Selling Options on Futures? - Options on Futures | futures io social trading
futures io futures trading


Selling Options on Futures?
Updated: Views / Replies:660,674 / 6,181
Created: by ron99 Attachments:714

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 714  
 
Thread Tools Search this Thread
 

Selling Options on Futures?

  #1471 (permalink)
Market Wizard
Cleveland Ohio/United States
 
Futures Experience: Advanced
Platform: Tradestation
Broker/Data: various
Favorite Futures: futures
 
Posts: 2,286 since Jul 2012
Thanks: 1,069 given, 4,148 received
Forum Reputation: Legendary


ron99 View Post
Here is an example of how not to trade (I got lucky and made a profit anyway. But I broke all my rules).

On 1/15/13 I sold 20 Ck3 600p for 2.000. On 3/21 they were down to the bottom, 0.125. I should have traded out by at least then. But I kept them on because I figured the corn price was over 7.25 and I can make the last bit of premium by waiting.

Well the grain report came out, corn crashed, and the premium jumped to a peak of 3.625. Losing money then and huge margin increase.

I ignored my rules for getting out and kept them. Corn stayed above 6.28. The options just did expire OTM.

Lesson here is take the profit and don't try to squeeze the last penny out of the trade.


What made you break your rules and keep those options, after the jump in premium? In hindsight, it was a good decision, but at the time, it had to be a little scary to violate your rules and stay in a trade that could have gone a lot more against you...

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
Reply With Quote
 
  #1472 (permalink)
Elite Member
NW Florida
 
Futures Experience: Intermediate
Platform: OX and TOS
Favorite Futures: Futures Options, Stocks
 
opts's Avatar
 
Posts: 234 since Aug 2012
Thanks: 29 given, 107 received


seemasp View Post
I had considered credit spreads but as you mentioned the return is even lower and so not worth to me...

Regarding my strategy, it is kind of similar but on little longer term, like wait for ES to go down few days then sell options with 30-40 day expiry and about 2 significant support out (on weekly charts - so usually they are about 150-200 points away). I had sold weekly before but got burnt and in my personal experience I find it more profitable to buy weekly options rather than selling them...I know this thread is about selling options but it is just that I could not find a way to control risk on weekly options that is acceptable to me and that is why I am asking for any thoughts/ideas for that.....

I am still on board for selling longer term and deep OTM options with preparedness to delta hedge or roll further....

Thank you


This is the one issue that I am trying to determine if selling weekly options on the ES is a worthy prospect...not much premium for the OTM options and the inherent risk of a big drop in one or two days. Yes, risk is part of trading, but this might be too much risk. I have been thinking about 20 or 30 DTE and then waiting for a few down days in a row within those 20 or 30 days then sell....let the market drop and deflate itself somewhat so in the event this drop is the start of a larger move then a certain % of the total move has already happened.

Going to try to build on that for a while....

Reply With Quote
 
  #1473 (permalink)
Market Wizard
Cleveland Ohio/United States
 
Futures Experience: Advanced
Platform: Tradestation
Broker/Data: various
Favorite Futures: futures
 
Posts: 2,286 since Jul 2012
Thanks: 1,069 given, 4,148 received
Forum Reputation: Legendary



opts View Post
This is the one issue that I am trying to determine if selling weekly options on the ES is a worthy prospect...not much premium for the OTM options and the inherent risk of a big drop in one or two days. Yes, risk is part of trading, but this might be too much risk. I have been thinking about 20 or 30 DTE and then waiting for a few down days in a row within those 20 or 30 days then sell....let the market drop and deflate itself somewhat so in the event this drop is the start of a larger move then a certain % of the total move has already happened.

Going to try to build on that for a while....


I ran some quick numbers on deep OTM weekly options, 1 to 2 weeks out. I looked at deltas of around .02 (per Ron's rules). For 7 DTE (days to expiration), the monthly ROI was less than 1%. For 14 DTE, the monthly ROI was less than 1.5%. Pretty low.

