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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:570,062 / 5,734
Last Reply:Yesterday (01:01 AM) Attachments:642

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Selling Options on Futures?

Old April 28th, 2013, 11:09 PM   #1481 (permalink)
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ron99 View Post
a266199, how many trades in the 8 months? What percent winners?

Hi Ron,

38 trades. 76% winners...had a rough patch in late February (win % was 85%, took a string of losers). Expectancy was 6 ticks per contract and has dipped down to 4.5 ticks per contract...

I do struggle sometimes in being patient. I feel like there are different ways to skin this cat, but only know the way I have been doing it.

That is part of the reason I was so interested in this thread...reading through it to see if there is anything that jives with me and whether I can expand my horizons.

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Old April 29th, 2013, 10:31 AM   #1482 (permalink)
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a266199 View Post
Hi Ron,

38 trades. 76% winners...had a rough patch in late February (win % was 85%, took a string of losers). Expectancy was 6 ticks per contract and has dipped down to 4.5 ticks per contract...

I do struggle sometimes in being patient. I feel like there are different ways to skin this cat, but only know the way I have been doing it.

That is part of the reason I was so interested in this thread...reading through it to see if there is anything that jives with me and whether I can expand my horizons.

When do you close the trade? At expiry of options or buy them back early at 20-25% of sold price? Also do you have more than 1 trade active at a time in same direction? Just trying to understand bit better here as the one example you gave was 10 days long trade....

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Old April 29th, 2013, 12:21 PM   #1483 (permalink)
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seemasp View Post
When do you close the trade? At expiry of options or buy them back early at 20-25% of sold price? Also do you have more than 1 trade active at a time in same direction? Just trying to understand bit better here as the one example you gave was 10 days long trade....

After I enter, the plan is to either let the contracts expire worthless or, if I take a loss, buy them back for 2X the average entry price.

When I first started, I had a rule that if I could realize 90% of the premium I sold on a monday/tuesday of the expiration week, I would close them. I have found that I have left money on the table doing that, so now, I just let them expire.

It really depends on what opportunities present themselves as to what I have on...right now, I'm flat.

On 4/17, I had 1465 puts and 1615 calls that I sold the week of 4/1 that were expiring on 4/19 and I also had 1465 puts that I sold on 4/15 that were expiring on 4/26. So, in that scenario, I had two positions in the same direction in two different expiration weeks.

The sell off on 4/15 didn't increase the premium received on the 1465s puts I sold the week of 4/1 (4/3 and 4/5 respectively) to the point to where I could add another bunch to that expiration week, so I initiated a new trade in the same strike for the following weeks' expiration.

Right now, stats show that there is a 75% probability that this weeks high in ES will be greater than the previous weeks high. If that does happen, the most common range extensions past the previous weeks high are 3 and 8 points respectively. The 70th percentile of range extension past the previous weeks high is 18 point.

So, if I'm going to think about selling calls, I am going to wait, at the very least, for this weeks high to break last weeks high by 3-8 points...and then I will start looking at WK2 call strikes.

On the put side, I like the 1440, 1465, 1475 strikes in general, but on this move up, they are obviously deflating...so, I'm not thinking about that right now. ES would have to start selling off for me to think about selling puts.

Not sure if that's more helpful or more confusing...sorry if it's more confusing.

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Old April 29th, 2013, 12:23 PM   #1484 (permalink)
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a266199 View Post
Hi Ron,

38 trades. 76% winners...had a rough patch in late February (win % was 85%, took a string of losers). Expectancy was 6 ticks per contract and has dipped down to 4.5 ticks per contract...

I do struggle sometimes in being patient. I feel like there are different ways to skin this cat, but only know the way I have been doing it.

That is part of the reason I was so interested in this thread...reading through it to see if there is anything that jives with me and whether I can expand my horizons.

Hmmm that is more than I thought. 4-5 trades per month. So basically one every week? Or is it several for one contract and then maybe skip a contract of two?

