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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,890 / 5,728
Last Reply:11 Hours Ago (05:26 PM) Attachments:642

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Selling Options on Futures?

Old December 19th, 2013, 11:32 AM   #2651 (permalink)
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SMCJB View Post
Since the Natural Gas conversations seem to have stopped I'm guessing you guys all got out.
For what it's worth
19-Dec EIA Release Estimates.
Based upon 37 estimates...
Average -266
Median -267
Range -228 to -283
Std Dev 11.7
Note that several of the major surveys have averages close to 260, but they have smaller data sets.
2012 EIA Report -70
6 year Average -133
I believe largest withdrawal in December was 208 and the largest withdrawal ever 274.

-285 WOW
Market trading +15c
Weekly Natural Gas Storage Report - EIA

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Old December 19th, 2013, 11:37 AM   #2652 (permalink)
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Delta Hedging

[QUOTE=PeterOhlson;376218
This is very crude obviously. *sigh* wish I had a database of all options on the S&P space, with IVs and all the greeks, where you could backtest by attaching automatic deltahedges to test profits of various structures through time, the structure being defined by some variables like % OTM, delta, theta/gamma and the backtest automatically opening the structure at the beginning of each new cycle. Because of my lack of Goldman Sachs like infrastructure I'm forced to use Excel and my brain along with the rest of us unwashed masses. Sucks /QUOTE]

It is easy to hedge the delta of a short far out of the money put. Say you have sold a naked put with a delta of 0.025,
then sell a call vertical with a delta close to 0.025. The call vertical reduces the risk to the downside, and has
reasonable risk to the upside. This also increases the maximum possible profit.

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Old December 19th, 2013, 11:41 AM   #2653 (permalink)
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SMCJB View Post
Since the Natural Gas conversations seem to have stopped I'm guessing you guys all got out.
For what it's worth
19-Dec EIA Release Estimates.
Based upon 37 estimates...
Average -266
Median -267
Range -228 to -283
Std Dev 11.7
Note that several of the major surveys have averages close to 260, but they have smaller data sets.
2012 EIA Report -70
6 year Average -133
I believe largest withdrawal in December was 208 and the largest withdrawal ever 274.

Thanks for the info.
Bought back my Mar 6 calls for break-even. Looking to sell Mar 7 calls (for a better premium than I've sold my Mar 6).

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Old December 19th, 2013, 11:47 AM   #2654 (permalink)
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datahogg View Post
It is easy to hedge the delta of a short far out of the money put. Say you have sold a naked put with a delta of 0.025,
then sell a call vertical with a delta close to 0.025. The call vertical reduces the risk to the downside, and has
reasonable risk to the upside. This also increases the maximum possible profit.

That's step one. Then what do you do when futures keep moving lower? Add more calls? And what do you do when the futures reverse and you have on a bunch of calls?

Show us an example using short naked NG calls the last 4 weeks.


Last edited by ron99; December 19th, 2013 at 12:39 PM.
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Old December 19th, 2013, 12:31 PM   #2655 (permalink)
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datahogg View Post
Thanks for your methods for the market. It might be more instructive if you gave the actual options bought and sold in a list form.

In the picture you can look at the title of the window for the spesific options bought and sold. Anyone can easily check the numbers I posted...

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Old December 19th, 2013, 02:57 PM   #2656 (permalink)
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It's interesting to see how unhinged March NG is from theoretical pricing:

Right now the March contract is up 16.6 cents.

$5.5 March calls which started the day at 0.15 delta are now 0.21 delta but are up 54 cents (suggesting that we just saw a one day 35 cent move).

$6 March calls which started the day at 0.09 delta are now 0.14 delta but are up 40 cents (suggesting that we just saw a one day 45 cent move).

$7 March calls which started the day at 0.05 delta are now 0.07 delta but are up 18 cents (suggestion that we just saw a one day 35 cent move).

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Old December 19th, 2013, 03:12 PM   #2657 (permalink)
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Blue Horseshoe Loves March NG Vol & Skew

Greed is Good - Gordon Gekko!

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Old December 19th, 2013, 03:25 PM   #2658 (permalink)
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SMCJB View Post
Blue Horseshoe Loves March NG Vol & Skew

Greed is Good - Gordon Gekko!

From the charts you posted earlier it looks like this typically mean reverts. Is this mean reversion based on NG prices or overall supply or a certain time period?

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Old December 19th, 2013, 03:38 PM   #2659 (permalink)
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eudamonia View Post
From the charts you posted earlier it looks like this typically mean reverts. Is this mean reversion based on NG prices or overall supply or a certain time period?

Price, Vol & Skew all spiking on the concern that we may not have enough gas in storage for the winter. If this is true the short squeeze hits March, hence why your seeing what you are in the March Calls. This is not a rare occurrence as you can see in the charts I posted.

Post 375470

If it's not true and we don't literally run out, which is again normally the case, then the March premium will disperse and March will probably trade equal to or at a discount to April. Of course we won't know whether that's the case for a while...

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Old December 19th, 2013, 04:19 PM   #2660 (permalink)
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rani View Post

The key price level for next week is 4.470, which is the May 2010 / April 2013 trendline. If NG breaks and holds above this level (and stays there the week after), there is not that much resistance above.

touched it briefly today, lets see if it breaks & holds above. hopefully not...though price at these levels appears to be reasonable value as per the EIA:

"The EIA also forecasts that gas prices will be higher than the year-ago level thanks to lower natural gas inventories and higher household heating demand."

Read more: Natural Gas ETFs Dip on Milder Weather Forecast - ETF News And Commentary - NASDAQ.com

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