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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,987 / 5,728
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Selling Options on Futures?

Old October 8th, 2013, 06:03 AM   #2171 (permalink)
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OX spread margins

I've just noticed that the OX Trade Calculator is working out the correct margins for spreads now, so you don't need to subtract the margin for one spread from two spreads any more.

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Old October 9th, 2013, 01:07 AM   #2172 (permalink)
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Which is the better trade?

Okay I am starting to look at Deeper OTM than I would normally consider.
I am trying to understand the reasons why one may be better than the other.
Out of the 2 trades which would you prefer and please state your reasons. Thanks Michael

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Old October 9th, 2013, 02:16 AM   #2173 (permalink)
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Given the two choices, I would choose to sell the 85P/120C. I would be farther away from the money and not as vulnerable to volatility in the underlying. And yes, I would make less but my chances of staying in the trade is higher. I would prefer to sleep better and make a lot less per trade and have a much higher overall winning percentage than taking on too much risk and be up all night worrying about the slightest move in CL.

Personally, I would even go farther out and sell the 80P/125C strangle for even less premium and even lower delta. But that is just me......There is no right or wrong. It depends on what your risk tolerance is. There is nothing wrong with selling the 90P/115C strangle (in my earlier option selling days I probably would have taking that exact trade) provided you have a mental stop loss in mind and you have the discipline to exit when that stop is reached. But trading closer to the money strikes also means having to exit more during times of higher volatility.

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Old October 9th, 2013, 06:53 AM   #2174 (permalink)
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MGBRoadster View Post
I've just noticed that the OX Trade Calculator is working out the correct margins for spreads now, so you don't need to subtract the margin for one spread from two spreads any more.

That's weird - it's gone back to calculating it the old way today. Maybe I imagined it.

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Old October 9th, 2013, 07:21 AM   #2175 (permalink)
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MJ888 View Post
Given the two choices, I would choose to sell the 85P/120C. I would be farther away from the money and not as vulnerable to volatility in the underlying.

Like he said. Plus the ROI is better on the 85P/120C (unless there's an error in my spreadsheet of course - it won't be the first time!!!)

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Old October 9th, 2013, 09:42 AM   #2176 (permalink)
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BlueRoo View Post
Okay I am starting to look at Deeper OTM than I would normally consider.
I am trying to understand the reasons why one may be better than the other.
Out of the 2 trades which would you prefer and please state your reasons. Thanks Michael

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Neither, how can you sleep at night being 11.71 OTM?
You may get lucky and have a couple successful trades, but it's just a matter of time before you get wiped out.
What's wrong with CLZ3135C @ .02 x 50 = $1000
CLZ373P @ .02 x 50 = $1000
Margin = $6864 Comm.= $350
Same DTE. Nearly the same ROI as the CLZ385p & CLZ3120C only I would sleep a lot better.

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Old October 9th, 2013, 10:04 AM   #2177 (permalink)
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turch View Post
Neither, how can you sleep at night being 11.71 OTM?
You may get lucky and have a couple successful trades, but it's just a matter of time before you get wiped out.
What's wrong with CLZ3135C @ .02 x 50 = $1000
CLZ373P @ .02 x 50 = $1000
Margin = $6864 Comm.= $350
Same DTE. Nearly the same ROI as the CLZ385p & CLZ3120C only I would sleep a lot better.

@turch -

How do you calculate ROI? I am coming up with an ROI for the 73P/135C as being half that of 85P/120C.

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WRONG! Ingnore these calculations. Correct ones are a few posts down. Sorry!

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Last edited by kevinkdog; October 9th, 2013 at 10:31 AM. Reason: goof
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Old October 9th, 2013, 10:20 AM   #2178 (permalink)
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kevinkdog View Post
@turch -

How do you calculate ROI? I am coming up with an ROI for the 73P/135C as being half that of 85P/120C.

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Based on the OX calculator: CLZ385P x 10 =$900
CLZ3120C x 10 = $700 Margin = $6072 Comm.= $70
$700+ $900 = $1600 - $70= $1530 /$6072= 25% ROI
CLZ3135C x 50 = $1000
CLZ373P x 50 = $1000 Margin = $6864 comm. = $350
$1000+ $1000 = $2000 -$350 = $1650/6864 = 24% ROI
Note: I have not multiplied the margins to keep it simple.

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Old October 9th, 2013, 10:24 AM   #2179 (permalink)
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kevinkdog View Post

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When I put the CLZ 85P/120C into the OX Tradecalc I get IM $1420.32 for 1 spread and $1,982.64 for 2 spreads, so that's a "true" margin of $562.32 each.

I must be doing something wrong. How did you get $992 Kevin?


Confused,

Chris

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Old October 9th, 2013, 10:29 AM   #2180 (permalink)
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MGBRoadster View Post
When I put the CLZ 85P/120C into the OX Tradecalc I get IM $1420.32 for 1 spread and $1,982.64 for 2 spreads, so that's a "true" margin of $562.32 each.

I must be doing something wrong. How did you get $992 Kevin?


Confused,

Chris

Yes, I screwed it up. I am going to recalculate.

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