So, at least right now, to do weekly with low delta puts, I conclude sufficient ROI just isn't there. So this means one has to add DTE, or raise delta, or some combination of the 2, or lower the excess you keep aside (not the 2x Ron recommends) to get better ROI.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
Reply With Quote
The following user says Thank You to kevinkdog for this post:
 
  #1474 (permalink)
Elite Member
NW Florida
 
Futures Experience: Intermediate
Platform: OX and TOS
Favorite Futures: Futures Options, Stocks
 
opts's Avatar
 
Posts: 234 since Aug 2012
Thanks: 29 given, 107 received


kevinkdog View Post
I ran some quick numbers on deep OTM weekly options, 1 to 2 weeks out. I looked at deltas of around .02 (per Ron's rules). For 7 DTE (days to expiration), the monthly ROI was less than 1%. For 14 DTE, the monthly ROI was less than 1.5%. Pretty low.

So, at least right now, to do weekly with low delta puts, I conclude sufficient ROI just isn't there. So this means one has to add DTE, or raise delta, or some combination of the 2, or lower the excess you keep aside (not the 2x Ron recommends) to get better ROI.


Exactly.....I'm thinking look at the options listed every month. Wait for some kind of move down within the first 5 days??? to remove some downside (threat) action. If there is no move to the downside then wait until the next month.

Just kicking around ideas here .... suggestion welcome...

Reply With Quote
 
  #1475 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,616 since Jul 2011
Thanks: 756 given, 4,492 received
Forum Reputation: Legendary


kevinkdog View Post
What made you break your rules and keep those options, after the jump in premium? In hindsight, it was a good decision, but at the time, it had to be a little scary to violate your rules and stay in a trade that could have gone a lot more against you...

Fundamentals and the thinking that the drop from the report was overdone and the futures would rebound. Grain carryover to the next crop year is very low.

Reply With Quote
The following user says Thank You to ron99 for this post:
 
  #1476 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,616 since Jul 2011
Thanks: 756 given, 4,492 received
Forum Reputation: Legendary


kevinkdog View Post
I ran some quick numbers on deep OTM weekly options, 1 to 2 weeks out. I looked at deltas of around .02 (per Ron's rules). For 7 DTE (days to expiration), the monthly ROI was less than 1%. For 14 DTE, the monthly ROI was less than 1.5%. Pretty low.

So, at least right now, to do weekly with low delta puts, I conclude sufficient ROI just isn't there. So this means one has to add DTE, or raise delta, or some combination of the 2, or lower the excess you keep aside (not the 2x Ron recommends) to get better ROI.

Looking at the May week 1 ES weeklies, if you go to 10 days before expiration, Apr 23rd, a .02 delta is 1465. It settled that day at 0.55. That was only 90 away from the futures price.

The margin on Apr 23rd was $2146. Monthly ROI is only 1.2%.

But if you look at my largest drop table for 10 days, there are several times in the last 5 1/2 years when the futures dropped 160-180 (ignoring Dec 2008) in 10 days. That puts this option ITM.

So the question is, can you get out and not have a large loss when the market goes against you? And do the gains more than offset the losers? And is the ROI good enough to do this vs something else?

I'd rather sell Sep 300 KC calls and make 6+% per month ROI. Far, far less chance of being knocked out of them at a loss than weekly ES. But some people get bored with that and that is OK.

Reply With Quote
The following 2 users say Thank You to ron99 for this post:
 
  #1477 (permalink)
Elite Member
NW Florida
 
Futures Experience: Intermediate
Platform: OX and TOS
Favorite Futures: Futures Options, Stocks
 
opts's Avatar
 
Posts: 234 since Aug 2012
Thanks: 29 given, 107 received


ron99 View Post
Looking at the May week 1 ES weeklies, if you go to 10 days before expiration, Apr 23rd, a .02 delta is 1465. It settled that day at 0.55. That was only 90 away from the futures price.

