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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,479 / 5,734
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Selling Options on Futures?

Old April 25th, 2013, 11:47 PM   #1431 (permalink)
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ES

opts,

I'm fairly new to posting on the board here.

I use volume profiling and auction market theory for my market analysis. As part of my analysis, I look at a long term chart that has daily bars that are set to 405 minutes per bar (RTH session minutes). From there, I look at days/areas that are "in balance" meaning they are in a range.

Conceptually, the market moves from balance to imbalance and back to balance...it does this on all fractals of time. On the larger timeframe, I am looking for these balance areas above and below where ES is currently trading and will determine what I think is support and resistance.

Also, I use R Project (R Studio) and a data set that has 322 weeks in it to run some stats. I look for most common weekly range, two week range, distribution of range extension past previous weeks highs/lows, etc...

I put this all together and get areas, or strikes where I think (and Ron as alluded to) the market is not likely to go in the period of time represented by the time left to expiration.

Once I have my areas outlined, it's time to wait for an opportunity. Those opportunities come when there is a big-ish move in the market and volatility increases. As the market moves and IV expands, further OTM option values expand with it...I want to get into deep OTM options as the IV's are increasing.

For example, on 4/15 as the market was going down, I scaled into 1465 puts. I sold my first bunch at 2.00 and then at the end of the day, I sold my second bunch for 3.15 giving me an average entry price of 2.57. My plan was to add another bunch if the value of the strike moved into the 4 - 4.30 range.

The stop on the position is always 2X the average entry price, giving this a 1:1 R/R.

Once I have my position, all I can do is sit back and wait...I'm either going to get stopped out or the contracts I sold will expire worthless.

It doesn't always work like this every week...in this environment, it's been hard. There have been some Friday's where I don't have anything expiring...but, this is the way I know how to do it and I can force a trade that doesn't fit. Hope this has been somewhat helpful.

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Old April 26th, 2013, 02:18 AM   #1432 (permalink)
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opts View Post
a:

I have been considering selling on the weekly ES options also for some time. The videos that Ron posted a few weeks back on YouTube have sidetracked about 80% of my attention the ES. Any insight you have on your weekly selling strategy would be most appreciated...

Looking at the June contract....

My murky crystal ball sees a double top on the horizon with less volume and bearish divergence in the RSI..Pullbac on the way.....we'll see...

Opts,

Are you able to trade the ES weekly options on OX? It doesn't let me put an order and the Trade Calculator doesn't seem to work either; just shows the same IM and MM on all strikes.

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Old April 26th, 2013, 08:15 AM   #1433 (permalink)
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Latest ES Cummulative Delta View


Here is my latest take on the ES.

The push down last week got to the low 1530's and also neutralized all longs from 1480 area, as they covered longs into the selling. This prevented any more downside as there was no-one left to sell to.

So we rise again, the sellers have taken their foot off the gas and we rise on low delta volume. Sellers are inviting buyers in and are likely waiting for a double top to form before hitting it down again. Strong bearish divergence is forming here. Just my thoughts.

We shall see.
Brit

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Old April 26th, 2013, 08:49 AM   #1434 (permalink)
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Barrington View Post
Opts,

Are you able to trade the ES weekly options on OX? It doesn't let me put an order and the Trade Calculator doesn't seem to work either; just shows the same IM and MM on all strikes.

Yes. But the weekly options are not available yet on the Droid Ap.

Here is the margin info to sell 10 for the May Week 1 1475 Put

No reason for the 1475 put...I just picked one for an example

Entered Trade


Price

Cost
Sell -10 (EW1K31475P) 0.30 ($150.00)
Requirements
Total Cost ($150.00)
Initial Requirement $4,664.00
Maintenance Requirement $4,240.00
Total Requirements $4,664.00
Estimated Commission $35.00

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Old April 26th, 2013, 08:50 AM   #1435 (permalink)
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a266199 View Post
opts,

I'm fairly new to posting on the board here.

I use volume profiling and auction market theory for my market analysis. As part of my analysis, I look at a long term chart that has daily bars that are set to 405 minutes per bar (RTH session minutes). From there, I look at days/areas that are "in balance" meaning they are in a range.

Conceptually, the market moves from balance to imbalance and back to balance...it does this on all fractals of time. On the larger timeframe, I am looking for these balance areas above and below where ES is currently trading and will determine what I think is support and resistance.

Also, I use R Project (R Studio) and a data set that has 322 weeks in it to run some stats. I look for most common weekly range, two week range, distribution of range extension past previous weeks highs/lows, etc...

