Thanks for starting this thread. I sell options in volume on futures. I have some excellent months but one bad month can wipe out the good ones and more. You say u sell OTM far, well, may be I am bit greedy since I sell them not too far and expiring in 30 days, so the delta is high and can explode with the High volatility on Ags, FX, silver...
If you sell far out of the money, how do u end up with high ROI? Controlling risk and adjusting positions on days where euro ranging 200 pips can be difficult. Add to that they are traded 3 sessions and each session has its trend, I end up with hundreds of dollars on commissions on some days.
Well, would like to know more how you control risk, do u use tools like OV?
Hope all is well in OH.
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Another point is that I am usually in at least 5 or more commodities. I also try to sell calls in some commodities and sell puts in others. If all of the markets were to move in the same direction then you aren't losing money on every position.
In flat market I will sell both puts and calls in the same commodity, a strangle. Profits on those are much better because margin is less for a strangle than if you held the positions separately. Sometimes it allows you to put one side of the strangle on for very little or free.
Right now if you have on a Sep 1800 Gold call, you can add a 1350 put for $57 of additional margin. Whereas a 1350 put by itself is 385 margin.
You must also watch seasonal tendencies of markets. Gold tends to increase in the fall, so I usually don't sell gold calls for the fall. Oil usually goes up in the spring.
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If you sold a Oct 73 oil put and then bought a lower strike like 70 put , that is a covered put. The 73 yesterday settled at .18 and the 70 at .11. So .07 or $70 is the max profit minus fees. Your maximum risk is 73-70 or 3,000 minus $70 = $2930 vs almost unlimited on the 73 naked.
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Been there done that. But a lot less lately than when I started.
You get the high ROI because the margin on the far OTM options is much lower than closer to ITM options. And after you put them on the closer they get to expiration the margin drops further so you can add more positions.
I mostly put on positions and leave them on. I never daily adjust them. That is what the excess cash is for.
One risk control I use is to stay away from commodities that are currently volatile. Like grains right now. But I will sell options in grains in the northern winter. But mostly it is staying far OTM.
What is OV?
Send some cool Canadian air down here. We're baking.
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I have never sold options on futures myself, but there's a professional trader named Max Ansbacher who used to sell options on the S&P in a managed account / hedge fund type of vehicle.I'm not sure if he's still managing money. If I recall correctly, he would sell OTM puts and calls, taking a directional bias based on his analysis of the market. He would usually sell them with 5-6 weeks left to go, right before the time decay really starts kicks in. He would ride them all the way down to expiration. I know he's written books about this many years ago (20-30 years ago).
The returns I remember from his program were steady but he got nailed a couple of times for bigger losses (in the area of 10% to 20% in a single month). Like I said I don't know whether he's still managing money or whether he got blown out but he had been selling options for many, many years.
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