I'm learning too, and I've never traded YM options, but here's how I'd approach this.
First I'd find a strike price that gives an ROI that I'm happy with. The initial margin for the 56 strike option on my IB account is GBP3554, so that's about USD5828. That gives an ROI of around 1.14% per month. I like to look for a better return.
I don't use my IB account to trade options on futures because of the margin.
The delta is about 0.13. I think Ron recommends 0.02 - 0.03, and Kevin goes up to 0.05, so I'd look for a strike further out.
If you right click on the strike price in Optiontrader and choose Contract Info > Description it gives you the trading times. It looks pretty similar to the underlying to me.
Hope this helps,
The following user says Thank You to MGBRoadster for this post:
This is good information. Thank you. I have heard the number 40 for selling as being good before. Time is only one factor. I think that implied volatility (IV) can be a large factor. Selling on a day when IV is high will give an advantage. I sold some /NQ puts yesterday when the /NQ IV was at 100% (relative to 1 year range). Today I show a gain. VIX is down today. Thanks for your plot.
The following user says Thank You to datahogg for this post:
The NG rally started yesterday after the EIA Energy Report was released. Stocks declined below the 5-year average, last year's numbers and also from the previous week.
The question is not whether NG will touch the stirke price but if the position can be held through the gargatuan margin increases that will be coming. And if If you have a broker like mine (OEX) you are looking at another 20-30% on top of SPAN.
Yes, I know that currently OEX margin is equal to SPAN. But from past experience, as the volatility and SPAN margin increases substantially, OEX starts pumping up their excess requirement over SPAN. So if this rally continues I expect OEX to start increasing the excess over SPAN.
The following 2 users say Thank You to Barrington for this post:
I only used IB for the quotes, I have an account with Globalfutures where I will be trading my futures.
Also, my plan is to put on credit spreads and somebody here said to me that you would put the order in individually
(option by option), not like with equity options, where you put it on as a spread.
Another thing is that I want to hedge my trade, if I am wrong, with shares or in this case I believe it is IYY, but first
I need to open that trade with the options.
If I were to take smaller 'Deltas' then the credit received for the spread would be so low that the commission would eat up all of the money I get, that is why I need higher delta.
Which brings me back to my original question, how much do you guys shave off an option price?
While I do not have any crystal ball, I am using price action along with seasonals. While seasonals turn negative in a week or two, the recent price action is too bullish for any significant downturn in next week or two. The recent rally has started almost three weeks back on colder weather and accelerated (broke out of range) yesterday.
My take is, it will go to about 4.5 to 4.75 (and another 2 to 4 weeks) before going down. Just my two cents...