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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,065 / 5,727
Last Reply:Yesterday (12:40 PM) Attachments:642

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Selling Options on Futures?

Old December 28th, 2013, 04:13 PM   #2721 (permalink)
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crito, welcome to the thread.

Here is the info from post#2


Quoting 
-When I put a position on I have 2 times the Initial Margin required for cash excess. If the increase in margin plus the loss on the increased premium uses up this cash excess then it is time to exit.

For example, if I sell an option for $100 and the margin required is $500, I will have $1000 excess.

If the combination of margin increasing and premium increasing uses up the $1000 cash excess it is time to exit.

I use only 33% of my balance for margin. I used to use 50% but ended up getting bounced out of trades that ended up being winners far too often.

Like mu2pilot said, Sometimes (most times?) he rolls, sometimes he closes the position, sometimes, if he is close to expiration and he feels confident in the trade, he stays put.

I agree that Karen numbers would have her out of the position before it got to 0.3 delta.

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Old December 28th, 2013, 04:16 PM   #2722 (permalink)
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mu2pilot View Post
Ron typically "does something" when a position goes 2x the premium received against him.

Actually that is Liberty Trading's rule. Since I sell so far OTM and for low premium I would be exiting all of the time. For example, if I sold the option for $40 and exited when it doubled I would get out at $80. But there is no reason to exit when it only goes up $40.

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Old December 28th, 2013, 10:20 PM   #2723 (permalink)
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mu2pilot View Post
Kevinkdog-

How did you compile your list of options? Did you do it manually? Programmatically? Did you use SPAN margin specific to each instrument? Or did you use a general margin requirement for each underlying? Did you use 3x margin to compute your ROI?

I am planning on writing a program (probably in VBA) to pull real time data from a data source, current SPAN margin info and build a ROI matrix of current futures options similar to what you have done and was curious how you did it.

Thanks,

mu2pilot


I use @Dudetooth 's great SPAN spreadsheet. If you look in the SPAN thread, you will find it.

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Old December 28th, 2013, 10:45 PM   #2724 (permalink)
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kevinkdog View Post
I use @Dudetooth 's great SPAN spreadsheet. If you look in the SPAN thread, you will find it.

I figured you used Dudetooth's spreadsheet to figure SPAN. I have his spreadsheets and was going to use some of his code for part of my program.

But I was wondering if you manually pulled up option chains for each of your markets and plugged them in to Dudetooth's spreadsheet or if you created a "trade finder" of sorts to scan through each market for all options that meet your criteria.

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Old December 28th, 2013, 10:48 PM   #2725 (permalink)
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mu2pilot View Post
I figured you used Dudetooth's spreadsheet to figure SPAN. I have his spreadsheets and was going to use some of his code for part of my program.

But I was wondering if you manually pulled up option chains for each of your markets and plugged them in to Dudetooth's spreadsheet or if you created a "trade finder" of sorts to scan through each market for all options that meet your criteria.

For each instrument, I basically calculate the ROI for each option. Then, I filter the results for delta, ROI, and a minimum amount of premium. I run over 3,000 individual options a day, and it takes an hour or two. But, it does let me look at a variety of ROIs.

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Old December 28th, 2013, 11:13 PM   #2726 (permalink)
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mu2pilot View Post
I figured you used Dudetooth's spreadsheet to figure SPAN. I have his spreadsheets and was going to use some of his code for part of my program.

But I was wondering if you manually pulled up option chains for each of your markets and plugged them in to Dudetooth's spreadsheet or if you created a "trade finder" of sorts to scan through each market for all options that meet your criteria.

So I basically run a complete sweep, then filter on what I am interested in. I could make it a lot better by just skipping options where I know the delta will be too high. That would greatly reduce the time it took to run. Maybe I'll eventually do that...

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Old December 29th, 2013, 07:43 AM   #2727 (permalink)
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thanks guys,

i'm looking at a coffee strangle, what do you think?
the put would be triggy, the call seems ok.
anybody know the fundamentals on coffee, would we have made a bottom yet? if i look at the continues data coffee hasn't been this low for mannnnny years but againd that doesn't say it can't go lower ;-)

I like to put (green) lines in my charts from opening the position (down for put, or up for call) to the exp. date.
so the fut should stay above the shorted put line or below the shorted call line as we move foward. (I let it cross in the first few weeks)
Than copy the line (create parallel and place it at bad locations in the past, as you can see the put has a fair change of be a looser, the call not so much). And yes i know time decay is not linear.

