NexusFi: Find Your Edge


Home Menu

 





Selling Options on Futures?


Discussion in Options

Updated
      Top Posters
    1. looks_one ron99 with 2,221 posts (4,489 thanks)
    2. looks_two SMCJB with 346 posts (733 thanks)
    3. looks_3 kevinkdog with 341 posts (400 thanks)
    4. looks_4 myrrdin with 288 posts (408 thanks)
      Best Posters
    1. looks_one SMCJB with 2.1 thanks per post
    2. looks_two ron99 with 2 thanks per post
    3. looks_3 myrrdin with 1.4 thanks per post
    4. looks_4 kevinkdog with 1.2 thanks per post
    1. trending_up 1,951,546 views
    2. thumb_up 9,259 thanks given
    3. group 458 followers
    1. forum 7,370 posts
    2. attach_file 794 attachments




 
Search this Thread

Selling Options on Futures?

  #3061 (permalink)
 kevinkdog   is a Vendor
 
Posts: 3,647 since Jul 2012
Thanks Given: 1,890
Thanks Received: 7,338


CafeGrande View Post
^ On a related note, can you find sufficient liquidity to sell a bunch of 1-Delta (.01) options with a premium of $40? I imagine there is plenty of liquidity in ES and maybe CL if you pick common, round number strikes, but what about some of the other physical commodity markets?

I realize everyone has their own number, but let's say to cover trade research and monitoring time, commissions and provide a decent profit, a trade won't be considered unless it's $1000 in gross premium (or $2000 or $10,000 or whatever). Even with a $1000 hurdle, can you get filled on 25 options without selling at or close to the bid?


I look for deltas < .05, and > $10 premium after commissions. Right now, I have 6 positions, in different instruments, of at least 20 contracts or more.

It isn't easy to get fills sometimes, especially with quantity, but it is possible.

Follow me on Twitter Reply With Quote
Thanked by:

Can you help answer these questions
from other members on NexusFi?
Online prop firm The Funded Trader (TFT) going under?
Traders Hideout
Futures True Range Report
The Elite Circle
Are there any eval firms that allow you to sink to your …
Traders Hideout
Ninja Mobile Trader VPS (ninjamobiletrader.com)
Trading Reviews and Vendors
New Micros: Ultra 10-Year & Ultra T-Bond -- Live Now
Treasury Notes and Bonds
 
  #3062 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785


CafeGrande View Post
^ On a related note, can you find sufficient liquidity to sell a bunch of 1-Delta (.01) options with a premium of $40? I imagine there is plenty of liquidity in ES and maybe CL if you pick common, round number strikes, but what about some of the other physical commodity markets?

I realize everyone has their own number, but let's say to cover trade research and monitoring time, commissions and provide a decent profit, a trade won't be considered unless it's $1000 in gross premium (or $2000 or $10,000 or whatever). Even with a $1000 hurdle, can you get filled on 25 options without selling at or close to the bid?

Heck yes. I have done 7,000-17,000 options per year, year after year and rarely did anything over 2 delta. 48,000 the last 5 years. And I don't blindly hit the bids.

My biggest volume last year was KC.

Started this thread Reply With Quote
  #3063 (permalink)
 datahogg 
Knoxville Tennessee USA
 
Experience: Intermediate
Platform: TOS
Trading: ES, NQ, CL, /6E futures options.
Posts: 346 since Oct 2012
Thanks Given: 135
Thanks Received: 154


On the /ES sometimes you can even get filled on the ask.

Reply With Quote
  #3064 (permalink)
CafeGrande
St Paul, MN, USA
 
Posts: 200 since Jan 2014
Thanks Given: 131
Thanks Received: 207

Good information - thanks for the responses. I'm especially surprised to hear about the coffee options, because that's one of the most annoying markets for me in terms of very wide bid/asks and not much volume.

I might have to try some different order entry methods. Although I sometimes sell options < 5 delta, my typical option sale is at a higher delta and perhaps term than some of the trade ideas mentioned here. I tend to leg into things and sometimes I switch the platform over to display volatility, rather than price, and enter/adjust my orders that way. I suspect than in some of the less liquid markets and months, I'm pretty much trying to sell to the market maker, and I want that last 10 or 20 basis points of volatility, too, so the orders sit and sit...

