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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,987 / 5,728
Last Reply:20 Hours Ago (05:26 PM) Attachments:642

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Selling Options on Futures?

Old July 11th, 2013, 02:25 PM   #1801 (permalink)
Market Wizard
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Cogito ergo sum View Post
I am not really familiar with selling options on futures, as opposed to equities. Knowing that at ~60 days theta starts to really work in your favour, why sell options on futures +60 days till expiration? Are you essentially using the contango or backwardation in these futures to offset the slower decay in the longer dated options?

Since I am selling far OTM options, many of them get to the lowest price possible at 20-50 DTE. So there is not much profit left at 60 DTE for them. You have to go further out in time to sell option that far OTM and have a worthwhile ROI.

For example the Oct CL 65 or less puts have virtually no Theta left with 69 DTE. The price is at 0.01. Theta worked in your favor far before 60 DTE for them.

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Old July 12th, 2013, 09:35 AM   #1802 (permalink)
Trading Apprentice
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Hi i'm new to futures options trading ,can someone suggest a broker which deals with option selling in Australia .
Thanks

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Old July 12th, 2013, 05:17 PM   #1803 (permalink)
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robby View Post
Hi i'm new to futures options trading ,can someone suggest a broker which deals with option selling in Australia .
Thanks

optionsXpress

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Old July 13th, 2013, 02:30 AM   #1804 (permalink)
Trading Apprentice
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thank you ron99

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Old July 13th, 2013, 12:55 PM   #1805 (permalink)
Market Wizard
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robby View Post
thank you ron99

You're welcome.

To keep the thread less cluttered, it is suggested to use the Thanks button in my post rather than making a new post to say thanks.

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Old July 13th, 2013, 12:56 PM   #1806 (permalink)
Market Wizard
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"My weakness has always been being a bit premature on entering positions. Iíve learned to think to myself, 'Patience, patience, patience.' I try to wait until things set up just right before I take a trade. Itís better to have the wrong idea and good timing than the right idea and bad timing."

ó Linda Bradford Raschke, President of LBRGroup, Inc.

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Old July 13th, 2013, 03:14 PM   #1807 (permalink)
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ron99 View Post
I disagree we are in the doldrums. Corporate profit is at record high. Home sales are booming. Car sales are booming. Construction spending is up. Hiring is strong. PE's are at normal levels. ISM Manufacturing index up. Consumer Confidence and Sentiment numbers are up. Income numbers are up.

And all that after payroll tax increase and sequestration cuts.

In my local paper there are help wanted ads for oil change technicians. When entry level jobs have to be advertised you know the situation is good.

hi ron, i am intrigued with your positive stance on the US market, thought i wld add a different perspective if you dont mind:

the net nfp's increase (out Jul 5th) was in fact attributed to part time jobs increase - full time jobs reduced by 240k+ (Debt Markets Respond To NFP Report - Seeking Alpha the quality of the employment data is the key here - and its far from reflective of a healthy economy. to add, jobless claims continue to increase. more ppl are on foodstamps than they are in jobs, foodstamps have increased by 70% since 2008 (US food stamp use swells to a record 47.8 million - World Socialist Web Site this reflective of a healthy economy? also someone reconciled the nfp's to another job data report which lags months behind and nfp numbers are 40% inflated in comparison (i can find the link if anyone is interested). to note the arbitrary seasonal adjustments make a mockery of such data reports anyway.

the other positives you have listed (car & home sales) relate to consumption driven growth - which can only be fuelled by increasing debt (for the majority) ie the middle classes increasing their debt burden (i saw somewhere that 50% of workforce do not have less than $800 savings iirc), which was the root cause of the problems back in 2008. there is no real sign of production driven growth...."Manufacturing output remains smaller than when the last recession began in 2007, despite the huge government stimulus since then" (Why Celebrate a False U.S. Manufacturing Renaissance? - Bloomberg). a large % of house sales are bulk purchases in cash by funds diversifying into real estate, and this has the net effect of pricing out first time buyers. the fed has now admitted that it caused the last housing bubble (Fed's Plosser Admits Fed Was Responsible For Last Housing Bubble, Doesn't Want To "Create Another" | Zero Hedge), and finally at least one fed crony understands that they want to avoid repeating the same mistake, though its arguably too late.

with respect to income, is this disposable income? ie income less taxes / medical insurance / mortgages/rent etc? cos iirc these 'average household' costs have risen sharply in the last 10 years (in the UK purchasing power is at its worst in 25 years & i thought the US was similar, heres some poor data for 2013 Q1: American Real Disposable Income Collapses in First Quarter of 2013). US inflation - if measured using the same calc they used 25 years ago is at circa 8% (Alternate Inflation Charts), and bernanke says he wants to see higher inflation - jeez. US real wages declined in June and thats using the fudged inflation figs of 1-2% (Real Wages Decline Again ? Literally No One Notices - Business Insider). fwiw consumer confidence reduced last week (first time in 2013), but these numbers really need to be taken with a pinch of salt as iirc consumer confidence was high prior to 2007 crash/recession.

record corporate profits is a little harder to analyse as accounting changes, share buybacks etc are certainly blurring the figs (inc PE ratios). also what % of these are financial corps related? obviously with ZIRP & the like its almost imposs for a TBTF bank not to make money (whilst the fed manipulates the bond mkts & maintains the liquidity pump). didn't all the TBTF prop desks report profit every day in Q1?

