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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,446 / 5,734
Last Reply:2 Hours Ago (01:01 AM) Attachments:642

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Selling Options on Futures?

Old August 28th, 2013, 07:31 AM   #2011 (permalink)
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Hi ron99,

firstly thank you for your ongoing posts here.

My question is, how do you calculate your ROI% ?

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Old August 28th, 2013, 09:56 AM   #2012 (permalink)
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ROI%

What we have done here is take the margin required to sell the option and added 2X that number for cash excess. Or simply 3X margin. That will give you 33% for margin and 67% for cash excess. For example if margin is $500 then you would have 500 margin and 1000 cash excess per contract.

(Premium - fees) / (Margin * 3) = Total ROI%

To get a monthly number to compare contracts with different DTE you do this.

(Premium - fees) / (Margin * 3) / DTE * 30 = Monthly ROI%

One other way that I calculate ROI%, but I haven't shown in this thread, is to use the average margin for the option by taking beginning margin and exit margin and averaging the two. This shows a more precise ROI% if you are using the freed up margin and premium to add additional options while you still have on this position.

(Beginning Premium - Ending Premium - fees) / ((Beginning Margin + Ending Margin) / 2 * 3) = Total ROI%

(Beginning Premium - Ending Premium - fees) / ((Beginning Margin + Ending Margin) / 2 * 3) / DTE * 30 = Monthly ROI%

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Old August 28th, 2013, 09:56 AM   #2013 (permalink)
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On that note 150 calls have a pretty nice premium. The seasonals support selling, and supply side is heavy. The only X factor is the geopolitical situation. Thoughts?

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Old August 28th, 2013, 10:08 AM   #2014 (permalink)
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TY for your detailed info on ROI%.

I will play around with your formula a bit.

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Old August 28th, 2013, 10:20 AM   #2015 (permalink)
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eudamonia View Post
On that note 150 calls have a pretty nice premium. The seasonals support selling, and supply side is heavy. The only X factor is the geopolitical situation. Thoughts?

That is a HUGE "X" factor in my opinion. If US launches cruise missile, who knows what is next? Gas attack on Israel? Iran getting involved? It could be really, really ugly.


As an alternative, what about selling Nov Puts? You can sell 86 P, delta of .01, and get around 5% ROI. It is against seasonals, though...

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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Old August 28th, 2013, 10:37 AM   #2016 (permalink)
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eudamonia View Post
On that note 150 calls have a pretty nice premium. The seasonals support selling, and supply side is heavy. The only X factor is the geopolitical situation. Thoughts?

The only tricky thing is picking the top. But if they release SPR oil then it crashes immediately and you missed out.

This is the toughest decision to make when selling options.

I have a delta of 0.025 based on the last trade of 0.15 (Nov 150) but the ask is now 0.11. But those prices are far higher than what it should be. I'm getting 0.06.

One thing to think about for something like this is doing a covered call for protection. 150-170. But good luck getting a seller at a reasonable price for Nov 170.

A Dec 150-170 has more volume. Maybe right now you could get 150c at 0.13 and 170s at 0.07. SPAN margin is 144 and yesterday's settlement was $50. OX is 20% more than SPAN for CL. For OX the monthly ROI% is 2.9.

FYI The Nov contract for a lot of commodities have much lower VOL & OI than Dec. Dec always has the highest VOL & OI for futures and options.

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Old August 28th, 2013, 10:52 AM   #2017 (permalink)
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kevinkdog View Post
That is a HUGE "X" factor in my opinion. If US launches cruise missile, who knows what is next? Gas attack on Israel? Iran getting involved? It could be really, really ugly.


As an alternative, what about selling Nov Puts? You can sell 86 P, delta of .01, and get around 5% ROI. It is against seasonals, though...

But if you sell puts and they release SPR oil you are screwed.

Jan 1991 before 1st Iraq war they released SPR oil and price dropped 43% in 2 days. 32 to 19.

CL right now may just be too volatile to trade if you want a lower risk account.

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Old August 28th, 2013, 10:53 AM   #2018 (permalink)
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ron99 View Post
CL right now may just be too volatile to trade if you want a lower risk account.

Great point.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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Old August 28th, 2013, 11:03 AM   #2019 (permalink)
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SPR release June 2011 caused CL to drop $10.

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Old August 28th, 2013, 12:13 PM   #2020 (permalink)
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Just like clock work yesterday, if CL futures go up then CL put OI increases more than CL call OI. If futures go down then call OI increases more than put OI.

This proves my theory that a lot of the option buying is protection for future purchases.

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