will likely result in an increase in Nat Gas power related consumption until this unit is fixed and back on stream.

With inventories now slightly below normal (compared to the five year average for the current week) the market is now exposed to unscheduled interruptions in any part of the power grid that will ultimately result in an increased usage level of Nat Gas for generating power. The Georgia Power issue would probably not have even resulted in a blink had it occurred last year at this time when end of winter inventory levels were at a record high. However, with the overhang gone and the summer cooling season yet to come the market will react to any of these type of situations with a quick rally in prices… if for nothing other than short covering.

http://www.cmegroup.com/education/market-commentary/energy/2013/04/pre-open-crud...rgy+Market+Commentary%29


Last edited by ron99; April 8th, 2013 at 01:15 PM. Reason: New info
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Old April 8th, 2013, 05:09 PM   #1276 (permalink)
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That was a good trade on the ZB as it lost about 20% of it's value today,

is there a subscription service you have where you post these trade recommendation?


decarleytrading View Post
Good morning

@Big Mike introduced me to this thread; I haven't gotten a chance to go all the way through it but I can see there are some high quality ideas and posts.

We advocate option selling strategies to our brokerage clients (which is a far different stance than most brokerage firms take). However, I like the idea of selling options against the trend in highly volatile situations. When a market move becomes over-extended, speculators tend to assume "the trend will always be their friend" and they bid up the value of OTM options. We look at this as an opportunity to sell option premium at what we hope are over-valued levels.

For instance, on Friday, we were selling June ZB (30-year bond) 152 calls for about 30 ticks. The options were trading near 6 ticks less than a week prior. The quadrupling of the value suggests to us that if ZB futures stablize, this option stands to lose value quickly. In a perfect scenario, we would be able to buy this option back for a quick profit in the coming sessions.


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Old April 8th, 2013, 08:46 PM   #1277 (permalink)
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ron99 View Post
I'm getting the deltas from CME Group Daily Bulletins. It is the only place I know that has them. I don't have any software data that has them. Does anybody else have charting that shows deltas?
http://www.cmegroup.com/tools-information/build-a-report.html?report=dailybulletin

I am using QST for my historical option charts.


I am using the Hoadley finance AddIn which allows the calculation of deltas, it is slightly different to OX, but passable for my needs.

Angelo, I have to agree 100% with Ron, just trying to pick up a quick summary is inadequate. Spend the time to slowly read and absorb what has been so kindly taught from the start and you will be glad you did, trust me. I have been going slowly with this for a year now with Ron's kind guidance and i still feel like i am a noob. One thing you will see as you read through is that there are people approaching the same markets in different ways, you need to take all that in and find which way sits best with you - don't take the shortcuts or you will have your ass handed to you again as you put it. Also, don't be so quick to write off Cordiers book, it is great overview of the business we are in and how to approach it, add to that some of the finer points re risk management from this thread and you are on the path.

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Old April 8th, 2013, 09:32 PM   #1278 (permalink)
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Some very interesting data from the futures only DCOT report. All time high for specs total positions and more importantly all time high for spec short positions for the 23 contracts I keep track of.

The specs are in the markets and pushing it around.

New all time high or near to for net shorts for specs in GC, SI , HG, KC, SB, LC, and LH.

New all time high for net longs for specs for NG and close to new high for CT.

Those are the trends.

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Old April 8th, 2013, 09:50 PM   #1279 (permalink)
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shawn4069 View Post
That was a good trade on the ZB as it lost about 20% of it's value today,

is there a subscription service you have where you post these trade recommendation?

@shawn4069 Thanks for the inquiry, I private messaged you as well but for others that might be interested. This recommendation was issued on a newsletter we write exclusively for our brokerage clients. You can visit our website, or send me an email for more information or for a free trial

We are anticipating this week's Treasury auctions (supply) and the equity earnings season could keep the ZB in correction mode in the short-run. In a perfect world, we will be looking to offset this position later this week or early next week with 60 to 70% of the option premium eroded.

*There is substantial risk of loss in trading futures and options.

If you have any questions about the products or services provided by DeCarleyTrading, please send me a Private Message or use the futures.io "Ask Me Anything" thread.
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Old April 9th, 2013, 06:58 PM   #1280 (permalink)
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SB margin dropping 21% on Apr 10!

Cocoa dropping 6%

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