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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,022 / 5,727
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Selling Options on Futures?

Old August 22nd, 2013, 11:59 AM   #1951 (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?

KC is ICE Coffee.

Yes I would sell a much wider strangle. The last CL strangle I did was $60 apart. 70-130. I myself wouldn't do one less than 50 apart. Much lower chance of losing money.

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Old August 22nd, 2013, 12:02 PM   #1952 (permalink)
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kevins View Post
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!!!

For a beginner I would recommend you use the seasonal charts in opts post. That is probably good enough to start.

Later you would need to look at each year because a 5 year average can be thrown off by one rogue year. Like 2008 for a lot of commodities.

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Old August 22nd, 2013, 12:20 PM   #1953 (permalink)
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BlueRoo View Post
Is there an answer to charting seasonality other than those expensive charting applications?

What I do is have the data from my data provider linked to an Excel spreadsheet. Each day I copy and paste the settlement values. Takes about 2 minutes per day. Then I make my own charts that have each individual year as a line on the chart.

On the chart below for CL Oct you can see that it normally rises in July but the huge drop in 2008 affects the 5 year average of other charts. So I get a better feel if I look at each recent year rather than averages. I feel that 15 and 30 year averages are useless because trading has changed so much from back then.

Of course you need a data provider that has excel linking. Not all do that.
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Old August 22nd, 2013, 12:23 PM   #1954 (permalink)
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ron99 View Post
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.

hmm sorry, i shld have been more specific:

ES Z3 +1740 (long) -1730 (short) Bear Call Spread Bid: 2.95 Ask 2.65.

So thats only 6 ticks wide (0.05 denomination), perhaps it is time of day & i was getting confused - easily done. Ignore!

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Old August 22nd, 2013, 12:38 PM   #1955 (permalink)
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ron99 View Post
What I do is have the data from my data provider linked to an Excel spreadsheet. Each day I copy and paste the settlement values. Takes about 2 minutes per day. Then I make my own charts that have each individual year as a line on the chart.

On the chart below for CL Oct you can see that it normally rises in July but the huge drop in 2008 affects the 5 year average of other charts. So I get a better feel if I look at each recent year rather than averages. I feel that 15 and 30 year averages are useless because trading has changed so much from back then.

Of course you need a data provider that has excel linking. Not all do that.
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Ron, I was trying to build the graph as you have distinct lines for individual years from a single spreadsheet which contains price data from several years. But I was not able to replicate your graph using the Graph Wizard in Excel 07. Would you be able to tell the steps you are using to built the graph?

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Old August 22nd, 2013, 12:53 PM   #1956 (permalink)
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rosho01 View Post
hmm sorry, i shld have been more specific:

ES Z3 +1740 (long) -1730 (short) Bear Call Spread Bid: 2.95 Ask 2.65.

So thats only 6 ticks wide (0.05 denomination), perhaps it is time of day & i was getting confused - easily done. Ignore!

Oh.

It looks like you are trying to trade something that does have low volume. My 2 data providers don't even have that quote for me.

I was going to suggest legging into it but then the ticks are 0.25 instead of 0.05.

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Old August 22nd, 2013, 01:05 PM   #1957 (permalink)
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Barrington View Post
Ron, I was trying to build the graph as you have – distinct lines for individual years from a single spreadsheet which contains price data from several years. But I was not able to replicate your graph using the Graph Wizard in Excel 07. Would you be able to tell the steps you are using to built the graph?

Right click on chart. Click on Select Data. Click on Add. Enter Series Name. Then click on the chart like icon at the end of Series Values and then highlight the daily prices for that year on your spreadsheet. Click enter. Do that for each year.

Attached is my page for CL V. To account for weekends so that each year is graphed the same the tables on the right include everyday not just trading days. The price on Friday is used for Sat & Sun by using Lookup.

Attached Files
Register to download File Type: xlsx CL V.xlsx (160.6 KB, 53 views)
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Old August 22nd, 2013, 02:17 PM   #1958 (permalink)
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Interesting article on CL backwardation. It opens in a pdf. The article is on pdf page 3.
http://content.emails.thomsonreuters.biz/emessageIRS/servlet/IRSL?v=5&a=10111&r=21957&m=3770&l=2&e=2&x=2456617.0


Quoting 
Heavy speculative buying and panicked selling by players on
the short side of the trade propelled WTI higher. Among the
biggest casualties of the move were commercial players who
are normally short the forward time structure of WTI.

This early close-out of shorts in the market left WTI's prompt
pricing built on a foundation of sand. As the futures contract
nears expiry commercial shorts closing hedging positions usually
help to offset speculative longs doing the same thing. But
after the July blowout this support mechanism was dangerously
impaired.


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Old August 22nd, 2013, 04:25 PM   #1959 (permalink)
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Old August 22nd, 2013, 05:29 PM   #1960 (permalink)
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CT margins increasing 25% Friday.

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