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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,515 / 5,734
Last Reply:6 Hours Ago (01:01 AM) Attachments:642

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Selling Options on Futures?

Old July 23rd, 2013, 02:04 PM   #1841 (permalink)
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Another reason to be bearish oil.

Rising China domestic oil output hurts import demand

Quoting 
(China) domestic oil production rising a fairly strong 4.3 percent over the first six months of the year from the same period in 2012.
...
If one assumed that China's domestic output had been steady in the first half of 2013, rather than increasing by 172,000 bpd, it would make the import picture quite different, and far more bullish.

Imports were 5.57 million bpd in the first six month, but without the increase in domestic output they may have reached 5.74 million bpd.

If this had been the case, first-half imports would have been 2.1 percent higher than for the corresponding period in 2012.

Put another way, the increase in domestic output has been the difference between the expected positive demand growth for imports and the actual decline recorded.

China's implied oil demand, which is calculated by adding refinery throughput to net imports of refined products, rose 3.4 percent to 9.82 million bpd in the first half.

This amounts to an increase of about 330,000 bpd, meaning that the rise in domestic output has accounted for more than half of the gain in oil demand.

But it also means China has been adding to stockpiles, as the domestic output plus crude imports exceeds the throughput by refineries.

COLUMN-Rising China domestic oil output hurts import demand: Clyde Russell | Reuters

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Old July 23rd, 2013, 09:40 PM   #1842 (permalink)
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Yeah, there's just too much of it out there right now.

Could get a spike with the storm in the Gulf of Mex sometime but those are usually short lived.

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Old July 24th, 2013, 06:11 AM   #1843 (permalink)
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Hi Ron,

Firstly i would like to thank you for this forum. I have been using your ROI method for the last 6 months and so far i am rebuilding my account from previously buying futures options. I had looked at sellling options previously and had read Cordiers book, but the return just didn't make sense for the risk. I now essentially follow the method you have described in this forum and everything is making much more sense. My strikes are also essentially at around 0.03 delta.

I have essentially been trading Coffee and the aussie dollar. My first trade was selling CL puts but i don't think i could ever sell CL Calls. I have started to look for other markets to trade and was looking at maybe heating oil. My question is, from your experience, does heating oil essentially follow the movement of CL and is it prone to the sudden price swings that CL is?

Regards,

Bakes

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Old July 24th, 2013, 01:32 PM   #1844 (permalink)
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Bakes View Post
Hi Ron,

Firstly i would like to thank you for this forum. I have been using your ROI method for the last 6 months and so far i am rebuilding my account from previously buying futures options. I had looked at sellling options previously and had read Cordiers book, but the return just didn't make sense for the risk. I now essentially follow the method you have described in this forum and everything is making much more sense. My strikes are also essentially at around 0.03 delta.

I have essentially been trading Coffee and the aussie dollar. My first trade was selling CL puts but i don't think i could ever sell CL Calls. I have started to look for other markets to trade and was looking at maybe heating oil. My question is, from your experience, does heating oil essentially follow the movement of CL and is it prone to the sudden price swings that CL is?

Regards,

Bakes

You're welcome. Amazing to me how many traders from Australia here.

HO & RB options are very low volume. Hard to get positions sold. And harder to get out if market is going against you. I know from experience about that.

I'm looking at Oct HO & RB. There are only 2 bids for 1 contract each for strikes <0.1000 delta. And one bid is 0.0001.

I used to think that I would never sell CL calls. Then I realized that CL rarely took an extreme quick jumps up because of a random event. There have been Middle East wars and CL didn't get crazy on prices.

If you are leery of them then sell covered calls.

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Old July 24th, 2013, 01:47 PM   #1845 (permalink)
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ron99 View Post
If I am correct oil will drop this week and then rise midweek next week.

Of course, other factors may come into play.

Crazy. I was wrong predicting there would be a build in oil inventories for today's report.

US oil imports were up. US oil production was up. Oil input to refineries was down. Yet inventories dropped???

But CL prices are dropping strongly now.

I had bought 75 CL 95 puts for the expected drop. When the inventory wasn't what I expected I held on and saw the small drop. When prices flattened out for 20 minutes from 11:20 to 11:40 I took my .03 profit.

Of course now I could have made 10 cents. Oh well.

I am not a good day trader. That's why I sell options.

