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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 28th, 2012, 01:38 PM   #191 (permalink)
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Thanks Ron,

Ya, I figured they were in the $400 range for my estimates. You are correct it may be a bit high on the delta but with the amount of cash I leave sitting around (a tinch more than you) it should be fine. Depending on the movement of course of CL.

Anyway, I used OptionsXpress years ago and was fairly happy with it, really no complaints and their CSR's were good.

I appreciate the fundamental tips as I'm strickly technical in natural for all our postitions.

Due to the margin spread calculation error, do they still hold the first spread to this $value (899) or do they accept the 399 value for all of them? Or, do they charge 899 if only one spread is held? Can you explain this error further?

In the meantime before we have ox up and running, is there a website where i can get some general margin (span) calculations on naked calls and puts? I can do it myself (as in the $400 example above), but it's time consuming.

Cheers

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Old August 28th, 2012, 02:25 PM   #192 (permalink)
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Thanks Ron,

Ya, I figured they were in the $400 range for my estimates. You are correct it may be a bit high on the delta but with the amount of cash I leave sitting around (a tinch more than you) it should be fine. Depending on the movement of course of CL.

Anyway, I used OptionsXpress years ago and was fairly happy with it, really no complaints and their CSR's were good.

I appreciate the fundamental tips as I'm strickly technical in natural for all our postitions.

Due to the margin spread calculation error, do they still hold the first spread to this $value (899) or do they accept the 399 value for all of them? Or, do they charge 899 if only one spread is held? Can you explain this error further?

In the meantime before we have ox up and running, is there a website where i can get some general margin (span) calculations on naked calls and puts? I can do it myself (as in the $400 example above), but it's time consuming.

Cheers

Yes OX holds the first spread to $899. Yes it is $899 if you only hold one. It's $1244 for 2. $1644 for 3.

Here is what OX sent me in an email.

Quoting 
The actual cause was much older and goes all the way back to when we merged the old XpressTrade platform into the OptionsXpress platform. Prior to the merge OX did did not use SPAN for futures requirements and held the full amounts regardless of the makeup of the portfolio. XT did use SPAN but the coding was old and had not been updated in some time. We took that old code and configured it to work with the OX platform. It is this old code that is causing the issue.

The actual time and development resources needed to correct the code are quite large and something that has been discussed at length.


I don't know anywhere where you can get free margin requirements for short options on futures.

Do you have your username and password for OX? Even if you don't have money there you can still use the website.

What is CSR?

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Old August 28th, 2012, 02:31 PM   #193 (permalink)
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ya, no biggy. I'll wait till i get the username / password for OX. I've had an old one which I forgot the password for and I had them set a new password but it was sent to an older email...

CSR - customer service representative.

thanks for the clarification on the margins.

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Old August 28th, 2012, 02:49 PM   #194 (permalink)
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Yes OX has excellent customer service. Best I have ever seen.

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Old August 28th, 2012, 05:17 PM   #195 (permalink)
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Futures Edge on FIO
Hey Ron, I am mainly a futures trader, but I have traded options in the past. In this sense I am not as sophisticated as you, so here come some questions:

I've read this discussion through and I couldn't find exactly how you deal with entering (opening) a naked put or call. I do remember you stating that it's tricky and sometimes you get what you want, sometimes not so much...

Initially what do you look for to make you interested in a position (besides fundamentals...)? Do you just watch the delta calculation on instruments your interested in and see if certain put/calls are declining to a preferable delta? Obviously you make sure there is huge OI on it. What is your process to actually sell that unit? Do you pick the middle of the B/A and set your full amount you are looking to acquire? Do you only look to acquire half/portion at first? Does this work? Is there a better time of day/week/month to submit a limit sell on a call or a put when hungry buyers need to purchase them? If there is a bid ask spread of $0.21 to 0.23 would you just hit the market or limit to the current bid?

All the money management (67%) and the 2X cash holdings, sell before long weekends, et cetera you don't have to go through. Like I said I did read through this discussion, forgive me if I skimmed over the answers to the above. Thanks again for imparting your knowledge.

I owe you lots of BS (beer and salmon)
Cheers.

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Old August 28th, 2012, 06:29 PM   #196 (permalink)
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Hey Ron, I am mainly a futures trader, but I have traded options in the past. In this sense I am not as sophisticated as you, so here come some questions:

I've read this discussion through and I couldn't find exactly how you deal with entering (opening) a naked put or call. I do remember you stating that it's tricky and sometimes you get what you want, sometimes not so much...

Initially what do you look for to make you interested in a position (besides fundamentals...)?
Mainly fundamentals. Some seasonals. ROI should be at least 2% per month. Lack of volatility in the future contract. Is someone bidding above fair price.

