Selling Options on Futures? (Page 221) - Options on Futures | futures.io
futures.io futures trading
 

Go Back   futures.io

> Futures Trading, News, Charts and Platforms > Traders Hideout > Options on Futures


Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:567,733 / 5,727
Last Reply:3 Hours Ago (12:40 PM) Attachments:642

Welcome to futures.io.

Welcome, Guest!

This forum was established to help traders (especially futures traders) by openly sharing indicators, strategies, methods, trading journals and discussing the psychology of trading.

We are fundamentally different than most other trading forums:
  • We work extremely hard to keep things positive on our forums.
  • We do not tolerate rude behavior, trolling, or vendor advertising in posts.
  • We firmly believe in openness and encourage sharing. The holy grail is within you, it is not something tangible you can download.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.


You'll need to register in order to view the content of the threads and start contributing to our community. It's free and simple, and we will never resell your private information.

-- Big Mike
     

Reply
 642  
 
Thread Tools Search this Thread

Selling Options on Futures?

Old October 10th, 2013, 11:31 AM   #2201 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,323 since Jul 2011
Thanks: 634 given, 3,899 received
Forum Reputation: Legendary


Bakes View Post
BlueRoo/Turch,

A penny for your thoughts. I have followed Ron's methods fairly closely over the last year for very good results. I guess my main deviation from Ron's trading is where i find it worthwhile to make a trade. From memory Ron is more than willing to sell CL @ 0.02-3, whereas for me, because of our higher commission charges here in Aust i do not see that as worthwhile. I generally look to sell most options at around 0.05-6. Do you guys generally look at slightly higher Premium per option than the guys in the US because of our higher commission charges?

Regards,

Bakes

Yes with higher commissions you need higher premium. But the main thing to look at is ROI in combination with risk.

Reply With Quote
     

Old October 10th, 2013, 11:36 AM   #2202 (permalink)
Elite Member
Cleveland Ohio/United States
 
Futures Experience: Advanced
Platform: Tradestation
Broker/Data: various
Favorite Futures: futures
 
Posts: 2,194 since Jul 2012
Thanks: 1,004 given, 3,965 received


ron99 View Post
Yes with higher commissions you need higher premium. But the main thing to look at is ROI in combination with risk.

Are you using delta to measure your risk, something else?

For example, I might be inclined to accept a 3% monthly ROI for .02 delta, rather than a 4% ROI for .04 delta. But, I always wonder with delta being so low if I am just splitting hairs - thinking I have less risk, but really just leaving money on the table.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
Reply With Quote
     

Old October 10th, 2013, 11:53 AM   #2203 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,323 since Jul 2011
Thanks: 634 given, 3,899 received
Forum Reputation: Legendary



kevinkdog View Post
Are you using delta to measure your risk, something else?

For example, I might be inclined to accept a 3% monthly ROI for .02 delta, rather than a 4% ROI for .04 delta. But, I always wonder with delta being so low if I am just splitting hairs - thinking I have less risk, but really just leaving money on the table.

Mainly delta but with adjustments based on each commodity and my experience with each commodity.

For CL I stay at least 25 out on puts 30 on calls no matter what the delta says.

For some of the softs like SB you have to go to higher deltas to just get positions on.

ES puts I follow delta.

For example, a Jan CL 81.50 put has a .04 delta. A 76 put has a .02 delta. In this instance I definitely go with lower delta, lower return.

There just isn't a strict number you can use. You need years of experience to fine tune your ideas to know the comfort level for you with risk vs reward.

Reply With Quote
     
The following 5 users say Thank You to ron99 for this post:
     

Old October 10th, 2013, 12:38 PM   #2204 (permalink)
Elite Member
Cleveland Ohio/United States
 
Futures Experience: Advanced
Platform: Tradestation
Broker/Data: various
Favorite Futures: futures
 
Posts: 2,194 since Jul 2012
Thanks: 1,004 given, 3,965 received

Trade Calculator

I just received this e-mail from Options Express:

"Hello Mr. Davey,

Thank you for your continued patience. I have received an update from our Technical department regarding trade calculator and errors that have been reported. They have confirmed the issues have been resolved therefore you should now be able to use without any problems. "



Hopefully now if it fixed for good!

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
Reply With Quote
     

Old October 10th, 2013, 12:59 PM   #2205 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,323 since Jul 2011
Thanks: 634 given, 3,899 received
Forum Reputation: Legendary

Futures Edge on FIO

kevinkdog View Post
I just received this e-mail from Options Express:

"Hello Mr. Davey,

Thank you for your continued patience. I have received an update from our Technical department regarding trade calculator and errors that have been reported. They have confirmed the issues have been resolved therefore you should now be able to use without any problems. "



Hopefully now if it fixed for good!

Email them back and tell them to fix the error that was there before the whole thing crashed. See my previous post 2187.

Reply With Quote
     

Old October 10th, 2013, 01:23 PM   #2206 (permalink)
Elite Member
Cleveland Ohio/United States
 
Futures Experience: Advanced
Platform: Tradestation
Broker/Data: various
Favorite Futures: futures
 
Posts: 2,194 since Jul 2012
Thanks: 1,004 given, 3,965 received


ron99 View Post
Email them back and tell them to fix the error that was there before the whole thing crashed. See my previous post 2187.

Done. I just sent them example of CL error. I saw it with Beans too just now, but I swear I looked last night and did not see it (I must be getting old).

I did not bother mentioning the spread miscalculation, as that seems like a whole other can of worms (I think you has said you were told it would require a big code rewrite).