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Old July 24th, 2013, 01:51 PM   #1846 (permalink)
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ron99 View Post
HO & RB options are very low volume. Hard to get positions sold. And harder to get out if market is going against you. I know from experience about that.

In cases where it is hard to exit at any price, do you ever offset using futures? It would not get you out, but at least you'd be protected against further losses.

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 July 24th, 2013, 02:28 PM   #1847 (permalink)
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kevinkdog View Post
In cases where it is hard to exit at any price, do you ever offset using futures? It would not get you out, but at least you'd be protected against further losses.

I tried that a few times years ago and net I lost more offsetting with futures than if I just got out.

The problem with HO & RB is that I never had on enough options to be delta neutral with one offsetting future. So then if I put on a future I am basically playing futures with a little offset with the options. And that can whipsaw me around into more losses.

If you have on enough options to get delta neutral with futures, then it would work better. But in the commodities that I would have on that many options it usually isn't a problem getting out of the options.

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Old July 31st, 2013, 08:52 AM   #1848 (permalink)
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hi can some please help, i'm new to futures options selling and would like to know what the premium collected, and

total margin cost would be to sell 1 CL oct 13, 85 put @ 0.15.

A broker i spoke to has confussed me with the premium and margin charge .

thanks

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Old July 31st, 2013, 08:57 AM   #1849 (permalink)
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robby View Post
hi can some please help, i'm new to futures options selling and would like to know what the premium collected, and

total margin cost would be to sell 1 CL oct 13, 85 put @ 0.15.

A broker i spoke to has confussed me with the premium and margin charge .

thanks


This is through OptionsExpress. Your margins may vary.


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Old July 31st, 2013, 10:28 AM   #1850 (permalink)
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I knew there was a margin difference between OX and IB, however I didn't realise that the margin requirements were this dissimilar for selling naked options.

Relating news to selling options on futures:

CME Group Announces Launch of KC HRW Wheat Short-Dated New Crop Options

CHICAGO, July 30, 2013 /PRNewswire/ -- CME Group, the world's leading and most diverse derivatives marketplace, today announced the launch of Short-Dated New Crop Options on KC Hard Red Winter (HRW) Wheat futures. Pending CFTC review, these new short-dated options will be available for trading on the Chicago trading floor and CME Globex on Monday, August 26, 2013. These products will be listed with and subject to the rules and regulations of the KCBT.

"Since acquiring KCBT last year, we've significantly developed the HRW wheat options complex through the introduction of innovative new products and the growth of standard options," said Tim Andriesen, Managing Director, Agricultural Commodities & Alternative Investments, CME Group. "These new short-dated options will provide market participants with a cost-effective tool to manage their price risk during targeted timeframes in the hard red winter wheat growing season. At the same time, average daily volume in our standard KC HRW Wheat options has increased by 30 percent since December 2012."

KC HRW Wheat Short-Dated New Crop Options are options on the July 2014 futures with earlier expiring contract months being listed -- December 2013, March 2014 and May 2014.

Since their introduction, Short-Dated New Crop Options on Corn and Soybean futures have traded more than 975,000 contracts, and reached a peak of more than 240,000 in combined open interest ahead of the July options expiry.

For more information on Short-Dated New Crop Options and other new options on KC HRW Wheat visit www.cmegroup.com/KCBT.

As the world's leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) is where the world comes to manage risk. CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate. CME Group brings buyers and sellers together through its CME Globex(R) electronic trading platform and its trading facilities in New York and Chicago. CME Group also operates CME Clearing, one of the world's leading central counterparty clearing providers, which offers clearing and settlement services across asset classes for exchange-traded contracts and over-the-counter derivatives transactions. These products and services ensure that businesses everywhere can substantially mitigate counterparty credit risk.

CME Group is a trademark of CME Group Inc. The Globe Logo, CME, Globex and Chicago Mercantile Exchange are trademarks of Chicago Mercantile Exchange Inc. CBOT and the Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are registered trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. KCBOT, KCBT and Kansas City Board of Trade are trademarks of The Board of Trade of Kansas City, Missouri, Inc. All other trademarks are the property of their respective owners. Further information about CME Group (NASDAQ: CME) and its products can be found at www.cmegroup.com.

Source: CME Group Announces Launch of KC HRW Wheat Short-Dated New Crop Options - WSJ.com

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