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Old April 29th, 2013, 12:33 PM   #1485 (permalink)
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eudamonia View Post
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?

My system say the delta is 0.0283.

2011 & 2010 had big drops in May. Maybe wait until late May to try and sell these.

The main problem will be finding buyers. It has only traded 7 times since 4/8.

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Old April 29th, 2013, 01:27 PM   #1486 (permalink)
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ron99 View Post
Hmmm that is more than I thought. 4-5 trades per month. So basically one every week? Or is it several for one contract and then maybe skip a contract of two?

It's more the latter...there could be weeks where I have nothing expiring and weeks where I have multiple contracts expiring.

I'd like it to be contracts expiring every Friday, but that just hasn't played out.

I've thought about expanding to different products as well, but the learning curve is steep and just haven't started.

Starting from page one, I'm still on page 18 of this thread...haha...still need to read through all the pages first.

There is one piece that I have seen about how you calculate ROI. It may be redundant, but if possible...do you think you could use a real world example in ES in how you do it? If you would be willing, could you do it on the WK2 1620 calls? (from TOS = EW2K3C1620)

Any info is appreciated!

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Old April 29th, 2013, 02:52 PM   #1487 (permalink)
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a266199 View Post
It's more the latter...there could be weeks where I have nothing expiring and weeks where I have multiple contracts expiring.

I'd like it to be contracts expiring every Friday, but that just hasn't played out.

I've thought about expanding to different products as well, but the learning curve is steep and just haven't started.

Starting from page one, I'm still on page 18 of this thread...haha...still need to read through all the pages first.

There is one piece that I have seen about how you calculate ROI. It may be redundant, but if possible...do you think you could use a real world example in ES in how you do it? If you would be willing, could you do it on the WK2 1620 calls? (from TOS = EW2K3C1620)

Any info is appreciated!

IM @ OX $2,984.30. We use 2X for cash excess. Friday's settlement 0.95. 14 DTE for Friday. I'll use OX commissions and fees of 4.07.

((47.50-4.07) / (2984.30 x 3)) / 14 *30= 1.2% monthly ROI

Now I see it is bid at 1.90. If the margin does not go up by the same percentage as the premium today then ROI would be higher.

I haven't followed this enough to know how the margin would react today. Does the weekend time erosion make up for the increase in futures price today and margin doesn't increase? Or is it so close to ITM that the margin increases anyways?

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Old April 29th, 2013, 02:57 PM   #1488 (permalink)
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ron99 View Post
IM @ OX $2,984.30. We use 2X for cash excess. Friday's settlement 0.95. 14 DTE for Friday. I'll use OX commissions and fees of 4.07.

((47.50-4.07) / (2984.30 x 3)) / 14 *30= 1.2% monthly ROI

Now I see it is bid at 1.90. If the margin does not go up by the same percentage as the premium today then ROI would be higher.

I haven't followed this enough to know how the margin would react today. Does the weekend time erosion make up for the increase in futures price today and margin doesn't increase? Or is it so close to ITM that the margin increases anyways?

I'd wonder if 2X margin excess is too much for these short term options. Going with 1x would raise the ROI to 1.67%, although still relatively low.

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 29th, 2013, 02:57 PM   #1489 (permalink)
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a266199 View Post
Starting from page one, I'm still on page 18 of this thread...haha...still need to read through all the pages first.

I never thought we would have this problem. That the thread would become so long that it is a daunting task to read it all.

Last week I reread the first 50 pages. Some good info at the beginning then there are pages where not many important nuggets are posted.

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Old April 29th, 2013, 03:01 PM   #1490 (permalink)
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kevinkdog View Post
I'd wonder if 2X margin excess is too much for these short term options. Going with 1x would raise the ROI to 1.67%, although still relatively low.

Yeah this trade is almost down to day trading, where you would carry less excess.

In most cases you aren't hanging on to the position so you wouldn't need a lot of excess. You are probably just trading out.

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