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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:570,153 / 5,734
Last Reply:December 9th, 2016 (01:01 AM) Attachments:642

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Selling Options on Futures?

Old February 20th, 2014, 10:15 AM   #3071 (permalink)
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EIA Natural Gas Storage Report Expectations 13-Feb-14 for week ending 6-Feb-14

The largest survey I see (38 respondents) shows
Average -259
Median -260
Range -236 to -283
Std Dev 8.7 (that's pretty high)

This week last year -131
5yr Average -133

Actual report will be available at Weekly Natural Gas Storage Report - EIA at 1030 EPT

At time of writing 9:11am EPT, NG market is down 6.5c but has already had over a 50c range TODAY. Trading as high as $6.40 (+25.1c) in the middle of the night (4am) and as low as $5.892 (-25.7c) this morning.

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Old February 20th, 2014, 01:31 PM   #3072 (permalink)
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Trades currently under consideration:

May Soybeans SK41140P = .03 delta. $75 prem. $541 margin. 2.2% ROI. Seasonals flat to bullish.
May Soybean meal SMK4350P = .03 delta. $65 prem. $338.85 margin. 2.9% ROI. Seasonals flat to bullish.
May Wheat WK4800C = .03 delta. $69 prem. $278 margin. 3.8% ROI. Seasonals bearish, long term trend bearish.
June Live Cattle LCM4116P = .03 delta. $40 prem. $112 margin. 3.2% ROI. Seasonals and LT trend bullish to flat.
May Silver SIK416P/SIK423C = .03 delta. $380 prem. $2019 margin. 3.1% ROI. Seasonals tend to go sideways next few months.
May Cocoa CCK42500P = .03 delta. $40 prem. $128 margin. 4.5% ROI. Seasonals flat to bullish. LT trend up.
May Sugar SBK422C = .03 delta. $33 prem. $64 margin. 7.4% ROI. Seasonals bearish. LT trend down
May Crude CLK475P = .01 delta. $30 prem. $111 margin. 2.8% ROI. Seasonals bullish to flat.
June Heating Oil HOM42.5P = .03 delta. $130 prem. $463 margin. 2.3% ROI. Seasonals bullish, trend up.
June Emini S&P 500 = .03 delta. $110 prem. $686 margin. 2.5% ROI. Seasonals up, LT trend up.

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Old February 20th, 2014, 01:46 PM   #3073 (permalink)
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eudamonia View Post
Trades currently under consideration:

1. May Soybeans SK41140P = .03 delta. $75 prem. $541 margin. 2.2% ROI. Seasonals flat to bullish.
2. May Soybean meal SMK4350P = .03 delta. $65 prem. $338.85 margin. 2.9% ROI. Seasonals flat to bullish.
3. May Wheat WK4800C = .03 delta. $69 prem. $278 margin. 3.8% ROI. Seasonals bearish, long term trend bearish.
4. June Live Cattle LCM4116P = .03 delta. $40 prem. $112 margin. 3.2% ROI. Seasonals and LT trend bullish to flat.
5. May Silver SIK416P/SIK423C = .03 delta. $380 prem. $2019 margin. 3.1% ROI. Seasonals tend to go sideways next few months.
6. May Cocoa CCK42500P = .03 delta. $40 prem. $128 margin. 4.5% ROI. Seasonals flat to bullish. LT trend up.
7. May Sugar SBK422C = .03 delta. $33 prem. $64 margin. 7.4% ROI. Seasonals bearish. LT trend down
8. May Crude CLK475P = .01 delta. $30 prem. $111 margin. 2.8% ROI. Seasonals bullish to flat.
9. June Heating Oil HOM42.5P = .03 delta. $130 prem. $463 margin. 2.3% ROI. Seasonals bullish, trend up.
10. June Emini S&P 500 = .03 delta. $110 prem. $686 margin. 2.5% ROI. Seasonals up, LT trend up.

My current positions, very similar to yours: 2,3,4,7,8,10
My current position, opposite to yours: 6

I am not in: 1,5,9


Good Luck!

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 February 20th, 2014, 04:25 PM   #3074 (permalink)
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ES

For the ES traders. I found this interesting. ES put options in further out months with the same premium have lower IM requirements and lower deltas. They also react better during adverse movements.

I used 1/22 to 2/3 for the study. ES futures dropped 106 in 8 trading days. All 3 contracts were 1.95 on 1/22/14. This chart shows the change to your buying power (balance-IM) over that movement. Starting balance was $100,000.

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On 2/3/14 the Feb option account had $25k buying power left. Mar $14k. April $36k.

The April option account weathered the storm better than the Febs or Marchs.

The attached spreadsheet has details and another group of 3 that started at 0.80.

Attached Files
Register to download File Type: xlsx Option Historic.xlsx (57.3 KB, 44 views)
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Old February 20th, 2014, 10:50 PM   #3075 (permalink)
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Futures Edge on FIO

Are you a NinjaTrader user?

