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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,515 / 5,734
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Selling Options on Futures?

Old June 12th, 2013, 04:56 AM   #1701 (permalink)
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seemasp View Post
The numbers just don't make sense here.... 345 billion = 345,000 million which divided by 19 million (or 87 million for world demand) comes to 18157.89 years (or 3965.52 years in case of 87 million).

I do not ever remember reading in any article related to oil mentioning about more than 100 or 200 years of oil supply in world left to extract. Per these numbers US alone has more than 3900 years of oil supply for entire world....WOW...

You have calculated the number of DAYS of oil supply. Devide by 365 to get YEARS.

So 10.8 years doen't sound quite so exciting.
Also this 365 billion is only refering to technically recoverable SHALE oil. Whether it is economical to recover it is another matter.

@ron99 I suspect the 19 million bpd is the US daily consumption. So our friend Mr Flynn is laying claim to ALL the words shale oil. I also read somewhere that the US has reduced its imports to below the 50% level, due to record shale oil production.

I kind of see this as supporting the price of WTI. If the refineries are replacing more expensive imported oil, based presumably on Brent prices, with home produced oil there should be scope for the premium between WTI and Brent to close further. So I would not be surprised if we push back up to the next range of 95-105 for CL n the near future.


Last edited by britkid99; June 12th, 2013 at 07:33 AM. Reason: more added
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Old June 12th, 2013, 10:09 AM   #1702 (permalink)
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World oil reserves for all types is 3,357 billion. Based on 89.2 bpd you get 103.1 years.
Analysis & Projections - U.S. Energy Information Administration (EIA) - U.S. Energy Information Administration (EIA)

Edited to show the current EIA number of 89.2.


Last edited by ron99; June 12th, 2013 at 10:15 AM.
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Old June 12th, 2013, 10:25 AM   #1703 (permalink)
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britkid99 View Post
I kind of see this as supporting the price of WTI. If the refineries are replacing more expensive imported oil, based presumably on Brent prices, with home produced oil there should be scope for the premium between WTI and Brent to close further. So I would not be surprised if we push back up to the next range of 95-105 for CL n the near future.

I would say that this would cause Brent to drop but I don't see it causing WTI to rise. Especially when inventories in the US are 33 billion above the 5 year average and at 30 year high and and couple of weeks ago were at 82 year high.
Here is a headline from Rueters from yesterday.
Brent Slips on US Reserve Estimates
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Old June 14th, 2013, 07:20 AM   #1704 (permalink)
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Wheat

The seasonal charts for Wheat show it should be making a bottom soon, so I've been looking at selling some September Puts.

There's a bit of OI at WU3560P with a Delta of 0.03, but I get the monthly ROI at about 1% or less.

In order to get an ROI around 2% I would have to go to WU3600P, but the Delta there is around 0.09 or 0.10, which is a long way from Ron99's suggested figure.

I would have thought that a 600 Put would be pretty safe as price hasn't been below 655 in the past 10 years on my (continuous) chart, but it is in a long-term downtrend.

Any thoughts on this would be appreciated.


Chris

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Old June 14th, 2013, 11:03 AM   #1705 (permalink)
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The seasonal charts for Wheat show it should be making a bottom soon, so I've been looking at selling some September Puts.

There's a bit of OI at WU3560P with a Delta of 0.03, but I get the monthly ROI at about 1% or less.

In order to get an ROI around 2% I would have to go to WU3600P, but the Delta there is around 0.09 or 0.10, which is a long way from Ron99's suggested figure.

I would have thought that a 600 Put would be pretty safe as price hasn't been below 655 in the past 10 years on my (continuous) chart, but it is in a long-term downtrend.

Any thoughts on this would be appreciated.


Chris

I'm watching September also. The bottom looks like it is trying to form here. The RSI is holding its ground with the price lows, a little weak today. I would keep an eye on the 670 level. If that is taken out then there looks like more down side pressure.

Crude calls look interesting now...

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Old June 14th, 2013, 11:27 AM   #1706 (permalink)
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MGBRoadster View Post
The seasonal charts for Wheat show it should be making a bottom soon, so I've been looking at selling some September Puts.

There's a bit of OI at WU3560P with a Delta of 0.03, but I get the monthly ROI at about 1% or less.

In order to get an ROI around 2% I would have to go to WU3600P, but the Delta there is around 0.09 or 0.10, which is a long way from Ron99's suggested figure.

I would have thought that a 600 Put would be pretty safe as price hasn't been below 655 in the past 10 years on my (continuous) chart, but it is in a long-term downtrend.

Any thoughts on this would be appreciated.


Chris

The Sep W contract has dropped below 655. Most recently 2007, 2009, 2010, 2011, 2012. They (2007-2012) haven't settled at expiration below 655 other than 2009 (467).

The Sep W 2013 contract hasn't been below 655.

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Old June 14th, 2013, 11:34 AM   #1707 (permalink)
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NG output from the federal Gulf of Mexico "is now only 6% of the country's
output, significantly below the 26% share provided in 2001. Unless significant
damage is done to production infrastructure in the area, disruptions to
production are likely to be small and brief," the analyst said.

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Old June 14th, 2013, 12:59 PM   #1708 (permalink)
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Going to be volatile in the markets the 1st 3 days of next week.

Quoting 
Next week the US Fed FOMC will be meeting on June 18 -19th with Chairman Bernanke holding a press conference after the meeting to discuss the outcome. In addition Mr. Bernanke will be testifying before Congress on July 17th and 18th regarding the state of the economy and on the Fed's monetary policy.


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Old June 14th, 2013, 01:32 PM   #1709 (permalink)
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UnZane View Post
Ron,
You asked how to calculate probability of an options finishing ITM. Below please find a calculation:

Excel:
1-NORMSDIST(LN(Strike/Tradeprice)/(historicalvol*SQRT(Daystoexp/365)))

When I calculate a Aug 1300 ES put with 64 DTE with 28.88 IV when ES futures are at 1631 I'm getting 0.96965. (I'm assuming that I convert 28.88 IV to .2888)

What does 0.96965 represent? I'm guessing it's the chances of being OTM not ITM.

If I remove the 1- at the front of the calculation the result of 0.03035 or 3.035% makes more sense to me.

So am I correct that
Excel:
NORMSDIST(LN(Strike/Futures Current Price)/(Implied Volatility*SQRT(DTE/365)))

in a percentage format would give me the chances of an option being ITM?


Last edited by ron99; June 14th, 2013 at 05:10 PM.
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Old June 14th, 2013, 04:09 PM   #1710 (permalink)
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ron99 View Post
When I calculate a 1300 ES put with 64 DTE with 28.88 IV when ES futures are at 1631 I'm getting 0.96965. (I'm assuming that I convert 28.88 IV to .2888)

What does 0.96965 represent? I'm guessing it's the chances of being OTM not ITM.

If I remove the 1- at the front of the calculation the result of 0.03035 or 3.035% makes more sense to me.

So am I correct that
Excel:
NORMSDIST(LN(Strike/Futures Current Price)/(Implied Volatility*SQRT(DTE/365)))

in a percentage format would give me the chances of an option being ITM?

I just tried it on the OX Trade & Prob. Calculator - 1300 ES Put with 63 DTE and changed the IV to 28.88. It gives me 3.57% probability of ending ITM. ESU = 1622.75

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