Thanks for pointing this out.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
Reply With Quote
     

Old October 10th, 2013, 01:30 PM   #2207 (permalink)
Elite Member
Georgia, US
 
Futures Experience: None
Platform: Various
Favorite Futures: Various
 
josh's Avatar
 
Posts: 4,898 since Jan 2011
Thanks: 5,143 given, 11,194 received


ron99 View Post
For example, a Jan CL 81.50 put has a .04 delta. A 76 put has a .02 delta. In this instance I definitely go with lower delta, lower return.

I'm trying to understand some lingo and using your example here to learn some things. If the Jan 76 put shows a Return on Capital (using thinkorswim here) of 100%, shouldn't that mean that in 67 days at expiration, my max profit for selling one (shown as $8, as the bid is .08 right now) should be equal to my reduction in buying power due to margin (shown as $280)? Or is this ROC an annualized number? (if so, I don't see the math working either way)

Another options newbie question: if I sold this put and if crude took a nice dive down to the low 80s, the value of the put that I sold would obviously rise. But let's say that at expiration, Jan crude is trading at 82.00. I still will have collected the premium, and all will be well, right? It's just that I didn't make as much as if I had sold a call instead, correct?

Reply With Quote
     

Old October 10th, 2013, 01:48 PM   #2208 (permalink)
Elite Member
Sacramento CA/USA
 
Futures Experience: Advanced
Platform: Infinity, TOS, OX, Lightspeed
Favorite Futures: Options
 
Posts: 3 since Apr 2013
Thanks: 1 given, 2 received


josh View Post
I'm trying to understand some lingo and using your example here to learn some things. If the Jan 76 put shows a Return on Capital (using thinkorswim here) of 100%, shouldn't that mean that in 67 days at expiration, my max profit for selling one (shown as $8, as the bid is .08 right now) should be equal to my reduction in buying power due to margin (shown as $280)? Or is this ROC an annualized number? (if so, I don't see the math working either way)

Another options newbie question: if I sold this put and if crude took a nice dive down to the low 80s, the value of the put that I sold would obviously rise. But let's say that at expiration, Jan crude is trading at 82.00. I still will have collected the premium, and all will be well, right? It's just that I didn't make as much as if I had sold a call instead, correct?

Josh, IF this were to happen, yes you would be fine, however depending on the timing you may not sleep too well during the drop. As an example lets say you got .08 for your put, then the market dove down to price 82, now that put would be worth say $1.90, so you sold it for $80 and now its trading at $1900, on how every many contracts you sold, ouch. So you can't just look at the end date. Hope this helps

Reply With Quote
     
The following user says Thank You to john99 for this post:
     

Old October 10th, 2013, 01:48 PM   #2209 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,323 since Jul 2011
Thanks: 634 given, 3,899 received
Forum Reputation: Legendary


josh View Post
I'm trying to understand some lingo and using your example here to learn some things. If the Jan 76 put shows a Return on Capital (using thinkorswim here) of 100%, shouldn't that mean that in 67 days at expiration, my max profit for selling one (shown as $8, as the bid is .08 right now) should be equal to my reduction in buying power due to margin (shown as $280)? Or is this ROC an annualized number? (if so, I don't see the math working either way)

Another options newbie question: if I sold this put and if crude took a nice dive down to the low 80s, the value of the put that I sold would obviously rise. But let's say that at expiration, Jan crude is trading at 82.00. I still will have collected the premium, and all will be well, right? It's just that I didn't make as much as if I had sold a call instead, correct?

A .08 price is $80 not $8.

You collect the whole premium of a put at expiration if the settlement price of the future is above your strike price. In this case $80 minus fees.

Yes if you hold onto the 76 put and CL is 82 you keep the $80. But in the mean time your margin and premium will rise substantially. If you have enough excess you could ride it out. But in most cases you will not have enough excess to ride out that big of a move.

Your last question depends on what you sold the call for not where futures ended.

Option selling has limited profit. You only get what you sold it for. No more.

Reply With Quote
     
The following user says Thank You to ron99 for this post:
     

Old October 10th, 2013, 02:23 PM   #2210 (permalink)
Elite Member
Georgia, US
 
Futures Experience: None
Platform: Various
Favorite Futures: Various
 
josh's Avatar
 
Posts: 4,898 since Jan 2011
Thanks: 5,143 given, 11,194 received


Thanks john and ron. Sorry about the mistype, I meant $80! Ron, I did not take into consideration the increase in margin requirement that would occur if crude were to drop as in this example. In futures the margins don't change very often, so this is not something I typically have to deal with, but it makes sense that as an exercise becomes more likely, that you are asked to have more capital on hand in the event of an exercise. Thanks guys for humoring my basic questions.

Reply With Quote
     

Reply



futures.io > Futures Trading, News, Charts and Platforms > Traders Hideout > Options on Futures > Selling Options on Futures?

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)
 

NinjaTrader 8: Features and Enhancements, Tips and Tricks

Dec 6
 

Al Brooks: Stop Losing when a Good Trade goes Bad, Correcting Mistakes

Elite only
 

Trading Technologies: Algo Design Lab hands-on

Dec 13
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Crude Oil (CL) futures inverse pairing options Big Mike Commodities Futures Trading 8 December 12th, 2013 12:00 PM
Recommend futures, options Broker? sam1197 Brokers and Data Feeds 17 March 27th, 2013 01:42 AM
Trading Futures with options as protection Gooffy2010 Commodities Futures Trading 6 October 2nd, 2012 05:55 PM
Selling Njniatrader sam1197 NinjaTrader 22 June 28th, 2012 01:40 PM
Zen-Fire Futures options tici88 Brokers and Data Feeds 1 July 30th, 2011 10:16 AM


All times are GMT -4. The time now is 03:52 PM.

Copyright © 2016 by futures.io. All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
 
no new posts

Page generated 2016-12-02 in 0.14 seconds with 20 queries on phoenix via your IP 54.146.141.60