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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,944 / 5,728
Last Reply:16 Hours Ago (05:26 PM) Attachments:642

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Selling Options on Futures?

Old January 4th, 2014, 04:13 PM   #2801 (permalink)
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I quickly did the test.
Below the table
Data used was Tradestation CL continues contract
Data period used aug. 3th 2001 till January 2014
Total trade days 3090
If the future at some time during the life of the put gets below the strike it counts as a ‘hit’ (it may end above the strike but that is not used)
Horizontal days till expiration
Vertical difference between CL fut day open & put strike
So a put with 42 days till expiration and with strike $16 below future has a 9.5% change of becoming in the money.
Obv. this doesn't take any market situation/politics/etc in consideration, only numbers.

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Old January 4th, 2014, 06:44 PM   #2802 (permalink)
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SMCJB View Post
I agree completely.

What's a lot more interesting,, and more important, is comparing the actual withdrawal with the actual weather, imports, exports etc and hence what the 'unexpected' change in storage was. That's actually available out there as well but you have to dig for it a lot more.

Other thing to consider is, while some of these analyst estimates are the result of some sophisticated analysis and models, some of them are also very little more than throwing darts at dartboards.

Are the NG storage amounts topped up in accordance to expected short term big increases in demand eg with next weeks forecasted 'worst in 40 years cold front' reserves wld be increased? So an unexpected extreme cold/warm period is more likely to move price? Iirc from a prev ron99 post its unlikely suppliers manipulate reserves levels....?

Or is NG futures mkt more linear ie extreme cold = go long futures? (But still accounting for other fundamentals eg substitute energy type/ or speculative traits eg possible overbought/sold mkt).

Still hold some short feb calls.

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Old January 4th, 2014, 06:52 PM   #2803 (permalink)
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NG will be tricky now. Long term weather forecasts are for above normal temps. But next week's extreme cold weather will mean a huge drop in NG inventory. I don't have a clue which way NG will go from here the next two weeks.

I still hold some Feb calls. Got out of March.

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Old January 4th, 2014, 09:16 PM   #2804 (permalink)
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ron99 View Post
NG will be tricky now. Long term weather forecasts are for above normal temps. But next week's extreme cold weather will mean a huge drop in NG inventory. I don't have a clue which way NG will go from here the next two weeks.

I still hold some Feb calls. Got out of March.

Well, does it seem that buying straddles would be an appropriate strategy at this point? Nobody knows how NG is going to react to the near term weather and drawdown numbers, volatility has come down from its peak of a couple of weeks, so it has room to move back or more ... just a thought!

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Old January 5th, 2014, 09:17 AM   #2805 (permalink)
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ron99 View Post
NG will be tricky now. Long term weather forecasts are for above normal temps. But next week's extreme cold weather will mean a huge drop in NG inventory. I don't have a clue which way NG will go from here the next two weeks.

I still hold some Feb calls. Got out of March.

@ron99
Why did you close your march NG call’s?
Did you close them as you mentioned on fundamental reasons (weather).
I have a few call7 open and don’t see a reason yet to close them so would like to learn.

If I look back at the last few years this is what happened
6 out of 8 years the NG h fut went higher than it was at the first trading day of the year, the peaks where mostly end jan early feb (I assume the coldest period).
The last few years it went up max 10% with 2007 & 2008 max 25%

So in worst case if NG goes up this year 25% it will go from 4.193 (open @ jan 2th) to 5.241
Current future value is 4.299 so up 0.94225 (lets say 1 )
That would mean my Call 7 would be valued as the Call 6 is now which is $350 (assuming no time decay, but since the peaks are end jan/ early feb there will be time decay)
I see no problem with that. (a fut. above 5.25 would be a trigger something changed).
Sure margin will go up and that means ROI would not be great but we know that.
Also looking at inventory I would say it’s about the same as other years just average.
Do I make a mistake somewhere?

Do you intent to sell them later?




year 2 jan (NGh) date highest highest high % up
from 2/jan
2013 3,361 22-jan 3,633 8,1
2012 2,986 2-jan 2,986 0,0
2011 4,509 29-jan 4,823 7,0
2010 5,677 7-jan 5,95 4,8
2009 5,595 6-jan 6,11 9,2
2008 7,867 25-feb 9,36 19,0
2007 6,44 5-feb 8,035 24,8
2006 10,8 2jan 10,8 0,0


Last edited by crito; January 5th, 2014 at 09:23 AM.
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Old January 5th, 2014, 01:17 PM   #2806 (permalink)
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ron99 View Post
NG will be tricky now. Long term weather forecasts are for above normal temps. But next week's extreme cold weather will mean a huge drop in NG inventory. I don't have a clue which way NG will go from here the next two weeks.

