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Selling Options on Futures?
Started: by ron99 Views / Replies:583,912 / 5,779
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Selling Options on Futures?

  #2021 (permalink)
Market Wizard
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Here's a trade you might consider.

Sell Dec CL 170 calls and buy 180 calls. SPAN margin is only $33.

180s are offered at 0.03. Trick would be to get 170s sold for 0.06 or higher.

Or if you are less risk adverse move the spread lower. SPAN margin on 150-160 is $87. 145-150 margin is $76.

Those margins will be slightly higher tomorrow if futures stay positive today.

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  #2022 (permalink)
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ron99 View Post
Here's a trade you might consider.

Sell Dec CL 170 calls and buy 180 calls. SPAN margin is only $33.

180s are offered at 0.03. Trick would be to get 170s sold for 0.06 or higher.

Or if you are less risk adverse move the spread lower. SPAN margin on 150-160 is $87. 145-150 margin is $76.

Those margins will be slightly higher tomorrow if futures stay positive today.


For those using Options Express, this is one of those "margin for 1 contract is screwed up" situations.

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I'm calculating margin as $601.92 - $564.96 = $36.96 per contract. 6.8% ROI is the credit is .03.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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  #2023 (permalink)
Market Wizard
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kevinkdog View Post
For those using Options Express, this is one of those "margin for 1 contract is screwed up" situations.

Correct

I'm calculating margin as $601.92 - $564.96 = $36.96 per contract. 6.8% ROI is the credit is .03.

Actually you are using the margin from yesterday but the premium from today. That gives you a false ROI%. Spread premium yesterday was 0.01.

Yesterday the 155-165 spread was 0.03. SPAN Margin was 81. OX would have been 97. ROI% 2.6 if held all 80 DTE. But I'm guessing the 170-180 spread margin is lower than the 155-165 $81 unless futures take off between now and closing.

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  #2024 (permalink)
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ron99 View Post
Actually you are using the margin from yesterday but the premium from today. That gives you a false ROI%. Spread premium yesterday was 0.01.

Yesterday the 155-165 spread was 0.03. SPAN Margin was 81. OX would have been 97. ROI% 2.6 if held all 80 DTE. But I'm guessing the 170-180 spread margin is lower than the 155-165 $81 unless futures take off between now and closing.

Good points. Thanks for clarifying!

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  #2025 (permalink)
World'sWorstTrader
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Advantages

Futures Edge on FIO

Which products do you trade?

 
What are the advantages of selling put options against the futures contracts when compared to
selling options against the index products such as SPX, RUT, and others??

thanks H. Hampton.

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  #2026 (permalink)
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ron99 View Post
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.


My answer to this is to move away from futures options for now and look at stock plus option to create a married put along the lines of Radioactive trading. The benefit here is a pre-defined 'maximum loss' and an open upside.
I have yesterday purchased USO and the equivilant matching Jan 45 puts.

The total outlay is $45.88 per share with a guarantee of selling at 45 until Jan 2014
This means if price spikes up sharply the stock rises faster than the put declines and allows for the sale of covered calls or ratio call spreads to recoup the 88 cents 'at risk'.

If the SPR is released and there is a sudden decline as speculators dump the futures, then the puts can be rolled down and the profits re-investd in more shares at a lower price ready for the next move up. This would have a compounding effect over time.

IF this proves successful I will keep most of my excess margin in easily cashed out married puts instead of hard cash and make it earn.

To bring back on topic, I do have some Dec 125c CL which are heavily underwater after the recent rise in CL. I now have a hedge, although not 100%, which I hope will allow me to ride out the volatility until I can close out without a loss.

Brit


Last edited by britkid99; August 29th, 2013 at 12:58 PM.
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  #2027 (permalink)
Market Wizard
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Someone had mentioned this earlier in this thread about Karen the Supertrader and the US tax treatment of the SPX options. Here is info from the CBOE.


Quoting 
Under section 1256 of the Tax Code, profit and loss on transactions in CBOEs SPX and SPXpm options are
entitled to be taxed at a rate equal to 60% long-term and 40% short-term capital gain or loss

http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCsQFjAA&url...v.51495398,d.cWc&cad=rjt

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  #2028 (permalink)
Market Wizard
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datahogg View Post
What are the advantages of selling put options against the futures contracts when compared to
selling options against the index products such as SPX, RUT, and others??

thanks H. Hampton.

Since I have never traded SPX, I can't answer your question.

But I do know that ES trades almost 24 hours a day. SPX only trades 9:30am to 4:15pm ET


Last edited by ron99; August 29th, 2013 at 10:58 AM.
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  #2029 (permalink)
Market Wizard
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KC option total OI has crashed. It was 300k in 2012. It is 116k now. Lowest since Feb 2010.

This shows how a trade that was great a few months ago, selling Jul & Sep calls, can totally disappear later.

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  #2030 (permalink)
Market Wizard
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Futures Experience: Advanced
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Favorite Futures: Options on Futures
 
Posts: 2,376 since Jul 2011
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Trade Alert?

Oct HO 3.95 calls settled yesterday at .0001. They are bid 97 times at .0010. 27 DTE. Futures are down .0089.

I don't know the margin because it has no OI so SPAN does not calculate a margin. We will have the margin amount tonight because it has traded 3 times.

Is it worth the risk to make $42 - fees? You will make most of that tonight if it settles at .0001.

Note to OX traders. If a contract has no OI you have to call the order in to their trading desk. You can't do it online.

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