Reply With Quote
  #3065 (permalink)
 rosho01 
London/UK
 
Experience: Intermediate
Platform: IBs ladder / Market Delta charts
Broker: IB / IQfeed
Trading: Bund
Posts: 438 since Sep 2012
Thanks Given: 260
Thanks Received: 96


CafeGrande View Post
I'm pretty much trying to sell to the market maker, and I want that last 10 or 20 basis points of volatility, too, so the orders sit and sit...

whats your strike rate / r:r (rhetorical question btw)?...........thus.......

can you afford slippage? can you lift offers/hit bids in illiquid markets or need to work both legs to have +ve expectancy?

Visit my NexusFi Trade Journal Reply With Quote
  #3066 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785

KC the last few months was not worth trading because nobody wanted to buy calls. That has recently changed with the price rise.

Most of the 2,686 KC options I sold were the Sep 2013 contracts. Dec 2013 I only did 48 contracts. Mar 2014 I only did 2 contracts.

I so miss the days where you could sell KC 300 calls and make 8% ROI.

Started this thread Reply With Quote
Thanked by:
  #3067 (permalink)
debosh2008
Moscow, Russia
 
Posts: 1 since Feb 2014
Thanks Given: 25
Thanks Received: 1

Hello, Ron!
One friend of mine gave me the link to that huge thread at BigMike's forum.

I am from Russia and we have a community of people that sells commodity options. There are basically 3 camps of option sellers:

1) sell options in opposite of expected market move (calculated on fundamental basis - like suppply and demand ratio)
2) sell option strangles (delta-neutral) on relatively neutral markets with good depth and put/call equality - I belong to this camp, strangle use less margin and you don't need to HOPE for that wishable market move.
3) volatility arbitragers - they evaluate current and potential IV on further strikes and go in calendar ratio spreads (selling High volatility and purchasing low volatiliy with delta and gamma neutral to the market.

We run a skype conference, unfortunately in Russian, so it may be quite difficalt to catch whole thing and there are lots of flood

I have account with Vision Financial Markets (some people have it in OptionExpess), stick with QST.

Please let me know if you'd like to get closer to my trading experience, thoughts about going into this industry professionally.

My skype is de_bosh2008.

With great respect,
Alex Gorbunov

Reply With Quote
Thanked by:
  #3068 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785

Hi Alex Gorbunov,

I'll pass on the offer.

Ron

Started this thread Reply With Quote
  #3069 (permalink)
 kevinkdog   is a Vendor
 
Posts: 3,647 since Jul 2012
Thanks Given: 1,890
Thanks Received: 7,338

For anyone still in the March Nat Gas calls, last week I pieced together this chart, comparing 2003 and 2014 (I updated it with through today).

Based on this chart, I bought back all my March calls, and actually went long calls. Scared out of my position, for sure.

Of course, there are a lot of reasons why 2003 is not exactly like 2014, but my account could not withstand even half of the trauma that occurred in 2003. So, I played it safe. I'm living to fight another day.

I have no idea what is in store for the next 4 trading days, but I'll bet they are interesting.

The big lesson I learned: if the ROI is too good to be true, there is a lot of risk in the position. Seller Beware!



This will almost certainly be the last time I trade March NG calls. If you see me doing it next year, please remind me that I said "never again!"



Follow me on Twitter Reply With Quote
  #3070 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,041 since Dec 2013
Thanks Given: 4,375
Thanks Received: 10,192


REPORT ON THE NATURAL GAS PRICE SPIKE OF FEBRUARY 2003
STAFF INVESTIGATING TEAM FEDERAL ENERGY REGULATORY COMMISSION JULY 23, 2003
https://www.ferc.gov/legal/maj-ord-reg/land-docs/The-Price-Spike-Report-07-23-03.pdf

Of course we know one of the big losers back in 2003 was Reliant as they had to adjust their earnings forecast based upon an $80 million trading loss.
Reliant Resources to join trading market exodus - Houston Business Journal

Reply With Quote
Thanked by:




Last Updated on July 28, 2023


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts