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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 August 21st, 2013, 08:41 AM   #1921 (permalink)
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kevins View Post
Hey Everyone. Thanks for the amazing amount of information shared here, and I am reading with great intent. /CL 90p 125c active right now for NOV to observe the reaction while in my initial stages of learning how to read what fundamentals I need to learn.

Welcome! That is quite a high delta (.086) for the put. Most of this thread discusses deltas .04 and below, so techniques for that put might be different than discussed here.

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Old August 21st, 2013, 09:00 AM   #1922 (permalink)
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kevinkdog View Post
Welcome! That is quite a high delta (.086) for the put. Most of this thread discusses deltas .04 and below, so techniques for that put might be different than discussed here.

Oh definitely. I only grabbed that one as it had OI over 5k, and I wanted to watch how it would react on my tos platform. I experimented with these on /ZB many years ago, but gave them up as I was still trading pretty small. OX should be funded by the end of the month, so I can cross compare both platforms.

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"Obstacles are those frightful things you see when you take your eyes off your goal." -- Henry Ford
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Old August 21st, 2013, 09:09 AM   #1923 (permalink)
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Raven View Post
Looks like you both made wise trades.

I always have the puts in the 75 area in my cross-hairs but I'm looking for price to retreat back into the 90's. I think the threat in the Middle East is keeping prices elevated here. When that calms down CL might see a pull back. The hurricane season has been in a lull, so far, and storms in the Gulf of Mex will spike prices because the oil platforms can be shut down limiting drilling which always pushes things up somewhat. Prices have fallen back a few dollars the past few days and if they get back up to the 107 area or so then I'll look at the 135's or 140's to sell again pending the news that moves prices back up.

In my ever humbling opinion... I personally think that CL is one of the best markets to sell options against.

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Old August 21st, 2013, 11:16 AM   #1924 (permalink)
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kevinkdog View Post
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Kevin has on ES puts? I'm shocked.

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Old August 21st, 2013, 11:45 AM   #1925 (permalink)
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ron99 View Post
Kevin has on ES puts? I'm shocked.

I bit the bullet with those, with a couple of caveats...

In general, selling ES puts scares the bejesus out of me, since I am scared of a quick and sudden drop in ES (due to terrorist attack, natural disaster, etc).

But, I did sell a few ES puts lately, with all this in mind:

1. Instead of a normal allocation of 10% of equity, I only allocated about 5%. Smaller position size.

2. I kept the expiration date close (end of Sept).

3. Instead of a 3x margin cushion, I used 5x, and still got around 2% monthly ROI (I think it was 1.88%). I am willing to give up some ROI for more cushion.

4. In the future, I may buy some lower priced puts when I sell the higher priced puts, to reduce my max risk further. It also will greatly lower my ROI though.

5. I only plan to sell ES puts when there is nothing else appealing to fill the account. Kind of a last ditch trade, but better than keeping it in cash.

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Old August 21st, 2013, 12:31 PM   #1926 (permalink)
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Kevin, my main surprise was that your strike is higher than any strikes I have on. None over 1400.

My research yesterday found that the ROI was highest for ES puts that were 335 less than futures. 285 & 385 had lower ROI. 385 OTM were significantly lower. 285 OTM was slightly lower than 335 OTM.

I used 1685 ES futures and 1300, 1350, 1400 Oct puts and 100 or less DTE. Best ROI for the 1350s was on at 2.60 to 1.90 (delta 0.031 to 0.028) and off at 0.35 to 0.25. This was assuming flat ES futures.

Putting on puts at those strikes at a price higher than 2.60 gave a lower ROI because of greater DTE, which caused the margin to be higher. You have to go to 100 DTE to get a premium of 3.50 on a 1350 put when futures are 1685.

The time erosion of the premium hits hardest when the prices go from 1.25 to 0.25. Or when the delta goes from 0.015 to 0.005.

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Old August 21st, 2013, 12:45 PM   #1927 (permalink)
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ron99 View Post
Kevin, my main surprise was that your strike is higher than any strikes I have on. None over 1400.

My research yesterday found that the ROI was highest for ES puts that were 335 less than futures. 285 & 385 had lower ROI. 385 OTM were significantly lower. 285 OTM was slightly lower than 335 OTM.

I used 1685 ES futures and 1300, 1350, 1400 Oct puts and 100 or less DTE. Best ROI for the 1350s was on at 2.60 to 1.90 (delta 0.031 to 0.028) and off at 0.35 to 0.25. This was assuming flat ES futures.

Putting on puts at those strikes at a price higher than 2.60 gave a lower ROI because of greater DTE, which caused the margin to be higher. You have to go to 100 DTE to get a premium of 3.50 on a 1350 put when futures are 1685.

The time erosion of the premium hits hardest when the prices go from 1.25 to 0.25. Or when the delta goes from 0.015 to 0.005.

Great stuff, thanks for sharing! I'll have to follow this, should I trade ES puts in the future. I love that they have volume, which is why I may need them. Other instruments are sometimes very hard to get fills with any volume...

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 August 21st, 2013, 01:07 PM   #1929 (permalink)
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Yesterday CL total option OI for calls was up 6k but puts were up 30k.

People getting ready for a drop?

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Old August 21st, 2013, 02:43 PM   #1930 (permalink)
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ron99 View Post
Yesterday CL total option OI for calls was up 6k but puts were up 30k.

People getting ready for a drop?

ron99- where do you get your information on the OI totals on CL (or any futures) options? Thanks in advance.

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