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just saw at the page before ron mentioned the march call 135
perhaps sell the call & wait for a downswing to sell the put.

just found on page 32 a link to the monthly ice pdf
https://www.theice.com/publicdocs/futures_us/ICE_Monthly_Softs_Fast_Facts.pdf

although i still think the put is a risky trade, this is interesting.
does anybody know at what price farmers start burning their stock out of frustration? (the minimum production costs?)
A part of it in italic...
Coffee open interest has been falling lately
and commercials are holding a rather long
position. What is important to note about
this is that the increase in the commercial
net position is not from shorts increasing
their holdings, but rather longs increasing
the size of their coverage. This would imply
less worry about prices falling going forward
and more risk of prices going higher. Given
how far the market has fallen already it
makes sense fundamentally, even though
there are no strong indicators yet the
market has reached bottom.




Interested in your thoughts,

regards.


@Ron99, you mentioned you like at least 2%/month, is that based on the maint. margin for the contract or do you take the 33% or 66% 'spare money' in account?
lets take this above coffee call as a sample
premium is 0.28 * 375 = $105, days 55, MM (ib) = $731
so it makes %105/ $731 in 55 days = 14.9% in 55days, which is 14.9% * (31 / 55d ) = 8.39%/month
but that 8.39% is based on the MM at opening, you use only 33% of your money (i still use 50%)
so taking that in account you have $731 * 3 = $2193 sitting in the bank (for margin safety) to make $105 (in the 55days)
that gives this trade 8.39 / 3 = 2.799% /month, (or 33.5%/year) which is still nice.


Last edited by crito; December 29th, 2013 at 12:57 PM. Reason: added ice pdf link + text
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Old December 29th, 2013, 11:07 AM   #2728 (permalink)
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Hi,

here is another interesting one (also mentioned by kevin), more dangerous but well we get paid for fear...
in case you consider this trade, you may want to read the conversation on this thread (first page) since the NG march-april can be a very rough ride.
https://futures.io/commodities-futures-trading/29985-looking-spread-traders.html


Short NGh14 call 6.0 or 6.5 (i guess the 6.5 is the better/safer candidate),
Looking forward to your replies.

oh, i guess you could consider a spread for this one, either C6-C6.5 or C6-C7, etc

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@kevin, when did you sell your NGg14 calls?


Last edited by crito; December 29th, 2013 at 11:14 AM. Reason: added spread idea
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Old December 29th, 2013, 11:17 AM   #2729 (permalink)
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mu2pilot View Post


I encourage you to take the time to read this entire thread. There are numerous golden nuggets for your discovery. Ron typically "does something" when a position goes 2x the premium received against him. Sometimes (most times?) he rolls, sometimes he closes the position, sometimes, if he is close to expiration and he feels confident in the trade, he stays put.

mu2pilot

I second that, I don't post here much as I subscribe to the theory is you don't have much to add why add something of no value.

However, The above comment is really important, if you have a trade that goes against you or not as planned, skimming through the pages of this thread will either make you see something you personally overlooked, or glean some insight from a number of traders who have been doing this for a number of years.

I personally think this might one of the best threads on this forum, and this is probably the best forum on the interwebs for trading!


I've been trading for 15 years and selling options for 8. I would state that when you start out at this game, take is slow and keep your size manageable. 2 or 3 contracts going not as planned is a lot easier to manage than 5 or 10 or more.

Thanks to all the contributors of this thread and forum!

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Old December 29th, 2013, 03:26 PM   #2730 (permalink)
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Implied Volatility (IV)


Friday's close IV for /ES futures was 10.12 (or 8% of the 52 week high).
Friday's close IV for /CL futures was 13.53 ( or 0% of the 52 week high).
Friday's close IV for /NQ futures was 11.77 ( or 8% of the 52 week high).

Presently does not look like a time to sell premium.

Probably will change soon.

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