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Selling Options on Futures?
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Selling Options on Futures?

  #1941 (permalink)
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kevinkdog View Post
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.

high volume, but what about the spread (bid/offer)?

the spreads in ES on IB are stupidly wide, why is liquidity so bad? lots are >200 size on bid/offer from the MMs - yet spread is 30% wide of price, why no volume/liquidity?

i was selling calls as soon as goldmans/jpm/TBTF analysts came out with their eoy projections (joke: i was short well before the goldman analyst report posted by ron). anyway, with a spread a $ wide in the (allegedly) most liquid equity market ever....why do i require a market move of 'move % x 1.3' for me to get out @ fair value? whats hte alternative - trade futures? well, i had v little view on direction.

the other issue with IB is that some of my orders do not show - i have adjusted lot size from 5 to 10 to 20........& they didnt show in the order book. but this issue seems to occur randomly - i cannot see a pattern for why it wld happen.

i am confused, what am i missing? anyone have similar issues?

happy trading.

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  #1942 (permalink)
Market Wizard
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rosho01 View Post
high volume, but what about the spread (bid/offer)?

the spreads in ES on IB are stupidly wide, why is liquidity so bad? lots are >200 size on bid/offer from the MMs - yet spread is 30% wide of price, why no volume/liquidity?

i was selling calls as soon as goldmans/jpm/TBTF analysts came out with their eoy projections (joke: i was short well before the goldman analyst report posted by ron). anyway, with a spread a $ wide in the (allegedly) most liquid equity market ever....why do i require a market move of 'move % x 1.3' for me to get out @ fair value? whats hte alternative - trade futures? well, i had v little view on direction.

the other issue with IB is that some of my orders do not show - i have adjusted lot size from 5 to 10 to 20........& they didnt show in the order book. but this issue seems to occur randomly - i cannot see a pattern for why it wld happen.

i am confused, what am i missing? anyone have similar issues?

happy trading.


I can't address your IB concerns, but quoted spread on IB should be the same as all other brokers. I would address order book issue with IB, too - maybe they are holding your orders for some reason.

Regarding wide spreads, I pay it no mind. Generally what I do is find a price I am willing to sell at (with an acceptable ROI), and then place a GTC order. If the order remains open past a day or 2, I check every few days to make sure I still want to be a seller at that price. I may get filled, I may not, but I know if I do get filled I'll get a good price. Right now, for example, I have 3 open orders that are a few days to a week old, and I am at the ask price. I'm just waiting for a buyer, and if none materializes, I'll just sell something else.


Deep out of money options will have larger spreads, and lower volume, because most people are trading close to at the money calls and puts.

Hopefully that explains some of your concern, or at least my take on the situation.

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  #1943 (permalink)
Trading for Fun
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Seasonality


Is there an answer to charting seasonality other than those expensive charting applications?

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  #1944 (permalink)
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BlueRoo View Post
Is there an answer to charting seasonality other than those expensive charting applications?

Do a search for seasonality, @Fat Tails has a nice thread on it.

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  #1945 (permalink)
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Diversity


ron99 View Post
1) I generally look at the excess margin I had when I put on the position. If that is used up then it is time to move on. But I don't strictly adhere to that. I look at why the position has moved and use that to determine whether to stay or leave it. But it takes years and years of experience trading to get to that point. I have been trading 15 years.

2) For 2012 Short options - 746 trades of 5,034 contracts = 150k net profit. A lot less contracts than 2011 but more profit. 99.7% winners.

2013 will not be as good. Lost big money on $200 2 day GC crash.
So far 730 trades of 8,211 contracts = 159k net profit. 95.5% winners.

Average net profit
2012 $30/contract.
2013 $19/contract.

2013 Partial Details
KC 2,638 contracts 74k net profit 100% winners all rode to expiration.
CL 1,646 contracts 67k net profit
ES 1,071 contracts 28k net profit

GC 185 contracts 57k net loss


Appreciate your willingness to share your experience Ron. I trade CL as a monthly staple and want to look at diversification. I was interested to note KC (Red Wheat) is a major part of your current results. Is KC worth considering as a staple regular trade?

