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Selling Options on Futures?
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Selling Options on Futures?

  #251 (permalink)
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ron99 View Post
The SPAN minimum margin for being short a Dec CL 70 put is $436 (Sep 24th). Premium is $150. With double excess your possible ROI is 11.3%.

That's some pretty decent returns.

Shame, with OX I can only get double excess on stocks. I assume you get it on commodity futures due to volume traded/time you've been using them?

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  #252 (permalink)
Market Wizard
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rosho01 View Post
That's some pretty decent returns.

Shame, with OX I can only get double excess on stocks. I assume you get it on commodity futures due to volume traded/time you've been using them?

Double excess means that I keep double the margin as excess to cover any movements of the option against me.

For example, if the margin is $436, I then keep $872 (436 X 2) extra per contract. Double excess. That's a total of $1208 per contract in my account for each option.

If you don't keep enough excess you will either be getting margin calls or you will be having to trade out of positions when the market makes an unexpected move. With plenty of excess and positions far enough OTM you will rarely have to trade out of positions at a loss.

For this year I have made a profit on 96% of the short options I put on. Having a higher percentage of winners is more important than trying to make more profit per trade. Because if you do riskier trades to make a larger profit per trade there will be a time when you suffer a big loss and that will take away a lot of the profit you worked so hard to make.

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  #253 (permalink)
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ron99 View Post
Double excess means that I keep double the margin as excess to cover any movements of the option against me.

For example, if the margin is $436, I then keep $872 (436 X 2) extra per contract. Double excess. That's a total of $1208 per contract in my account for each option.

If you don't keep enough excess you will either be getting margin calls or you will be having to trade out of positions when the market makes an unexpected move. With plenty of excess and positions far enough OTM you will rarely have to trade out of positions at a loss.

For this year I have made a profit on 96% of the short options I put on. Having a higher percentage of winners is more important than trying to make more profit per trade. Because if you do riskier trades to make a larger profit per trade there will be a time when you suffer a big loss and that will take away a lot of the profit you worked so hard to make.

Ah sorry, not heard the term double excess before (did search this thread)......but OX customer service had (in different context).

I like the credit spread type of trade, good for the beginner (me) to try with small account. Have you ever tried to trade butterfly's / condors et al in commodity futures? Or is the greater volatility just not worth it? I have seen a few videos showing the management of trading fly's in volatile markets, but only with equity/eq index/eq etfs, and it seems quite challenging but manageable. The target returns in one month (trading 1mth to expiry) were 15% of margin. I suppose it suits the more liquid instruments better, so no point doing for commod futs.

Thanks for you guys answering questions, I have bought and read 3/4 of the cordier book, and am working my way through a ton of cboe option webinars to get up to speed. Hopefully my questions will become a little more challenging as time goes on.

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  #254 (permalink)
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I have done condors. But I don't do any adjusting of positions to make them delta neutral.

You are correct that you don't want to do them in volatile markets.

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  #255 (permalink)
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hi Ron

Where are you getting your delta data for coffee (KC), I cannot find anything in OX? I cannot find it in IB either. Specifically I am looking at the KCZ22200C option delta. I would like access to the other greeks also, and previous days data is fine.

You mentioned that you are not interested in Volatility data (vega), but is it not possible you will have to bail out of a position due to price moving against you (closer to strike / increasing the delta) and also due to the price increasing because of increased volatility? So you are obviously trading theta but also short volatility?

Happy trading.


Last edited by rosho01; September 27th, 2012 at 10:38 AM.
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  #256 (permalink)
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rosho01 View Post
hi Ron

Where are you getting your delta data for coffee (KC), I cannot find anything in OX? I cannot find it in IB either. Specifically I am looking at the KCZ22200C option delta. I would like access to the other greeks also, and previous days data is fine.

You mentioned that you are not interested in Volatility data (vega), but is it not possible you will have to bail out of a position due to price moving against you (closer to strike / increasing the delta) and also due to the price increasing because of increased volatility? So you are obviously trading theta but also short volatility?

Happy trading.

Like this you mean

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Selling Options on Futures?-coffee.jpg  
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  #257 (permalink)
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britkid99 View Post
Like this you mean

great, thanks

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  #258 (permalink)
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Technicals for options on OX are on the Futures Options Quote Detail page and also on the Option Chain page.

They also are available on the CME daily bulletins.
Daily Bulletin | Build a Report

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  #259 (permalink)
Market Wizard
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rosho01 View Post
You mentioned that you are not interested in Volatility data (vega), but is it not possible you will have to bail out of a position due to price moving against you (closer to strike / increasing the delta) and also due to the price increasing because of increased volatility? So you are obviously trading theta but also short volatility?

Happy trading.

I have no clue what theta is and I don't see a need to know. If it isn't broke don't fix it.

The KISS approach is best.

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  #260 (permalink)
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ron99 View Post
I have no clue what theta is and I don't see a need to know. If it isn't broke don't fix it.

The KISS approach is best.

Theta is the greek name representing time value of the option.

It would be interesting to know from the thousands of options you have sold, the % of those trades you bailed from which were at significant levels in volatility when you entered ie recent lows perhaps? I know you trade off fundamentals, but you also have technical parameters eg delta of <0.03 (i think you have said)...my thoughts were that perhaps volatility could also be used as a parameter for entry. Probably not - you do not close out many before expiry, but there's no harm in raising the point, as volatility is a key driver of price (and pontential to drive price to stop out).

Perhaps someone who trades using the other greeks would be able to comment.

I will refrain from asking too many questions for now.


Last edited by rosho01; September 28th, 2012 at 07:43 PM. Reason: crap english
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