Predictability of the direction of the futures. For example, I sold some grain puts when the market was racing higher. But I don't have anything on now because it could go dramatically either way from here.


Do you just watch the delta calculation on instruments your interested in and see if certain put/calls are declining to a preferable delta?
Not really.

Obviously you make sure there is huge OI on it.
Nope. I have sold options where that was the first trade of that option. Usually because someone was bidding it. Since the vast majority of options I ride to expiration, ease of getting out of them isn't usually a concern.

But I will prefer the more highly traded strikes. For example I have never traded a 60.50 CL option. But I have traded thousands of 60.00s.


What is your process to actually sell that unit? Do you pick the middle of the B/A and set your full amount you are looking to acquire? Do you only look to acquire half/portion at first? Does this work?
A lot of times I am picking off good bids. Other times I will pick what I consider a fair price between the bid and ask.

This is where experience helps. Trading options over the years gives you a sense of how to acquire options in that commodity. Some commodities you can get above fair price. Others you have go go below fair price to get anything done.

Fair price is determined by multiplying the amount that the futures contract is up or down times the delta. Then that is added to yesterday's settlement of the option.

On some commodities if the futures had a big up or down day, I find that you need to wait until the next day to get fair priced bids to show up.


Is there a better time of day/week/month to submit a limit sell on a call or a put when hungry buyers need to purchase them?

Not really. Mainly when the pit is open. Monday mornings and Friday afternoons are slow.

If there is a bid ask spread of $0.21 to 0.23 would you just hit the market or limit to the current bid?

Depends on the commodity and the direction the futures are currently moving.

All the money management (67%) and the 2X cash holdings, sell before long weekends, et cetera you don't have to go through.
Before a long weekend is one of the best times to sell options. You get an extra day of time erosion on your option when there isn't any trading.

Like I said I did read through this discussion, forgive me if I skimmed over the answers to the above. Thanks again for imparting your knowledge.

I owe you lots of BS (beer and salmon)
Cheers.

The salmon sounds good. Ron

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Old August 29th, 2012, 12:37 AM   #197 (permalink)
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Ya if I'm in the area I owe ya... Don't know how west coast salmon would ship... :-) We're havin a salmon bbq this saturday, can't wait - good times.

If anyone can be so kind, it looks like it may take a bit of time for my OX account to be enabled for the futures options (I've got to send in a bunch of documents) so I'm looking for some general markers. IE = margins.

If I'm able to get 3 month to expiry option put/call's that that are far OTM and ones that are halfway to ATM from far OTM for GC, SI, CL, ES, and NG? Such as:

CL Dec12 65P, 80P, 150C, 130C
NG Dec12 2P, 2.5P, 5c, 4c
GC Dec12 1400P, 1500P, 2100C, 1900C
SI Dec12 25P, 28P, 43c, 35c
ES Dec12 1000p, 1200p, 1800c, 1600c

I appreciate this is asking for a bit, so I'm obviously in no rush and indebted... just trying to do some analysis and risk calculations with these rough numbers while I wait.

Then I can keep my eye open to the CME and the such margin updates to stay up to date.

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Old August 30th, 2012, 12:26 AM   #198 (permalink)
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Another question I'd like to throw out there. When you have a short strangle do people find that the increase in one leg of the positions margin sometimes even's out with the decrease of the second leg's margin? I'm assuming the only thing that could increase both is heavy volatility in either direction.

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Old August 30th, 2012, 02:54 PM   #199 (permalink)
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How are other people doing that have taken on the call to do short strangles? Scott? Others? I've read this post all the way back to mid 2011 and have seen some pickup the call. I've enjoyed your posts too Britkid, thanks.

I like the BM forum, an amazing amount of great posts. Very happy to be here.

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Old August 30th, 2012, 04:53 PM   #200 (permalink)
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Mobiius View Post
How are other people doing that have taken on the call to do short strangles? Scott? Others? I've read this post all the way back to mid 2011 and have seen some pickup the call. I've enjoyed your posts too Britkid, thanks.

I like the BM forum, an amazing amount of great posts. Very happy to be here.

Hi Mobiius,

Regarding short strangles, I currently have two going 80/120 CL and 2/4 NG both Nov.

I nearly always try to do a strangle as you effectively get one side margin free and hence free premium. As you can see I am a lot more aggressive than Ron is, I am sure he would wince at my deltas.

As of today with CL now down to 94.75 my deltas are -.083 for the 80P and 0.0409 for the 120C. As I have 10 of each my net delta is -0.421, this has left my margin lopsided and slightly higher. The difference is not enough to warrant using a futures contract (delta 1.0). So what I have done is sell 4 x 110 calls with a delta of 0.106 at 0.53 which brings my delta back to zero and gains premium of $2120.

The effect on margin was minimal and has now rebalanced them.

Brit

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