The margin on Apr 23rd was $2146. Monthly ROI is only 1.2%.

But if you look at my largest drop table for 10 days, there are several times in the last 5 1/2 years when the futures dropped 160-180 (ignoring Dec 2008) in 10 days. That puts this option ITM.

So the question is, can you get out and not have a large loss when the market goes against you? And do the gains more than offset the losers? And is the ROI good enough to do this vs something else?

I'd rather sell Sep 300 KC calls and make 6+% per month ROI. Far, far less chance of being knocked out of them at a loss than weekly ES. But some people get bored with that and that is OK.

I agree....I might be beating a dead horse here....

Reply With Quote
 
  #1478 (permalink)
Trading Apprentice
MA
 
Futures Experience: Intermediate
Platform: Velocity/Sierra Charts/TOS
Favorite Futures: ES
 
Posts: 23 since Mar 2011
Thanks: 1 given, 11 received

ES Options

The one key for me (and others that I know to be using this strategy) is to be patient and wait for ES to make a move. I definitely find myself frustrated during times of low volatility. There have been times where I've wanted to enter, but didn't.

ES typically balances no more than 3-4 days before vertical price discovery...that could be up or down. Volatility really expands a lot as price moves down, so much so that on 4/18, 1420 puts expiring on 4/30 (EOM) were bif for 2.00. On that day, ES was at about 1532...that's 110+ points.

While it certainly can happen, it's not likely that ES is going down in a straight line in 12 days to 1420 after coming from 1593. That would be a 173 point move in 12 days. But if it did happen, and I was in that trade, I would have been happy to take the loss on it. I'm fine with that.

It has been interesting to me to read through this thread and to hear of everyone's rules. I can see the advantages of just picking a delta and selling strikes that have that delta while making sure you have enough margin to account for 2X the initial margin upon entry...

While my percentage gains may not be as impressive as some others on the board, with my selective entries, in 8 months, my account is +23.76%...not setting the world on fire, but anything > 0 is a win.

I will be interested to see how this thread evolves through time and hope that people keep posting to keep it going.

Reply With Quote
 
  #1479 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,616 since Jul 2011
Thanks: 756 given, 4,492 received
Forum Reputation: Legendary

a266199, how many trades in the 8 months? What percent winners?

Reply With Quote
 
  #1480 (permalink)
10 out of 10
Sacramento, CA
 
Futures Experience: None
Platform: None
Broker/Data: OX and DeCarley
Favorite Futures: Futures options
 
eudamonia's Avatar
 
Posts: 310 since Jul 2010
Thanks: 299 given, 424 received


My thoughts on Live Cattle:

1) Typically the seasonal turn is mid-May to mid-June.
2) Fundamentally demand spikes up during the 2nd quarter; however, prices are tempered due to heavy production
3) This year we have the smallest amount of production in 13 years.

August Live Cattle puts at 106 are 0.01 delta and are about 3% ROI. Thoughts?

Reply With Quote

Reply



futures io > > > > Selling Options on Futures?

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

July Journal Challenge w/$1100 in prizes from TopstepTrader

July

John @ No BS Day Trading (TBA)

Elite only

An Afternoon with FIO member Softsoap (being rescheduled)

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Crude Oil (CL) futures inverse pairing options Big Mike Commodities Futures Trading 8 December 12th, 2013 11:00 AM
Recommend futures, options Broker? sam1197 Reviews of Brokers and Data Feeds 17 March 27th, 2013 12:42 AM
Trading Futures with options as protection Gooffy2010 Commodities Futures Trading 6 October 2nd, 2012 04:55 PM
Selling Njniatrader sam1197 NinjaTrader 22 June 28th, 2012 12:40 PM
Zen-Fire Futures options tici88 Reviews of Brokers and Data Feeds 1 July 30th, 2011 09:16 AM


All times are GMT -4. The time now is 06:43 PM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-06-28 in 0.14 seconds with 20 queries on phoenix via your IP 54.224.247.75