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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,332 / 5,728
Last Reply:December 6th, 2016 (05:26 PM) Attachments:642

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Selling Options on Futures?

Old November 27th, 2013, 08:22 AM   #2451 (permalink)
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Singapore
 
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Ecko View Post
I've been trading a 1 lot CL for a while now. I can handle more risk but I'm ''afraid'' of a black swan event/flashcrash that wipes out my account.

Would trading CL options be a good alternative? In that case I can define my max risk.

Who trades CL options here? Is the spread always 0.03-0.04 between bid/ask?

Ecko, CL is a staple for most selling options on this thread. You can only define your risk by buying options or by entering a credit spread as a sell strategy, CL options can see rapid decay when markets are quite, like the whole of this Nov has been for CL, great for sellers , not great for option buyers.

No the spread is not always 3-4 ticks, it depends on time of day , market perception, liquidity, pending market data, distance out or in the money etc.

At least you have the freedom to try and narrow that spread by placing your orders between the bid ask and make the market, ok getting in, sometimes not so easy when you want to get out in a hurry.

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Old November 27th, 2013, 10:05 AM   #2452 (permalink)
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Ecko View Post
I've been trading a 1 lot CL for a while now. I can handle more risk but I'm ''afraid'' of a black swan event/flashcrash that wipes out my account.

Would trading CL options be a good alternative? In that case I can define my max risk.

Who trades CL options here? Is the spread always 0.03-0.04 between bid/ask?

Ecko-

Take the time and read all 245+ pages of this thread. It will give you a tremendous amount of insight into trading options on futures, including the CL.

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Old November 27th, 2013, 10:54 AM   #2453 (permalink)
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Ecko View Post
I've been trading a 1 lot CL for a while now. I can handle more risk but I'm ''afraid'' of a black swan event/flashcrash that wipes out my account.

Would trading CL options be a good alternative? In that case I can define my max risk.

Who trades CL options here? Is the spread always 0.03-0.04 between bid/ask?

The bid/ask varies. Sometimes .01, sometimes a lot more. Depends on the option. Most folks in this thread are sellers, so their risk can be unlimited.

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 November 27th, 2013, 11:08 AM   #2454 (permalink)
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Here's an easy to understand Thanksgiving trading schedule in pdf. All times are CT.

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Old November 27th, 2013, 01:12 PM   #2455 (permalink)
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Futures Edge on FIO

Are you a NinjaTrader user?

 
hi
im a option seller om the sp500 for the last 4 years after reading this forum,
im looking to go in to more commodity's
just signed up tp MRCI were do I see recommended trades ? I only see short trades for 2 to 3 weeks and only in futures ?


( thanks ron and kevin for opening a new window in my life )

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Old November 27th, 2013, 08:06 PM   #2456 (permalink)
Market Wizard
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aron1234 View Post
hi
im a option seller om the sp500 for the last 4 years after reading this forum,
im looking to go in to more commodity's
just signed up tp MRCI were do I see recommended trades ? I only see short trades for 2 to 3 weeks and only in futures ?


( thanks ron and kevin for opening a new window in my life )

MRCI does not recommend option trades. Only futures and futures spreads.

MRCI is mainly useful for seeing the seasonal moves in markets and using that info to make option trades.

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Old November 28th, 2013, 12:52 AM   #2457 (permalink)
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WHICH CHART FRONT MONTH OR CONTRACT MONTH?

I have only recently started looking at price charts for specific future contract months. I watch these charts looking for support and resistance. It has dawned on me that when the next month out becomes the current month there are two different charts.

For example I watch a front month chart. So for NG the current front month chart looks like this...

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The actual current furture contract month is NGF14. This chant looks like this...

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So my question is which chart should I be really watching...Looking at each chart you can see you would suggest different support and resistance zones...so which one is correct or more accurate to follow...???


Last edited by BlueRoo; November 28th, 2013 at 01:50 AM.
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Old November 28th, 2013, 05:40 AM   #2458 (permalink)
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BR, it looks like you have a continuous front month chart vs a Jan NG chart.

If you are selling options, it is obvious that you need to be watching the chart of the underlying month deliverable against the options you have sold, if there is a lot of contango or backwardation you need to watch that carefully too.

A personal example for me was back at the end of August when there was steep backwardation in the CL market and the front month was priced at a large premium to deferred, I had sold calls in the deferred months so was not feeling that much heat as the front month, but my main focus was on watching the front month chart and looking for signs of the strong backwardation rolling into the next months (where I sold) as they became closer to being the front month. That backwardation has worked out of the market now as CL has dropped and if you look across the next 6-7 months CL contracts there is not much difference.

There are many factors to look at but the first is just the realisation that indeed there is a difference between different delivery months and it needs to be watched, as you have highlighted.

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Old November 28th, 2013, 09:10 AM   #2459 (permalink)
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BlueRoo View Post
I have only recently started looking at price charts for specific future contract months. I watch these charts looking for support and resistance. It has dawned on me that when the next month out becomes the current month there are two different charts.

So my question is which chart should I be really watching...Looking at each chart you can see you would suggest different support and resistance zones...so which one is correct or more accurate to follow...???

Certain commodities have seasonals built into the price. NG is a prime example. RB, HO, Hogs, grains are some of the others.

You should not use a continuous chart for them.

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Old November 28th, 2013, 04:07 PM   #2460 (permalink)
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Watch the underlying chart! Got it...


Ron and Harvard,
Other than clicking the thanks button I wanted to more personally thank you for your guidance.

Ron, I am slowly learning about the seasonality and the differences between contract months...it takes time...and much experience...

Harvard, I found how you related the role of the front month on the contract month insightful thanks...

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