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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,280 / 5,728
Last Reply:December 6th, 2016 (05:26 PM) Attachments:642

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Selling Options on Futures?

Old April 30th, 2013, 08:33 PM   #1511 (permalink)
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MJ888 View Post
Hey guys, I want to hear more about your experiences trading ES and SPX credit spreads.......Good stuff

Agree. This may be the kicker that I was looking for....

There are many things to consider such as:

Just example strikes here....

You sell the SPX 1650 call for 2.00
You buy the SPX 1675 call for 1.00

Credit received = 1.00

MAX LOSS = difference in strike point values - credit received

However....Say the SPX is at 1670 on the day of expiration. The 1675 will be worthless and the 1650 you sold is 20 points ITM. Will this loss on the 1650 still be less than the MAX LOSS?

The BID/ASK numbers on the SPX options after trading hours may not be representative of the BID/ASK during the exchange open so getting a real credit # for a probable trade might not be doable until the market is open.

Just left the eye doctor and my eyes are dilated...back in a few hours... har d to cee whut i am tipeing.

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Old April 30th, 2013, 11:19 PM   #1512 (permalink)
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OX has an option spread order list (for credit and debit) that shows % return, max loss, etc. Can input the range between strikes....After hours quotes on SPX so open market hours will be 'real'...

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Old May 1st, 2013, 08:26 AM   #1513 (permalink)
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My Vulcan logic may be incorrect but...

Again on credit spreads:

Since there is an option purchased to maximize risk, reduce margin, and the overall position has to be initiated a little closer to the underlying price, might credit spreads be a little more comparable to trading the contracts outright? What I mean is since the position has to be put on closer to the underlying price (to gain any decent premium) versus selling options uncovered, credit spreads can be an alternative to buy the dips and sell the rallies. The max risk between the strikes would be your stop loss if you were trading contracts outright. However, you still bank premium on the credit which is the goal. I realize that you can purchase the option further away from the sold option to bank a larger premium because the ASK on the purchased option should be lower but then your max risk is higher and then you are leaning towards selling options outright again with the larger risk..sort of.

Either way, I still plan on selling far OTM uncovered but I'm thinking that the credit spreads can be used to 'trade' contracts.

Any thoughts????

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Old May 1st, 2013, 10:21 AM   #1514 (permalink)
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With this method, sometimes you place limit orders to enter, and then it takes a few days for the order to actually be executed.


Sometimes, if you are not careful, you forget about these orders. That is what happened to me today. With the big drop in crude, I was filled on a July 68 put - an order that I had entered a week or more ago. I was already short a July 122 Call (I know I said I'd never sell Crude call, but I changed my mind).

Anyhow, the lesson here is to always keep track of open orders!

Here is what my Crude Oil situation looks like. As long as the market stays within a 44 point range over the next month and a half, I am good.


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Old May 1st, 2013, 11:47 AM   #1515 (permalink)
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Futures Edge on FIO

Are you a NinjaTrader user?

 
"Sell in May and go away" is working well today.

I bought CL puts.


Last edited by ron99; May 1st, 2013 at 11:53 AM.
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Old May 1st, 2013, 12:38 PM   #1516 (permalink)
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ron99 View Post
"Sell in May and go away" is working well today.

I bought CL puts.


Buying puts is something different for this thread. Without giving up any proprietary or secret details, is there anything you can share?

I'm guessing you don't buy deep OTM puts. Or maybe you do. In which case maybe you bought one of mine!

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Old May 1st, 2013, 12:53 PM   #1517 (permalink)
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Here is my post from a year ago when I didn't play it. Big mistake.

It is basically playing the seasonal May drop.

Quoting 
You could have bought July CL puts on May 1st pretty cheap and then sold then last Friday for HUGE gains. On May 1st the July 85 put was 0.12. On Friday it was 1.01. 742% ROI. In only 17 days. The 90 went from 0.27 to 2.30. 752% ROI. The 95 went from 0.60 to 4.78. 697% ROI. The 100 went from 1.34 to 8.67. 547% ROI. Notice how the ROI was better on the 90 than the 100. But you need a large movement for that to work.

CL & ES had dropped significantly the beginning of May the last 2 years ("sell in May and go away" is the old saying). I was waiting for it but didn't want to put on the long puts before the May 4th employment report in case it was bullish. After the report was out I thought I had missed so much of the move, it was already down 7.67 in 3 days, that I thought I was too late and didn't add any then.

https://futures.io/options-cfd-trading/12309-selling-options-futures-14.html#post223282

Buying about 15.00 away on Jul CL seems to give you the best ROI.

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Old May 1st, 2013, 04:47 PM   #1518 (permalink)
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Wish I had gone with those CL sold calls a few days ago but my energy complex margin has been tied up with Nat Gas.

Nat Gas looked all set for a breakout to the upside today cracking that 4.4 level (hitting about 4.5) which it had failed to breach several times. All of sudden Nat Gas saw Ron99, got scared, and now we are back down to 4.3.

Yes, that's my crazy version of events and I'm sticking to it.

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Old May 1st, 2013, 05:56 PM   #1519 (permalink)
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opts View Post
Agree. This may be the kicker that I was looking for....

There are many things to consider such as:

Just example strikes here....

You sell the SPX 1650 call for 2.00
You buy the SPX 1675 call for 1.00

Credit received = 1.00

MAX LOSS = difference in strike point values - credit received

However....Say the SPX is at 1670 on the day of expiration. The 1675 will be worthless and the 1650 you sold is 20 points ITM. Will this loss on the 1650 still be less than the MAX LOSS?

The BID/ASK numbers on the SPX options after trading hours may not be representative of the BID/ASK during the exchange open so getting a real credit # for a probable trade might not be doable until the market is open.

Just left the eye doctor and my eyes are dilated...back in a few hours... har d to cee whut i am tipeing.

Opts, On the SPX each point is $100. So your max loss on this spread (assuming 1 contract) will be $2500. With a closing price for the SPX at 1670, you are essentially excercised at 1670 on the call you sold. (-$20 ITM * 100) = negative $2000. $100 credit + (-$2000) = $1900 loss (minus commish). These options are european style and are excercised cash only. Hope that helps.

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Old May 1st, 2013, 10:23 PM   #1520 (permalink)
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eudamonia View Post
Wish I had gone with those CL sold calls a few days ago but my energy complex margin has been tied up with Nat Gas.

Nat Gas looked all set for a breakout to the upside today cracking that 4.4 level (hitting about 4.5) which it had failed to breach several times. All of sudden Nat Gas saw Ron99, got scared, and now we are back down to 4.3.

Yes, that's my crazy version of events and I'm sticking to it.



My guess is that the educated traders, including commercials, know that above 4.40 is suicide for NG. So they sell every time it gets there.

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