I also note that the group seems to sell DEEP OTM contracts. This is new to me. I learnt from someone who taught me to me much closer to the money. For CL my strangles are normally a spread of $25 to $30 between my short calls and puts. I would say the average profit on the trades I do is around $200 / contract but I rarely trade outside of the 30 DTE. I know it is a subjective comment/question. I generally aim for 3% return on capital per trade/month. This equates to 50% annual return on capital. Am I crazy doing it this way? Is there a better approach to have a return goal and trade allocation?

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  #1946 (permalink)
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BlueRoo View Post
Is there an answer to charting seasonality other than those expensive charting applications?

Moore Research (MRCI.com) is under $400 per year.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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  #1947 (permalink)
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BlueRoo View Post
Is there an answer to charting seasonality other than those expensive charting applications?

Seasonal Charts

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  #1948 (permalink)
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BlueRoo View Post
Appreciate your willingness to share your experience Ron. I trade CL as a monthly staple and want to look at diversification. I was interested to note KC (Red Wheat) is a major part of your current results. Is KC worth considering as a staple regular trade?

I also note that the group seems to sell DEEP OTM contracts. This is new to me. I learnt from someone who taught me to me much closer to the money. For CL my strangles are normally a spread of $25 to $30 between my short calls and puts. I would say the average profit on the trades I do is around $200 / contract but I rarely trade outside of the 30 DTE. I know it is a subjective comment/question. I generally aim for 3% return on capital per trade/month. This equates to 50% annual return on capital. Am I crazy doing it this way? Is there a better approach to have a return goal and trade allocation?


BlueRoo: everyone has their own technique and trading style. If something works for you, stick with it. My only concern with your strangles is the vicinity of your strangles to the underlying. If you are writing them at $30 between then your $15 away from the underlying, that's really close. However, your shorter holding time is a balancing factor which is good. Some recent posts here suggest that CL might be pulling back somewhat when Egypt settles down. For instance, say there is a peace agreement today, I'm thinking that CL could fall a good bit over a few days. Add that to a slower GDP here and there is your pullback.

Strangles are a very good strategy for CL right now because it has been bouncing around a few $ for a while. $15 away is too close for me to sell at any given time but recently this has been a safe range. I'd keep an eye on the fundamentals in relation to price for this marker more than anything right now.

This is my 2 cents..I'm pretty sure Ron can afford to throw in at least 3 or 4 cents here...

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  #1949 (permalink)
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How have I missed this?

Man oh Man! this thread is fantastic - or possibly I am just the right trader, at the right time, with the right mindset for absorbing this stuff up like a sponge. I have very well defined strategies for trading options on the spx and rut, but am learning that options on futures is going to be a much more efficient use of margin. Looking into MRCI, and have an account now opened at OX. Learning the new platform makes me feel like a beginner all over again, but in tandem with how well I know the tos platform, I'm hoping it wont take too long to get up to speed. Incredible thanks to all the generosity shared here. GREAT stuff no doubt!!!

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  #1950 (permalink)
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rosho01 View Post
high volume, but what about the spread (bid/offer)?

the spreads in ES on IB are stupidly wide, why is liquidity so bad? lots are >200 size on bid/offer from the MMs - yet spread is 30% wide of price, why no volume/liquidity?

i was selling calls as soon as goldmans/jpm/TBTF analysts came out with their eoy projections (joke: i was short well before the goldman analyst report posted by ron). anyway, with a spread a $ wide in the (allegedly) most liquid equity market ever....why do i require a market move of 'move % x 1.3' for me to get out @ fair value? whats hte alternative - trade futures? well, i had v little view on direction.

the other issue with IB is that some of my orders do not show - i have adjusted lot size from 5 to 10 to 20........& they didnt show in the order book. but this issue seems to occur randomly - i cannot see a pattern for why it wld happen.

i am confused, what am i missing? anyone have similar issues?

happy trading.

Could the wide spreads be due to the time you are trading? Between 9am to 4pm EDT the spreads are very close. That would be 4pm to 11pm your time.

I'm looking at ES Oct 1400p bid is 2.00 offer is 2.10 at 10:45 EST. Most strikes there is a 0.10 spread.

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