I put this all together and get areas, or strikes where I think (and Ron as alluded to) the market is not likely to go in the period of time represented by the time left to expiration.

Once I have my areas outlined, it's time to wait for an opportunity. Those opportunities come when there is a big-ish move in the market and volatility increases. As the market moves and IV expands, further OTM option values expand with it...I want to get into deep OTM options as the IV's are increasing.

For example, on 4/15 as the market was going down, I scaled into 1465 puts. I sold my first bunch at 2.00 and then at the end of the day, I sold my second bunch for 3.15 giving me an average entry price of 2.57. My plan was to add another bunch if the value of the strike moved into the 4 - 4.30 range.

The stop on the position is always 2X the average entry price, giving this a 1:1 R/R.

Once I have my position, all I can do is sit back and wait...I'm either going to get stopped out or the contracts I sold will expire worthless.

It doesn't always work like this every week...in this environment, it's been hard. There have been some Friday's where I don't have anything expiring...but, this is the way I know how to do it and I can force a trade that doesn't fit. Hope this has been somewhat helpful.

So you are monitoring these on an intra-day basis correct?

""For example, on 4/15 as the market was going down, I scaled into 1465 puts. I sold my first bunch at 2.00 and then at the end of the day, I sold my second bunch for 3.15 giving me an average entry price of 2.57. My plan was to add another bunch if the value of the strike moved into the 4 - 4.30 range.""

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Old April 26th, 2013, 09:11 AM   #1436 (permalink)
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opts View Post
Yes. But the weekly options are not available yet on the Droid Ap.

Here is the margin info to sell 10 for the May Week 1 1475 Put

No reason for the 1475 put...I just picked one for an example

Entered Trade


Price

Cost
Sell -10 (EW1K31475P) 0.30 ($150.00)
Requirements
Total Cost ($150.00)
Initial Requirement $4,664.00
Maintenance Requirement $4,240.00
Total Requirements $4,664.00
Estimated Commission $35.00


opts:



I'm getting a much higher margin requirement for these guys at OptionsXpress.

Sell -10 (EW1K31475P) 0.30 ($150.00)
Requirements

Total Cost ($150.00)
Initial Requirement $18,656.00
Maintenance Requirement $16,960.00
Total Requirements $18,656.00
Estimated Commission $20.05


Do you have offsetting long in there, or call options?

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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Old April 26th, 2013, 11:41 AM   #1437 (permalink)
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weekly eq options

Hi weekly options traders,

is it worth setting up a separate thread for weekly stock/index options as they are quite a different beast to FOPs and the strategies which most ppl are trading FOPs on here? ie high probability of vol spikes for one.

i will be keen to contribute, and have been demo trading them for few months using IB/OX. i wld set one up myself but wont be free to give full attention til a cpl of weeks time.

thks.

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Old April 26th, 2013, 12:28 PM   #1438 (permalink)
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ron99 View Post
CL margins dropping 10% on May 1st.

@ron99

Are you thinking June calls or something like that? Looks like the ROI would start to be acceptable once margin drops on Wednesday.

I've been scaling out of my Nat Gas taking profits on this nice decline here. See if I can get filled at 0.001 on the rest.

I'm keeping some of my margin loose waiting for the ES to drop but so far it's just cruising

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Old April 26th, 2013, 12:35 PM   #1439 (permalink)
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Quoting 
@rosho01
Hi weekly options traders,

is it worth setting up a separate thread for weekly stock/index options as they are quite a different beast to FOPs and the strategies which most ppl are trading FOPs on here? ie high probability of vol spikes for one.

i will be keen to contribute, and have been demo trading them for few months using IB/OX. i wld set one up myself but wont be free to give full attention til a cpl of weeks time.

thks.

I would be greatly interested in a thread on weekly options.

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Old April 26th, 2013, 12:49 PM   #1440 (permalink)
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a266199 View Post
Ron,

Can you use PC_SPAN to calculate/project what margin is likely to be on a position if there is an averse move against it?

This is just an example, not real...if I'm short 1 ES WK2 1500 put with an initial margin requirement at entry of $2,354 while ES is trading 1577...can I model what the margin requirement is likely to be on that same WK2 1500 put if ES is trading at 1550 in 3 days? Or at 1530 in 6 days?

Any information you can provide is appreciated.

Not in PC SPAN. It only does current, no projections. And I doubt you can do that anywhere because there are too many variables to get a concrete answer.

A back of the napkin way is to look at margin for strikes closer to ITM.

For example, you are looking for what margin would be if ES dropped 27. So look at the margin required for an option that is 27 closer than your 1500. But that won't answer your question about where it would be if it took 3 days to do that.

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