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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 12th, 2014, 09:58 AM   #2861 (permalink)
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kevinkdog View Post
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.

Hi kd, where are you extracting your option chains from....ox/api/et al?

Soz I know this has been mentioned before, thread is huge. Just trying to figure easiest, quickest, cheapest option chain extraction into excel/access.

Thks.

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Old January 12th, 2014, 10:03 AM   #2862 (permalink)
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rosho01 View Post
Hi kd, where are you extracting your option chains from....ox/api/et al?

Soz I know this has been mentioned before, thread is huge. Just trying to figure easiest, quickest, cheapest option chain extraction into excel/access.

Thks.

I manually enter the options I am interested into Excel. I then use @Dudetooth 's SPAN worksheet to get all the data.

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Old January 12th, 2014, 03:12 PM   #2863 (permalink)
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I know some of you still have some NG calls on so I'll continue to post this at least for the next few weeks.

16-Jan EIA Release EARLY Estimates.
First estimates coming in, still subject to a lot of changes.
First survey I have seen had 15 respondents and an average of -299.9, median -300
Range was -255 to -325 with standard deviation 17

Last year same week -159
5 year average same week -159

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Old January 12th, 2014, 03:39 PM   #2864 (permalink)
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ron99 View Post
I have been using this chart of mine to see how the current year's NG injection/withdrawal compares to the prior 6 years.

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SMCJB View Post
I know some of you still have some NG calls on so I'll continue to post this at least for the next few weeks.

16-Jan EIA Release EARLY Estimates.
First estimates coming in, still subject to a lot of changes.
First survey I have seen had 15 respondents and an average of -299.9, median -300
Range was -255 to -325 with standard deviation 17

Last year same week -159
5 year average same week -159


So, the early estimate for 1/16 report is a withdrawal higher than any week in the past 6 years? I guess it makes sense, based on the bad cold snap we had.

It will be interesting to see how the market reacts, assuming this big estimate is already baked into current prices.

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Old January 12th, 2014, 04:42 PM   #2865 (permalink)
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kevinkdog View Post
So, the early estimate for 1/16 report is a withdrawal higher than any week in the past 6 years? I guess it makes sense, based on the bad cold snap we had.

It will be interesting to see how the market reacts, assuming this big estimate is already baked into current prices.

The -285 last Dec was the highest in history.

The recent movement of NG prices just shows me how screwed up the futures markets have become. Inventories well below average, extreme inventory drop coming and prices drop below $4?

We are just pawns in game played by players with billions. True price discovery is gone.

I'll get off my soapbox now.

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Old January 12th, 2014, 05:19 PM   #2866 (permalink)
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Along the same lines, I just finished reading Hedge Hogs, which was recommended by SMCJB a while back-- the story of the Amaranth hedge fund which Ron and others have commented on in this thread. I recommend it to anyone wanting to know a bit more of the story. It's also an eye opener on how a few big fish were able to drive the price of a commodity in either direction-- fundamentals be damned.

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Old January 13th, 2014, 03:58 AM   #2867 (permalink)
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kevinkdog View Post

I'm still analyzing this, and results may be different for your situation, but in general it looks like you can really boost your ROI (by factor of 2+) by exiting positions early, and not waiting until expiration.

This assumes that you have more trades waiting in the wings for you to enter. Otherwise it is better to hold to expiration.

Kevin, I take it you are only basing your analysis on the initial margin, how do you account for the reduction in margin that occurs as an option approaches expiry assuming it is still far OTM. As an example:

Take NGG4 6.4C trading at 0.01 ($10) , margin requirement (OX) $48.40, days remaining till expiry 15. That gives you a 30 day return of 41.3%. That's still a good return, admittedly on a small amount. If you are not charged commission on an expired option, that saving also needs to be factored in.

I generally don't close my positions out unless I need the margin else , as you suggested.

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Old January 13th, 2014, 08:28 AM   #2868 (permalink)
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Harvard16 View Post
Kevin, I take it you are only basing your analysis on the initial margin, how do you account for the reduction in margin that occurs as an option approaches expiry assuming it is still far OTM. As an example:

Take NGG4 6.4C trading at 0.01 ($10) , margin requirement (OX) $48.40, days remaining till expiry 15. That gives you a 30 day return of 41.3%. That's still a good return, admittedly on a small amount. If you are not charged commission on an expired option, that saving also needs to be factored in.

I generally don't close my positions out unless I need the margin else , as you suggested.


What are you using for excess, and commission? I get nowhere near 41.3% monthly return.

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Old January 13th, 2014, 08:51 AM   #2869 (permalink)
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I get around 7% ROI

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delta is wrong on this, but it is for reference only

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Last edited by kevinkdog; January 13th, 2014 at 09:02 AM.
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Old January 13th, 2014, 09:57 AM   #2870 (permalink)
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I was not using a margin multiple, but since most of the ROI's here are based on multiple. my calc would be excluding brokerage:

$10/ ($48.40x3) = 6.89%/15 days till expiry x 30 days = 13.77%.

Which on straight RoR is a very worthwhile return at negligible risk. To make closing out and establishing a new trade a fair move one would need to find a comparable trade at similar risk.

If we factor in any brokerage fees as well that can have a dramatic impact. For me it depends on which broker.

With Deepdiscountrading if I let my options expire worthless there are no exit commission or exchange fees, only half up front.
With DeCarley trading, commission is up front , so that doesn't factor but also get charged exchange fees around $ 2.5 either way.

So as another example lets say we have 10 x NG 6.4C at 0.01 to buy back , that will free up $484, not a significant amount of margin, with DeCarley it would not make a difference but with DDT that would cost about $23 as opposed to letting them expire. That means to find a better home for the $484 , one would need to find a option giving better than 16.94% over a similar time frame( factoring in the 10 x exchange fees)

I'm just looking at it from a numbers point of view, I know there are times I have closed early for small money because I need the margin for other trades or just to tidy up and there is definitely a nice feeling banking profits on buying back and moving on. And each trade may have greatly varying factors and reasons to close.

Again it goes back to my original question of if you were only basing you analysis on the original margin requirements or factoring in the reduction that occurs on wasted options.

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