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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,052 / 5,727
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Selling Options on Futures?

Old April 9th, 2013, 10:37 PM   #1281 (permalink)
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Kicking things around....again.

I have been mulling over the prospect of a weekly strategy with the mini500 since there are weekly options available. I am just throwing this out there for anyone and everyone to rip apart, make suggestions, and to entertain any criticisms as well. I am thinking of a put ratio spread with a few curve balls. This could be a buy one sell two (1:2) or 1:3, 2:4, 2:6.....whatever ratio as long as the net from the sell side of the short options is greater than the options purchased and it has a worthy ROI.

Puts only due to the fact that the premium is there for the further OTM puts vs the further OTM calls...the market can fall further quicker vs. the market rising further quicker.

Curve ball #1: The put(s) bought would not be ITM like a 'usual' spread making this a weak ratio spread? Call it what you will. The reason for this is because if you buy the put too close to the underlying then your net sell premium is lowered unless you sell a greater number of puts or sell closer to the underlying. But, that would add more risk and required margin.

Curve ball #2: This would have to be put on every Friday when the weeklies are listed to bank the max time premium from the options sold. However, Fridays can be large economic news so some Fridays might have to be avoided due to the volatility spikes.

Curve ball #3: How far away to buy the put and how far away to sell the puts? They would have to be closer because of the shorter time frame (vs. the 56 DTE per the videos) for the sold options to have the premium unless you sell a lot of them like 1:5??? That might be a change up. Anyway, If you are selling a week away then this is where the probabilities come into play. If the market does start to drop your bought put(s) will gain value as long as this happens in the first 1 to 3 days(?) and by what percentage? If your sold puts are still 5 to 10% away with a few days left there would have to be some dramatic news for the markets to drop that far that fast if you sold the long put(s) for a profit and held the short puts until expiration.

Curve ball #4: If the market does drop but you are 'certain' that your sold puts will not got ITM because of your expert moon phase biorhythm analysis indicator and your long put(s) are gaining value, at what point (% or $) do you sell the long put for a profit and let the short puts expire worthless?

The long puts are there for a little insurance and to lower the margin requirement. But, I am thinking that if the long puts expire worthless...who cares? The main objective is to make money from the short puts per the initial trade.

Why even buy a put(s)? Because of the possibility of make a little on that also along with some insurance and reduced margin. BUT: Be prepared for you margin requirement to increase if you sell the long put for profit and still hold the short puts.

I don't have any historical option data to look at so I'm waiting on Friday to see the actual weekly premiums....

Hit me back....


Last edited by opts; April 9th, 2013 at 10:45 PM.
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Old April 9th, 2013, 10:51 PM   #1282 (permalink)
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opts, I'm not sure I have enough info of what you are thinking of doing. Can you give a possible trade?

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Old April 9th, 2013, 11:23 PM   #1283 (permalink)
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ron99 View Post
opts, I'm not sure I have enough info of what you are thinking of doing. Can you give a possible trade?

Okay...Looking at the ES April puts that expire in 10 days. That's the closest to the weekly that I can see. Sooooo, something like the following:

ES is at 1563

Buy 1 April 1500 put for 1.50 or $75
Sell 5 April 1475 puts for .70 ($35 ea) or $175
1:5
Gross = $100

So a 2:10 = $200, 3:15 = $300 etc. This is gross so net is after comm/fees....


Or not just weekly, but maybe with 10 days to go, or 20....

Just something that is a little more frequent.



Back in the a.m.


Last edited by opts; April 9th, 2013 at 11:25 PM. Reason: zzzzzzzz
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Old April 10th, 2013, 12:34 AM   #1284 (permalink)
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For your example you make $100 if the price is over 1500. Your profit peaks at $1350 at ES price 1475 (actually one tick above 1475). Break even is 1468.25. Losses start below that.

Does the ES move down more than 90 in 7 days? Yes but not too often. Late 2008 and Aug 2011 are a couple of recent examples.

Margin is 8361. With 2X excess and no fees you are getting 0.4% ROI in 10 days if the price is above 1500. Or 1.2% for 30 days.

Take away the long put and the margin is 11,006.

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Last edited by ron99; April 10th, 2013 at 12:45 AM.
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Old April 10th, 2013, 05:39 AM   #1285 (permalink)
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to OX user

Futures Edge on FIO

Are you a NinjaTrader user?

 
I.
Have anybody experience with ACATS process between IB and OX accounts? (After ACATs inception I receive in OX account only small part of my assets. OX service people said that I need to wait for all cash and open positions transfer, IB -that they was complete full ACAT).

II.
On 8th Apr I open some position in OX:
sell 4 LHM13 102 C at 0.25, IM=1009$
sell strangle 1 CLN13 78 P/107 C at 0.41, IM = 1433$
On 9th Apr I open some position in OX:
sell 5 SBN13 21 C at 0.05, IM = 924$

Total margin = 3366$, but on OX Balances Summary page under Futures Requirements I sow another IM=4565.9$ (10th April 3:32 a.m. CST).
Does it mean that OX calculate margin in another way than I can show using OX Margin Calculator?

Thanks in advance

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Old April 10th, 2013, 07:54 AM   #1286 (permalink)
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Thanks for doing that Ron. I've got the thinking cap on for a while about this.....

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Old April 10th, 2013, 10:14 AM   #1287 (permalink)
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ron99 View Post
For your example you make $100 if the price is over 1500. Your profit peaks at $1350 at ES price 1475 (actually one tick above 1475). Break even is 1468.25. Losses start below that.

Does the ES move down more than 90 in 7 days? Yes but not too often. Late 2008 and Aug 2011 are a couple of recent examples.

Margin is 8361. With 2X excess and no fees you are getting 0.4% ROI in 10 days if the price is above 1500. Or 1.2% for 30 days.

Take away the long put and the margin is 11,006.

The bolded text and chart is wrong. If the final price is 1475 or lower the short puts are ITM and you get long futures. Which could mean large losses.


Last edited by ron99; April 10th, 2013 at 10:25 AM.
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Old April 10th, 2013, 10:24 AM   #1288 (permalink)
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uuu1965 View Post
I.
Have anybody experience with ACATS process between IB and OX accounts? (After ACATs inception I receive in OX account only small part of my assets. OX service people said that I need to wait for all cash and open positions transfer, IB -that they was complete full ACAT).

II.
On 8th Apr I open some position in OX:
sell 4 LHM13 102 C at 0.25, IM=1009$
sell strangle 1 CLN13 78 P/107 C at 0.41, IM = 1433$
On 9th Apr I open some position in OX:
sell 5 SBN13 21 C at 0.05, IM = 924$

Total margin = 3366$, but on OX Balances Summary page under Futures Requirements I sow another IM=4565.9$ (10th April 3:32 a.m. CST).
Does it mean that OX calculate margin in another way than I can show using OX Margin Calculator?

Thanks in advance

I can't help you on part I.

In Futures Requirements they include the value of the options plus the margin.

Also the margin on options changes daily.

For example the margin on your SB is 973.50 today.

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Old April 10th, 2013, 11:51 AM   #1289 (permalink)
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uuu1965 View Post
I.
Have anybody experience with ACATS process between IB and OX accounts? (After ACATs inception I receive in OX account only small part of my assets. OX service people said that I need to wait for all cash and open positions transfer, IB -that they was complete full ACAT).

You have to wire cash out from IB. They will not transfer anything that is not held in margin via ACATs.

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Old April 11th, 2013, 08:30 AM   #1290 (permalink)
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