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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,534 / 5,727
Last Reply:December 2nd, 2016 (12:40 PM) Attachments:642

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Selling Options on Futures?

Old August 26th, 2013, 06:25 PM   #2001 (permalink)
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Lots of good trading methodology rolling in here...good stuff, thanks everyone.

Sometimes you just don't feel right about the markets. The only position I have on are 140 CL Nov calls. The situation in the Middle East has me a little on edge even though these are a good bit away from the underlying. There is always and inherent Middle East volatility premium built into CL but if things get worse, meaning we get involved and the Tomahawks start flying then CL really has no choice but to spike up. I know that the US imports a lot less oil these days but I feel that has no bearing on what the floor traders will do to this market if there is a 'war' in addition to what is already happening. With that being said I'm planning on exiting this market as soon as tomorrow. I sold these at .05 and will put in a buy to close at .02. I have no problem 'only' taking 60% of the premium out of this trade...

Other than that, I just don't like any other market right now. In other words, I'm exercising my right of 'when in doubt stay out'...just not feeling it.

I've been writing stock and index credit spreads with TOS and that has been working well so that will be my bread and butter for a while.

If we do get that spike in CL then I will look to enter there again with selling calls, yes calls, because I feel that those premiums will be very inflated.

That's what I got...

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Old August 26th, 2013, 06:50 PM   #2002 (permalink)
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FWIW here is what happened at the start of the Iraq war. The actual combat started 3/20/2003. But plenty of rumors prior to that.

Front month CL went from 27 to 38, Dec to Mar. But then it dropped all of that in 9 days at the start of the war.

Sure looks like a "buy the rumor sell the fact" chart.

So do you look at it as up 40% or up $11? My opinion is something in between.
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Old August 26th, 2013, 07:15 PM   #2003 (permalink)
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That's just it....I don't know...

You still planning on making it to PC Beach in the fall? Meet ya at D's if you do even though I've been catching and blackening my own redfish lately...good stuff.

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Old August 27th, 2013, 06:15 AM   #2004 (permalink)
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Timing of protective orders and paper trading some diversity in NG


ron99 View Post
Sometimes when you roll it is best to just wait for the best time to put on the further OTM strikes after you get out of what you have. The roll doesn't need to happen right away. Of course sometimes that will be wrong, but usually it is right more than wrong.


Yes this is very true Ron and something I have only learn over the past year or so. As sellers of options I believe we can not ignore the skills of those who are buyers. There are two different trading styles. But over the last year I have started to learn to mold both together. Some times for protection and some times for profit. It is also worthwhile to combine options and futures in these endeavors.

Timing then is very important. When CL broke 100 recently I had 105 calls 2 weeks from expiry. I bought deep in the money options in the same series for protection. Rode the short calls to 105 and exited while held the long calls exiting them at 108. This balanced margin in my account and resulted in extra profit. I am sure I would not like to be doing this every month. It takes a steel hold of your trading plan but it is very valuable to understand how this can work have practiced it.

I am trying to look at diversifying my pure CL focus. Kevin posted his suite of trades with 10-15% allocation. (Still working through this Kevin.) What I am discovering is that grains and meats are very different beasts to CL. I wonder if I could every come to terms with there unique characteristics after seeing some of the posts and recent moves in cotton and soybeans. I have a paper trade on at the moment in NGV13 Short 4.2 Calls and 2.90 Puts. Getting a feel for price action and movements and the effect of time decay as well as contract specifics. Thought NG would be a good way to diversify a little yet stay in my energy comfortability. Its chart does look different to Oil.

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Old August 27th, 2013, 09:21 AM   #2005 (permalink)
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CL / War (infrequent events)

Futures Edge on FIO

Are you a NinjaTrader user?

 
considering that wars are 'fairly' low frequency events, do people deviate from their trading plans when war looks inevitable (in this instance with re to Syria/CL)?

in other words.....do you bail early or keep to your trading rules?

edit: "inevitable" is the million dollar word though as none of know what is going on behind the scenes on the diplomacy front.

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Old August 27th, 2013, 10:43 AM   #2006 (permalink)
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How Much To Sell?

For the people who are actively trading deep out of the money (OTM) calls and puts, I have a question:

How do you determine how much to sell, on an account level (not an individual trade)?

Do you...

take what the market offers (meaning, if no trades look good, you just stay on sideline)?

sell enough to always max out your margin? (using Ron's 3x excess rule)

sell options in a minimum number of different instruments?

target a certain rate of return?

do something else?


I'm curious how people go about, in Ron's words, "filling the kitty."


I'll go first - I try aim for a target return of 50%. Once I hit that, I feel like I've sold enough. But, that also means I sometimes find and execute sub-optimal trades (like my current beans and Corn calls).

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Old August 27th, 2013, 02:45 PM   #2007 (permalink)
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I'm curious how people go about, in Ron's words, "filling the kitty."

Feeding the Beast.

I try to keep the account full using all available margin and excess. My spreadsheet numbers turn red if I am over and are green when money s available. If they are red I never put on new trades.

When I have money available I target the best ROI instruments if fundamentals are good. I rarely trade when ROI% of a trade is below 2.0% monthly. If none available then I have cash on hand waiting for next trade.

It always surprises me when trades appear out of the blue. When I start trading for the day I rarely know what I might do that day.

When someone asks how do things look for next month I say I don't have a clue. Because I don't.

I have moved a little away from diversification. I used to always want at least 5 commodities. Now it is more like 3. But the ones I am in are the more liquid ones.

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Old August 27th, 2013, 02:56 PM   #2008 (permalink)
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rosho01 View Post
considering that wars are 'fairly' low frequency events, do people deviate from their trading plans when war looks inevitable (in this instance with re to Syria/CL)?

in other words.....do you bail early or keep to your trading rules?

edit: "inevitable" is the million dollar word though as none of know what is going on behind the scenes on the diplomacy front.

I remember Karen the supertrader saying she doesn't look at outside factors. She just keeps trading the same thing.

Outside factors or fundamentals are probably not as important in equities as commodities. But they still need to be looked at. Summer 2011 was one time.

I call not trading because of a perceived event as trying to be smarter than the market. Most times in those cases I am wrong.

So I end up watching fundamentals some and just being far far OTM to ride out when I am wrong.

Now I am debating this with myself for ES puts and the upcoming Fed announcement on Sep 18th.

Do I stay out of ES puts in Sep or do I just sell 1350 and lower and figure it will not get that low or low enough to force me out?

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Old August 27th, 2013, 05:11 PM   #2009 (permalink)
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Quoting 
The impact on markets if the US and west strike Syria is not the problematic issue on oil supply. Rather it will be the retaliatory action… if any… from the supporters of Syria like Iran.

Depending on the what retaliatory action takes place will determine if oil supply and demand balances will tighten and thus send oil prices higher.

However, action that could impact the flow of oil directly or through some sort of an embargo will quickly be met with a release of oil from the IEA's global Strategic Petroleum Reserves which should offset any major price spike.

http://www.cmegroup.com/education/market-commentary/energy/2013/08/pre-open-crud...rgy+Market+Commentary%29

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Old August 28th, 2013, 12:02 AM   #2010 (permalink)
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C & S margins increasing 17% Thursday.

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