I still hold some Feb calls. Got out of March.

Same boat, I'm holding some Feb calls, I liquidated my Mar calls (I was up 90% on them, and didn't want the margin on them to hammer me at a later date). Think sitting on the side lines looking for a opportunity might be the best play in NG right now.

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Old January 5th, 2014, 02:00 PM   #2807 (permalink)
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crito View Post
@ron99
Why did you close your march NG call’s?
Did you close them as you mentioned on fundamental reasons (weather).
I have a few call7 open and don’t see a reason yet to close them so would like to learn.

If I look back at the last few years this is what happened
6 out of 8 years the NG h fut went higher than it was at the first trading day of the year, the peaks where mostly end jan early feb (I assume the coldest period).
The last few years it went up max 10% with 2007 & 2008 max 25%

So in worst case if NG goes up this year 25% it will go from 4.193 (open @ jan 2th) to 5.241
Current future value is 4.299 so up 0.94225 (lets say 1 )
That would mean my Call 7 would be valued as the Call 6 is now which is $350 (assuming no time decay, but since the peaks are end jan/ early feb there will be time decay)
I see no problem with that. (a fut. above 5.25 would be a trigger something changed).
Sure margin will go up and that means ROI would not be great but we know that.
Also looking at inventory I would say it’s about the same as other years just average.
Do I make a mistake somewhere?

Do you intent to sell them later?




year 2 jan (NGh) date highest highest high % up
from 2/jan
2013 3,361 22-jan 3,633 8,1
2012 2,986 2-jan 2,986 0,0
2011 4,509 29-jan 4,823 7,0
2010 5,677 7-jan 5,95 4,8
2009 5,595 6-jan 6,11 9,2
2008 7,867 25-feb 9,36 19,0
2007 6,44 5-feb 8,035 24,8
2006 10,8 2jan 10,8 0,0

You didn't seem to learn anything from what happened in Dec in NG.

Go look at what Feb futures and 6 & 7 calls were in mid Nov and what they were on Dec 23rd.


Last edited by ron99; January 5th, 2014 at 03:19 PM. Reason: Had wrong month for the IM
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Old January 5th, 2014, 02:11 PM   #2808 (permalink)
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rosho01 View Post
Are the NG storage amounts topped up in accordance to expected short term big increases in demand eg with next weeks forecasted 'worst in 40 years cold front' reserves wld be increased?

Storage is filled in the summer. What we have now is what we have. It will either be enough or it won't. Hence the volatility in the March (last withdrawal month) - April (first injection month for next year) spread.

rosho01 View Post
So an unexpected extreme cold/warm period is more likely to move price? Iirc from a prev ron99 post its unlikely suppliers manipulate reserves levels....?

Or is NG futures mkt more linear ie extreme cold = go long futures? (But still accounting for other fundamentals eg substitute energy type/ or speculative traits eg possible overbought/sold mkt).

Still hold some short feb calls.

Obviously the colder it gets, the greater demand will be. Question is how much of this is already priced into the market? As Ron said current forecasts are for a blast of much below tempretures fllowed by some warmer than normal temps. Sorry not much help, but if I knew I knew the answer I'd be sitting on a beach somewhere.

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Old January 5th, 2014, 03:02 PM   #2809 (permalink)
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ron99 View Post
You didn't seem to learn anything from what happened in Dec in NG.

Go look at what Feb futures and 6 & 7 calls were in mid Nov and what they were on Dec 23rd.

BTW the Feb 6 SPAN IM was 75 on 11/26 and 587 on 12/23 on a .900 move in futures.

feb call 6 was $450 @ dec 23. As mentioned i estimate the call 7 could go to $350 if the fut goes up 1 point, with some vola dif & timing diff that could as well be $450.
bottom line, i don's see your point, yes they rise in value, but for me $450 is not a big problem. perhaps we trade these different.
Perhaps I'm willing to let my losses run a bit further because I believe in the numbers.

I sold mine for $150, and i'm not going to buy them back when they double in value. if i remember correctly you mentioned the same, at these low premiums you don't use a 200% rule.
Also we know NG has high volaltity at this time (which is the reason you can sell these calls in the first place).

Just curious if you just sold yours recently or that you had yours for a while in which case it may make more sense to buy them back with some profit and wait for a better deal.

ib margin for C6 is $560 and for the C7 its $250 so it will roughly double in value on a 1 point move.

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Old January 6th, 2014, 03:48 PM   #2810 (permalink)
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Running Out of NG


As a holder of short NG calls, this scares me a lot:

Natural gas company Dominion East Ohio Gas asks Ohio customers to conserve - Story



It is also -1 F right now where I live, so I am cold. Cold and scared.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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