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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,610 / 5,734
Last Reply:8 Hours Ago (01:01 AM) Attachments:642

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Selling Options on Futures?

Old May 13th, 2013, 01:29 PM   #1581 (permalink)
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QE can also be regarded as a fundamental, which is arguably driving stock markets higher (its the only asset CBs can inflate having already done bonds, property, tech stocks etc).

Central banks are now buying stocks, and some commodity markets have positive correlation to stock markets eg oil.


Price Of Oil Versus The Stock Market - Seeking Alpha

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Old May 13th, 2013, 01:52 PM   #1582 (permalink)
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Quoting 
The oil market got heavy as word of a possible story of a Fed exit, which started to permeate the trading floor on Friday. And sure enough the Wall Street Journal soon published an article by Jon Hilsenrath that said "Federal Reserve officials have mapped out a strategy for winding down an unprecedented $85 billion-a-month bond-buying program meant to spur the economy—an effort to preserve flexibility and manage highly unpredictable market expectations. Officials say they plan to reduce the amount of bonds they buy in careful and potentially halting steps, varying their purchases as their confidence about the job market and inflation evolves. The timing on when to start is still being debated. "

Oil falls as Fed discusses QE exit

If QE gets slowed down that will be bearish to commodities.

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Old May 13th, 2013, 02:41 PM   #1583 (permalink)
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ron99 View Post
If QE gets slowed down that will be bearish to commodities.

agree in part.....but thought the US govt cannot slow down QE as they wld go bust if they did, as noone else will buy their bonds. and how do they suppress interest rates without QE? the market will demand rate increase so as the bonds sell - which again will bankrupt the US cos of increased interest payments.

in addition, it is possible the Fed will 'diversify' into equities, if they are not already doing so, as per many other CBs.....

http://www.bloomberg.com/news/2013-04-24/central-banks-load-up-on-equities-as-low-rates-kill-bond-yields.html

and if there is a stock ramp caused by CB buying (like perhaps now), then the +ve correlation of oil price to stocks should not be dismissed. no doubt you are aware of the basic relationship: stocks up = good economy = more demand for energy = high oil price. not sure how it wld react in a false 'good' economy though.

interested to hear others thoughts.
----------------------------

a separate question, ron: when you look at seasonal variations over a number of years - do you look at seasonal variation of that contract you are looking to place a trade on? eg selling CL Jul Calls - you will look at the price of CLN futures contract historically (CLN 2012 / CLN 2011 / CLN 2010 etc etc)?

From what i have seen others posting charts on this thread they have only been for say the CL Dec futures contract over last 5/15 years. But i wld have thought this will ignore the issue of contango / backwardation, skewing any analysis of temporal variations. I need to think about this a bit more as getting confused.

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Old May 13th, 2013, 03:07 PM   #1584 (permalink)
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rosho01 View Post
a separate question, ron: when you look at seasonal variations over a number of years - do you look at seasonal variation of that contract you are looking to place a trade on? eg selling CL Jul Calls - you will look at the price of CLN futures contract historically (CLN 2012 / CLN 2011 / CLN 2010 etc etc)?

From what i have seen others posting charts on this thread they have only been for say the CL Dec futures contract over last 5/15 years. But i wld have thought this will ignore the issue of contango / backwardation, skewing any analysis of temporal variations. I need to think about this a bit more as getting confused.

I haven't seen a Dec CL chart here lately.

I look at the individual month over the last 6 years. Like Jul CL. I have my own seasonal charts from the years since 2006 that show each year on the chart.

There are some charts where the 5 yr or 15 yr will show one thing but the individual months will show some years up some down and no trend. Also the 5 yr is influenced by the abnormal 2008 contract year.

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Old May 13th, 2013, 03:19 PM   #1585 (permalink)
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Old May 13th, 2013, 09:38 PM   #1586 (permalink)
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ron99 View Post
The fundamentals for oil are bearish. Super high US inventories. Rising US production. Decreasing US demand. OPEC exporting more oil. Slow growth in demand worldwide. I have been selling calls.

Agree...I have nice bunch expiring worthless this week. Will be selling calls again soon. Might look at a diagonal spread just see how it works out. Will post the entry for that method when I do.

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Old May 14th, 2013, 12:21 PM   #1587 (permalink)
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KC

15 bid for 50 KCU3 300C....again.

if its same org/entity/person soaking up the hits, then cld be fun finding an offer to lift if have to puke them.

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Old May 15th, 2013, 12:26 PM   #1588 (permalink)
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Quoting 
NEW YORK--Arabica-coffee futures edged higher Wednesday as traders worried
about stoppages at ports in No. 1 coffee producer Brazil.

Unions said they halted movement at the country's main ports from Tuesday
afternoon until 7 a.m. Sao Paulo time (6 a.m. ET) Wednesday to protest a
government decree aimed at modernizing and expanding ports.

Brazil's Congress was debating the decree Tuesday and is expected to vote on
it later Wednesday. While the final version hasn't been determined, the measure
as originally announced would have let operators of privately owned ports hire
nonunion workers and let those ports operate under rules that would lower costs
for exporters compared with the public ports.

The Santos Port Authority declined to provide information on the effects of
the stoppage.

"Between that and the problems with the logistics down there," the futures
market is finding support, said Jack Scoville, vice president at Price Futures
Group in Chicago.

Inadequate infrastructure has long been a challenge for shippers from Brazil.
This year, big grain harvests and problems with scheduling truck deliveries
have created bottlenecks at the ports of Santos, Paranagua and others.

However, keep in mind:


Quoting 
Prices have been under pressure as Brazil begins what is expected to be the
biggest "off-year" harvest ever in its two-year crop cycle.

Brazilian coffee growers are expected to produce 48.6 million 60-kilogram
(132-pound) bags of beans in the 2013-14 growing season that begins this month,
government crop agency Conab said Tuesday.


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Old May 15th, 2013, 12:34 PM   #1589 (permalink)
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Conab is always low on their predictions. Most I have seen are at 51 million.

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Old May 15th, 2013, 08:47 PM   #1590 (permalink)
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A few notes on the SPX options:

SPX at 1559

May 24 Exp:
Calls Bid / Ask Puts Bid/Ask
1680 2.90/3.30 1640 6.60/6.90
1690 1.40/1.84 1630 4.50/4.90

May 31 Exp:
1680 5.20/5.70 1640 9.80/10.20
1690 3.10/3.40 1630 7.30/7.70

June7 Exp:
1680 7.70/8.10 1640 13.00/13.50
1690 5.10/5.50 1630 10.20/10.70

June 14 Exp:
1680 9.80/10.40 1640 15.80/16.50
1690 6.80/7.50 1630 12.80/13.50

Just example strikes here but look at the minimum difference between the May 31 and June 14 strikes. If you were to write credit spreads on the 1680 and 1690 calls for May 31 options the credit is 1.80. For June 14 the credit is 2.10. Two more weeks of time only gives up another .30 in credit and only .20 for the spread on the puts.

Not worth an extra two weeks of time in my very humble opinion....

Thoughts and criticisms always welcome......

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