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Selling Options on Futures?
Started: by ron99 Views / Replies:584,491 / 5,779
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Selling Options on Futures?

  #271 (permalink)
Trading Apprentice
Toronto/Canada
 
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Okay

I have sold :
2 CL Feb 65 Puts

And
2 SI Mar 24 Puts

Initial Margin is 8984

Mat is 6165

The silver trade is a bit aggressive, will have to keep a eye on it.

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  #272 (permalink)
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jawatimur
 
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Repair of Selling put when price agains us

dear ron99,

thanks for your article about futures on options thats realy help me. i have trade futures options since february 2012.. i have some problem when price agains me.. do you have any solution or repair / adjustment strategy if the price agains our position ? because usually i am only stop my position.. thanks before.. gbu

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  #273 (permalink)
Market Wizard
Cleveland, OH
 
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Mark59 View Post
Okay

I have sold :
2 CL Feb 65 Puts

And
2 SI Mar 24 Puts

Initial Margin is 8984

Mat is 6165

The silver trade is a bit aggressive, will have to keep a eye on it.

Is that 8984 for just the SI options? At OX it is 6178 for those.

Doing a SI option 125 days out and at a .0600 delta is extremely risky. I would never do that.

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  #274 (permalink)
Market Wizard
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aayohanes View Post
dear ron99,

thanks for your article about futures on options thats realy help me. i have trade futures options since february 2012.. i have some problem when price agains me.. do you have any solution or repair / adjustment strategy if the price agains our position ? because usually i am only stop my position.. thanks before.. gbu

If it looks like the price will not recover then you just need to get out.

How risky are the positions you are putting on? What are some examples of your trades?

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  #275 (permalink)
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Futures Edge on FIO
Ron

That is for both positions , Silver trade was def to aggressive.

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  #276 (permalink)
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jawatimur
 
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Repair of Selling put when price agains us

Dear ron99,

this is my example trade on oct 12, 2012
sold CL DEC 75.5 PUT @0.14
margin 2500
price CL when i opened that trade is 91.7
yesterday when CL price is 85.90 the premium became 0.35
what should i do ?
gbu

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  #277 (permalink)
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aayohanes View Post
Dear ron99,

this is my example trade on oct 12, 2012
sold CL DEC 75.5 PUT @0.14
margin 2500
price CL when i opened that trade is 91.7
yesterday when CL price is 85.90 the premium became 0.35
what should i do ?
gbu

This is purely my obsevations on this. Price has bounced off the lows and option is now worth around 0.20
You need to ask if you think CL will drop another 10$ in less than 3 weeks. If price consolidates or rises slightly the option will quickly decline further.

I am not a fan of odd half dollar strikes such as yours. This is entirely due to liquidity, look at the open interest.

85 - 32955
80 - 48003
75.5 - 177
75 - 32059

This lack of liquidity will give you a worse fill if you have to exit in a hurry.

To answer your question on repair strategy, the ultimate defense if price makes another drop is to short the futures. If you only have a few contracts on, one futures contract would cover losses easily. Keep it on until you have made up any losses and close it out if price comes back to your entry point.

Looking at the open interest makes me think there may be a shake out push down to 85.
If it does, that would be an attractive buying area for me.
I look forward to Rons comments

Brit


Last edited by britkid99; October 24th, 2012 at 05:01 AM.
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  #278 (permalink)
Market Wizard
Cleveland, OH
 
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aayohanes View Post
Dear ron99,

this is my example trade on oct 12, 2012
sold CL DEC 75.5 PUT @0.14
margin 2500
price CL when i opened that trade is 91.7
yesterday when CL price is 85.90 the premium became 0.35
what should i do ?
gbu

Are you sure you gave us the correct info? My data provider doesn't have that option trading at 0.14 on the 12th. Was it the 22nd?

The option never traded at 0.35 yesterday. 0.31 was the high. It settled at 0.20.

0.06 loss is not anything to panic about yet. If you had/have enough excess you should be able to ride it out unless CL drops a lot more.

The 11.00 your strike is less than futures is tight but with enough excess and only 21 days to go you should be OK.

But you need to move further away in your strikes.

I agree with britkid99 that you should not trade the in between strikes. Too low volume.

For a beginner in option selling, I would not recommend selling futures to protect losses. Too easy to get run over by a price swing. Just trade out of it if it is too much pressure for you to handle.

If the margin was 2500, then you should have had 5000 excess. That should be enough excess to ride this dip out. I highly doubt CL is going under 80 in 21 days.

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  #279 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
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Favorite Futures: Options on Futures
 
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Mark59 View Post
Ron

That is for both positions , Silver trade was def to aggressive.

When you say both is that both SI options or both (all 4 contracts) for the SI and the CL?

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  #280 (permalink)
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Hi Ron

That was for all 4 Options, 2 Silver & 2 Oil.

Question;

When you budget to keep twice the Margin in reserve do you count the Maintenance Margin as well?

Thanks!
Mark

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