so in light of the above, and coupled with the massive central bank interventions (of not just the US, but EU, Japan, China & the UK) manipulation of the markets (wld the steepening of the yield curve caused by the actual mkt last mth scare the crap out of the US & China CBs if the economy was doing ok?), i have a less positive outlook on the state of the US (& global) economy.

will be interested to hear your thoughts on the above. apols for all the 'iirc's....i am happy to provide more links as back up to my comments.

r
-------------------------------------------------------------------

i have also sold CL aug/sep 130/140 calls. with respect to the egypt issue - i cannot see how the muslim brotherhood have the capability of closing down the suez, the military has the fire power & will they let it happen? will the US support the MB against the wishes of the majority of the population? i think the recent CL ramp is more speculative driven than fundamentals - i posted on here a while ago its correlation to the S&P, & both are heavily bid (i am actually a technical trader anyway).

i have been selling quite a few Lean hog calls also recently, & have older short positions in wheat / cocoa / ES / NG / KC.

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Old July 13th, 2013, 04:28 PM   #1808 (permalink)
Market Wizard
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rosho01, I don't have time right now for a full answer.

But "more ppl are on foodstamps than they are in jobs" is not true.

The not seasonally adjusted employment numbers tell a different story. I don't trust the seasonally adjusted numbers. All numbers in thousands. Table A-9. Selected employment indicators
Full-time
June 2012 116,024
May 2013 116,643
June 2013 117,400

Part-time
June 2012 27,178
May 2013 27,789
June 2013 27,442

Consumption growth is also driven by higher incomes. Which that is the case.
Table B-3. Average hourly and weekly earnings of all employees on private nonfarm payrolls by industry sector, seasonally adjusted

Corporate profits after tax
Corporate profits after tax (A055RC0A144NBEA) - FRED - St. Louis Fed

Zero hedge is extremely biased so their slant isn't always true.

More answers later this weekend.

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Old July 14th, 2013, 03:53 AM   #1809 (permalink)
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ron99 View Post
rosho01, I don't have time right now for a full answer.

But "more ppl are on foodstamps than they are in jobs" is not true.

The not seasonally adjusted employment numbers tell a different story. I don't trust the seasonally adjusted numbers. All numbers in thousands. Table A-9. Selected employment indicators
Full-time
June 2012 116,024
May 2013 116,643
June 2013 117,400

Part-time
June 2012 27,178
May 2013 27,789
June 2013 27,442

Consumption growth is also driven by higher incomes. Which that is the case.
Table B-3. Average hourly and weekly earnings of all employees on private nonfarm payrolls by industry sector, seasonally adjusted

Corporate profits after tax
Corporate profits after tax (A055RC0A144NBEA) - FRED - St. Louis Fed

Zero hedge is extremely biased so their slant isn't always true.

More answers later this weekend.

hi ron, thks for the response, i look fwd to a full response. i wasnt really referring to zerohedge with respect to my points hence why i linked to various other sources - i understand zh is v biased. i agree re the foodstamps comment....my bad.....the point was the rate of increase in ppl on foodstamps......nfp's have increased at rate of 1% over the same term. to summarise.....the welfare state (the population on a type of govt benefit) in the US is expanding at a time when budgets are being cut, this can be argued as a political tool to garner votes, but thats a moot point.... whats relevant is that tax receipts are reducing at a time when liabilities are increasing.....the fiscal deficit is increasing, the so much talked about debt ceiling gets higher and higher.....this is far from healthy. if bond yields continue to rise what affect will this have on debt payments? why is chairman of the fed admitting that he needs to inflate asset values to generate growth?

sorry, a few more questions though if you dont mind......
why does the Fed interfere in a huge way in the financial markets if the economy is in reasonable shape?
why wld news that the Fed announcing a possible near term reduction in the interference (taper) create a massive sell off in almost all the markets (bar oil)? on the back of apparently improving economic data?
n your opinion, why wld the Fed then back track on those comments? do you have confidence in what they are doing?
why does bernanke want higher inflation rates? (noting the fact that 'real' inflation is fairly high circa 8%)
why wld the UK & EU soon after come out with opposite comments (ie doveish) to what bernanke said in his minutes in june?
do you know how much of the QE has trickled down to the economy (outside of the banks)?
why is: debt ceiling / taper / fiscal cliff - terms which are quickly adopted by MSM, yet never actually come to fruition (ie they remain purely terms used by the MSM & associated parties)?

i am not trying to be cantankerous, its good to debate and i respect your opinion, and i am interested in learning. i have a feeling though this will lead down a pro/anti keynesian road....and from there a discussion on the purpose of fiat money.

an aside, i like this jefferson quote (allegedly from around 1802):

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

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Old July 14th, 2013, 07:57 PM   #1810 (permalink)
Market Wizard
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Sorry but I do not have time to answer all of those questions. It would take me hours to properly research and reply. Also I feel this is getting to far off subject for this thread.

But I will give you one other person's opinion who knows far more than I do.

Jim CRAMER: LAST QUESTION. AMERICA NEXT YEAR AT THIS TIME. WHERE'S UNEMPLOYMENT? WHERE'S GDP?

Jamie DIMON: I'M NOT -- YOU'RE BETTER AT THIS THAN I AM. MY GUESS IS GDP WILL BE STRONGER AND UNEMPLOYMENT WILL BE 6.5%.
CNBC Exclusive: CNBC Transcript: JPMorgan Chase Chairman & CEO Jamie Dimon Speaks One-on-One with CNBC's Jim Cramer on "Squawk on the Street" Today

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