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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,616 / 5,727
Last Reply:December 2nd, 2016 (12:40 PM) Attachments:642

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Selling Options on Futures?

Old August 22nd, 2013, 05:40 PM   #1961 (permalink)
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ron99 View Post
CT margins increasing 25% Friday.

Thanks for info. In cases like this, what would you do if the extra margin requirement took away whatever excess you had, and now your system tells you to exit? It would be an exit not due to change in option price, but primarily because of increased margin - would you treat your decision differently, based on the root cause (option price going up vs. margin going up)?

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Old August 22nd, 2013, 06:40 PM   #1962 (permalink)
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kevinkdog View Post
Thanks for info. In cases like this, what would you do if the extra margin requirement took away whatever excess you had, and now your system tells you to exit? It would be an exit not due to change in option price, but primarily because of increased margin - would you treat your decision differently, based on the root cause (option price going up vs. margin going up)?

No. Usually if margins are raised it was because of a severe price movement. In that case it is probably best to either bail or move to a further OTM strike.

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Old August 22nd, 2013, 09:41 PM   #1963 (permalink)
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Selling Options on Futures?


Thanks to Ron and others that have contributed to this thread.
I have a few questions

when it comes to margin.

Is the margin listed for EACH contract

Lets say CL margin is $1000
Then you would need $10,000 cash in your account to sell 10 contracts. correct?

So with far OTM with less than 0.02 delta, you would need to sell several contracts to make it worthwhile.
Is that accurate?

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Old August 22nd, 2013, 09:49 PM   #1964 (permalink)
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kiont View Post
Lets say CL margin is $1000
Then you would need $10,000 cash in your account to sell 10 contracts. correct?

Yes, and you would need more than that, if margin requirements rose enough while you had the trade on.


kiont View Post
So with far OTM with less than 0.02 delta, you would need to sell several contracts to make it worthwhile.

Yes and no - you might have to sell a lot to make significant money, but you could sell 1, 10 or 100, and still have the same return rate, if it is based on initial margin.


The important thing to keep in mind is that the margin required changes with the option strike price/month, and it changes on a daily basis.

So, for example, with October CL Puts right now from Options Express:

90 put (.02 delta) >> initial margin = $872.52
95 put (.07 delta) >> initial margin = $1886.28
99 put (.17 delta) >> initial margin = $2993.76

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Last edited by kevinkdog; August 22nd, 2013 at 10:02 PM.
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Old August 22nd, 2013, 11:26 PM   #1965 (permalink)
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Seasonal Chart in Excel

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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?

Barrington,

In excel use the pivot chart function.

Build your in a dynamic data list. One column Year, One column Day one Column price. This just past your year data into the long table. Then use Pivot table and or chart function to create the chart Ron has posted as a simple line chart. The key is to have the date column absent of a the Year and use the Year value as the series label.

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Old August 23rd, 2013, 12:40 AM   #1966 (permalink)
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kevinkdog View Post

So, for example, with October CL Puts right now from Options Express:

90 put (.02 delta) >> initial margin = $872.52
95 put (.07 delta) >> initial margin = $1886.28
99 put (.17 delta) >> initial margin = $2993.76

hi ron (though its kevins post), out of interest as CLZ3 90P has a delta which fits with your strategy have you been selling any of these? i am surprised by the delta being that low for a 90P.

re the ES spreads, from other forums i have read that TOS provides much more liquidity, though there seems to be a lot of debate over which is the cheapest. I will have to check TOS out.

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Old August 23rd, 2013, 03:12 AM   #1967 (permalink)
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Seasonality in USO

Ron, Thanks for post your approach to seasonal charts in excel. It spurred me on to complete some work I had been doing with XSP seasonality in excel. Here I have applied it to USO as I don't have a data service for futures. I would imagine it would provide a similar seasonal chart for the continuous month in CL. (Is that reasonable to suggest?). I have normalized the prices for each year so the extent of the moves are comparable. Thoughts and feedback welcomed.

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Old August 23rd, 2013, 07:38 AM   #1968 (permalink)
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Old August 23rd, 2013, 09:53 AM   #1969 (permalink)
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rosho01 View Post
hi ron (though its kevins post), out of interest as CLZ3 90P has a delta which fits with your strategy have you been selling any of these? i am surprised by the delta being that low for a 90P.

re the ES spreads, from other forums i have read that TOS provides much more liquidity, though there seems to be a lot of debate over which is the cheapest. I will have to check TOS out.

rosh:

Even though the delta 'fits'...90 is simply too close to the underlying. A quick drop of several dollars on bearish news will send the delta through the roof and magnify the premium. December w/Nov expiration is a lot of time for something to happen.

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Old August 23rd, 2013, 10:06 AM   #1970 (permalink)
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opts View Post
rosh:

Even though the delta 'fits'...90 is simply too close to the underlying. A quick drop of several dollars on bearish news will send the delta through the roof and magnify the premium. December w/Nov expiration is a lot of time for something to happen.

hi opts - yes i def agree hence the question. if it closes below 100 then imo it has a way to fall further. but for that reason i am struggling to find puts of any value.

its imposs trying to put on LH call/put spreads at decent price, gonna have to leg into them if you want to run the theta down with a hedge.

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