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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,792 / 5,734
Last Reply:23 Hours Ago (01:01 AM) Attachments:642

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Selling Options on Futures?

Old January 27th, 2014, 02:57 PM   #2991 (permalink)
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Quoting 
An added lift in the natural gas market comes on chatter that some power companies were getting squeezed, and that may be providing a new segment of buyers into the fray.

Rumor is utilities are scrambling to get their hands on physical molecules rather than financial derivs, although price action today doesn't reflect that.

Chicago/Michigan etc prices are up $1 because of the pipeline explosion

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Old January 27th, 2014, 03:07 PM   #2992 (permalink)
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ron99 View Post
NG margin going up Monday and now it is going up Tuesday too. So that is up 30% from Thursday's rate to Tuesday's rate.

ICE is going up Wednesday as well... 3rd day in a row. Haven't heard about CME

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Old January 27th, 2014, 11:25 PM   #2993 (permalink)
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As a follow up to my post 2977 I did another study using ES puts a month apart in expiration. I used a longer time frame and options that had a higher DTE.

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The results? The same surprising answer.

The Sep puts, even though they were 28 days closer to expiration, had a margin increase far more than options 28 more DTE for options with about the same premium value at the start.

The Sep 1400 puts had a premium increase less than Oct 1400 puts but the margin for the Sep 1400 went up more than the Oct 1400. So the premium and margin increase for both 1400s was about the same. But since the margin was 1/2 for the Sep you would have had on twice as many. So the hit on your account would have been twice as much if you did Sep 1400s instead of Oct 1400s.

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Old January 27th, 2014, 11:34 PM   #2994 (permalink)
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ron99 View Post
As a follow up to my post 2977 I did another study using ES puts a month apart in expiration. I used a longer time frame and options that had a higher DTE.

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The results? The same surprising answer.

The Sep puts, even though they were 28 days closer to expiration, had a margin increase far more than options 28 more DTE for options with about the same premium value at the start.

The Sep 1400 puts had a premium increase less than Oct 1400 puts but the margin for the Sep 1400 went up more than the Oct 1400. So the premium and margin increase for both 1400s was about the same. But since the margin was 1/2 for the Sep you would have had on twice as many. So the hit on your account would have been twice as much if you did Sep 1400s instead of Oct 1400s.

So from what I'm gathering - that its better to do further out DTE on ES puts (80+days are preferable to 50+ days), and then buy them back after a certain ROI? This way you get better resistance on your Margin requirements with big swings down in the S&P, and you get same premium for further OTM strike prices.

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Old January 28th, 2014, 08:16 AM   #2995 (permalink)
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ron99 View Post
As a follow up to my post 2977 I did another study using ES puts a month apart in expiration. I used a longer time frame and options that had a higher DTE.

The results? The same surprising answer.

The Sep puts, even though they were 28 days closer to expiration, had a margin increase far more than options 28 more DTE for options with about the same premium value at the start.

The Sep 1400 puts had a premium increase less than Oct 1400 puts but the margin for the Sep 1400 went up more than the Oct 1400. So the premium and margin increase for both 1400s was about the same. But since the margin was 1/2 for the Sep you would have had on twice as many. So the hit on your account would have been twice as much if you did Sep 1400s instead of Oct 1400s.

Good observation! Exactly why I have a rule of no more than 50% of my account is used for total margin.

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Old January 28th, 2014, 09:49 AM   #2996 (permalink)
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Mo111 View Post
So from what I'm gathering - that its better to do further out DTE on ES puts (80+days are preferable to 50+ days), and then buy them back after a certain ROI? This way you get better resistance on your Margin requirements with big swings down in the S&P, and you get same premium for further OTM strike prices.

In my other study I compared 35 DTE to 63 DTE. The 63s were better.

But if you put on ES puts 80+ DTE and keep them to expiration your ROI will be worse. So you need to sell at a high enough premium to allow you to exit early and still have enough net profit to keep the ROI decent.

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Old January 28th, 2014, 09:51 AM   #2997 (permalink)
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TNGreg View Post
Good observation! Exactly why I have a rule of no more than 50% of my account is used for total margin.

I used to use 50%. Got forced out too many times and suffered losses.

I now use 33% as my limit for Initial Margin.

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Old January 28th, 2014, 10:14 AM   #2998 (permalink)
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ron99 View Post
I used to use 50%. Got forced out too many times and suffered losses.

I now use 33% as my limit for Initial Margin.

Good food for thought. As I am still only on paper and have not had that happen yet, I will see if I can adjust to a safer rule.

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Old January 28th, 2014, 11:37 AM   #2999 (permalink)
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ron99 View Post
But if you put on ES puts 80+ DTE and keep them to expiration your ROI will be worse. So you need to sell at a high enough premium to allow you to exit early and still have enough net profit to keep the ROI decent.

Hi ron99,

Say you sell an option at 22.50 with 79 dte and you intend to buy to close at 5.00. Do you have any way of estimating when that might happen so you can approximate your ROI?

Or do you just monitor the ROI and exit when it's acceptable?

Another question: you gave an example of an ES1400P at 51 dte and an ES 1250P at 79 dte. Do you know what the deltas were for those options?


Thanks in advance,

Chris

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Old January 28th, 2014, 12:50 PM   #3000 (permalink)
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MGBRoadster View Post
Hi ron99,

Say you sell an option at 22.50 with 79 dte and you intend to buy to close at 5.00. Do you have any way of estimating when that might happen so you can approximate your ROI?

A way to approximate that would be to look at options with the same strike and less DTE and see about when they hit your 5.00.

Or do you just monitor the ROI and exit when it's acceptable?

I do do that.

Another question: you gave an example of an ES1400P at 51 dte and an ES 1250P at 79 dte. Do you know what the deltas were for those options?

1.04 And 0.63

Thanks in advance,

Chris

.

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