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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,414 / 5,727
Last Reply:December 2nd, 2016 (12:40 PM) Attachments:642

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Selling Options on Futures?

Old January 13th, 2014, 10:05 AM   #2871 (permalink)
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Harvard16 View Post
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.

I am basing it on the original margin requirements, since I keep that amount (plus excess) tied up for the whole trade duration. I find this keeps me out of trouble, where using freed up margin to generate new trades got me into a bit of trouble back in December.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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Old January 13th, 2014, 10:24 AM   #2872 (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.

Demand was through the roof and cash prices went crazy last weekend. (Jan 3-7). Chicago traded $13.74 for the weekend block (Balance Month now $4.40), Algonquin/Boston traded $35 for last Tuesday ($14.5 BalMo) and New Jersey traded over $40 ($4.80 Balmo).


Last edited by SMCJB; January 13th, 2014 at 10:52 AM. Reason: Can't SPELL!
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Old January 13th, 2014, 10:31 AM   #2873 (permalink)
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ron99 View Post
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.

Very difficult to know but I suspect that a large part of last week's sell off was caused (or at least started) by the enormous commodity index rolls taking place. I have seen estimates ranging from 35,000 to 100,000 contracts of NG selling/rebalancing.

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Old January 13th, 2014, 11:07 AM   #2874 (permalink)
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SMCJB View Post
Very difficult to know but I suspect that a large part of last week's sell off was caused (or at least started) by the enormous commodity index rolls taking place. I have seen estimates ranging from 35,000 to 100,000 contracts of NG selling/rebalancing.

If the indexes started rolling the 5th trading day of the month then OI is down 29k so far for those days. But that means that shorts also got out on the drop.


Quoting 
NEW YORK, Jan 8 (Reuters) - Brent crude oil will see nearly $3 billion in fresh buying and gold more than $1 billion from the annual rebalancing of the world's two largest commodity indexes beginning Wednesday, a spokesperson for the indexes said.
Allocations toward U.S. crude oil will fall almost $3 billion while natural gas takes a cut of nearly $1.5 billion under the changes to occur over five business days at the Standard & Poors Goldman Sachs Commodity Index and the Dow Jones-UBS Commodity Index.

Reweightings to start Wed and occur over 5-business day cycle

COMMODITIES-Index rebalance to boost Brent by $3 bln, gold $1 bln | Reuters

I see that the S&P Dow Jones Commodity Indices roll on the 4th business day of Jan.

If index rolls are moving the market then they are allowed to have too many positions.


Last edited by ron99; January 13th, 2014 at 03:29 PM.
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Old January 13th, 2014, 12:02 PM   #2875 (permalink)
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ron99 View Post
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?

Maybe somebody out there is listening to you!

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Old January 13th, 2014, 12:39 PM   #2876 (permalink)
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SMCJB View Post
Hey Brit I think you might have something off here

The $7 spread is H4-Z4 but Mar14 expires in about 50days on 20-Feb not in 8 months.

If you meant Mar15, then Z14-H15 spread is less than $2.50, but Z4 but does expire in just under 11 months.

The spread has reduced from 7.00 to 4.50 and I have closed out the position for $2500 per spread profit.
The spread tested 4.00 twice but has held and I think it may widen again if CL gets a decent pullback.
I may consider re-entering if it gets back to 6.00 ish.

Brit

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Old January 13th, 2014, 01:59 PM   #2877 (permalink)
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britkid99 View Post
The spread has reduced from 7.00 to 4.50 and I have closed out the position for $2500 per spread profit.
The spread tested 4.00 twice but has held and I think it may widen again if CL gets a decent pullback.
I may consider re-entering if it gets back to 6.00 ish.

Brit

Thatís nicely done. I read your post alerting of the trade but since I have never done a spread before and also was still reeling from NG hit, I didnít bite.

By any chance are you monitoring the Heating Oil Feb-Apr 2014 spread which was up to 0.0379 today? Last January it went on to touch 0.06.

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Old January 13th, 2014, 02:01 PM   #2878 (permalink)
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britkid99 View Post
The spread has reduced from 7.00 to 4.50 and I have closed out the position for $2500 per spread profit.
The spread tested 4.00 twice but has held and I think it may widen again if CL gets a decent pullback.
I may consider re-entering if it gets back to 6.00 ish.

Brit

Great trade

Edit:
Btw did you chart up the mar/dec13, 12, 11 spread to see how they reacted in the past? I am remote so cannot access the charts, but you need to be very cautious with these spreads as the market can flip contango to backwardation in a day and vice versa, with no warning, and even with v little happening in the front month!

I used to trade brent and wti cal spread futures and they were supposedly mean reverting (crude was far from though) but that trade blew a few years ago, and this was across white, red, green futures months. Mar/Jun/Sep/Dec mths were more volatile than others and often deviated away from the spreads trends either side. Just my 2 cents ie go careful!


Last edited by rosho01; January 13th, 2014 at 02:30 PM.
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Old January 13th, 2014, 02:39 PM   #2879 (permalink)
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Guys, one reason this thread has become so many pages is that sometimes we get off the topic (OT) of selling options on futures. I am just as guilty as others.

A new person coming here could say, "I don't want to read 288 pages" and miss out on good info.

Also your OT subject may be missed by someone who could use that info but who doesn't come here because they don't sell options on futures.

Check to see if your OT post could fit into another thread or if not, start a new thread in the appropriate folder.

Let's work together and keep the posts on topic. I promise to stay off my soapbox and stay on topic. Call me out if I don't.

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Old January 13th, 2014, 05:06 PM   #2880 (permalink)
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MLK holiday schedule pdf

Most things closed Monday. ES & NYMEX & COMEX half days.

Are these helpful or does everyone have access to this info somewhere else?

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