 

eudamonia View Post
Trades currently under consideration:

May Soybeans SK41140P = .03 delta. $75 prem. $541 margin. 2.2% ROI. Seasonals flat to bullish.
May Soybean meal SMK4350P = .03 delta. $65 prem. $338.85 margin. 2.9% ROI. Seasonals flat to bullish.
May Wheat WK4800C = .03 delta. $69 prem. $278 margin. 3.8% ROI. Seasonals bearish, long term trend bearish.
June Live Cattle LCM4116P = .03 delta. $40 prem. $112 margin. 3.2% ROI. Seasonals and LT trend bullish to flat.
May Silver SIK416P/SIK423C = .03 delta. $380 prem. $2019 margin. 3.1% ROI. Seasonals tend to go sideways next few months.
May Cocoa CCK42500P = .03 delta. $40 prem. $128 margin. 4.5% ROI. Seasonals flat to bullish. LT trend up.
May Sugar SBK422C = .03 delta. $33 prem. $64 margin. 7.4% ROI. Seasonals bearish. LT trend down
May Crude CLK475P = .01 delta. $30 prem. $111 margin. 2.8% ROI. Seasonals bullish to flat.
June Heating Oil HOM42.5P = .03 delta. $130 prem. $463 margin. 2.3% ROI. Seasonals bullish, trend up.
June Emini S&P 500 = .03 delta. $110 prem. $686 margin. 2.5% ROI. Seasonals up, LT trend up.

Couple of comments:
- Have you considered a strangle in Sugar, maybe a put around 15 cents? If the dryness in Brazil continues, Sugar should have found its bottom.

- Within a strike or two, I'm in the same trades on beans and meal, although I sold them a month or two ago. While they might continue to be relatively firm, watch the inverses closely, because Brazil will soon be the source for new export business.

- Do you have a typo in the Silver strangle? A 23C by itself is about a 35 delta option.

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Old February 23rd, 2014, 10:31 PM   #3076 (permalink)
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ron99 View Post
For the ES traders. I found this interesting. ES put options in further out months with the same premium have lower IM requirements and lower deltas. They also react better during adverse movements.

I used 1/22 to 2/3 for the study. ES futures dropped 106 in 8 trading days. All 3 contracts were 1.95 on 1/22/14. This chart shows the change to your buying power (balance-IM) over that movement. Starting balance was $100,000.


On 2/3/14 the Feb option account had $25k buying power left. Mar $14k. April $36k.

The April option account weathered the storm better than the Febs or Marchs.

The attached spreadsheet has details and another group of 3 that started at 0.80.

Thanks Ron for the ES study. As someone who has some experience selling ES options for many years, I do not find your results surprising at all. It makes perfect sense that strikes in the farther months have lower IM requirements and lower deltas simply because they would be farther OTM than if you traded closer strikes using a closer month. The only difference is the longer amount of time it would take to make the same potential profit but like your study showed, you would be able to whether a sell off better by selecting the farther out months/strikes.

I see that you started your study/enter a trade on 1/22/2014. Was there a particular reason why you choose that date? Or was it purely random?

Because with a bit of market timing, you could have waited until around February 3rd or 4th to sell some deep out of the money puts after the 106 point sell off. Of course, no one can predict if ES would've sold off further or bounced back but with put premiums going higher after a significant sell off, wouldn't that be a better time to get in?

On Feb 3rd ESH14 traded as low as 1732 and ESM14 traded as low as 1725

ESH41150P closed at 0.80
ESK41050P closed at 0.75
ESM4975P closed at 0.90

Of course, I did not calculate the ROI of these but they would be very safe distance OTM.

Any thoughts? Comments?

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Old February 24th, 2014, 12:51 AM   #3077 (permalink)
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MJ888, I chose that date to show what happened under a worst case scenario. The market immediately dropping 106.

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Old February 26th, 2014, 12:09 PM   #3078 (permalink)
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MJ888 View Post
Thanks Ron for the ES study. As someone who has some experience selling ES options for many years, I do not find your results surprising at all. It makes perfect sense that strikes in the farther months have lower IM requirements and lower deltas simply because they would be farther OTM than if you traded closer strikes using a closer month. The only difference is the longer amount of time it would take to make the same potential profit but like your study showed, you would be able to whether a sell off better by selecting the farther out months/strikes.

I see that you started your study/enter a trade on 1/22/2014. Was there a particular reason why you choose that date? Or was it purely random?

Because with a bit of market timing, you could have waited until around February 3rd or 4th to sell some deep out of the money puts after the 106 point sell off. Of course, no one can predict if ES would've sold off further or bounced back but with put premiums going higher after a significant sell off, wouldn't that be a better time to get in?

On Feb 3rd ESH14 traded as low as 1732 and ESM14 traded as low as 1725

ESH41150P closed at 0.80
ESK41050P closed at 0.75
ESM4975P closed at 0.90

Of course, I did not calculate the ROI of these but they would be very safe distance OTM.

Any thoughts? Comments?


What is your exit criteria for the ES ??

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Old February 26th, 2014, 01:03 PM   #3079 (permalink)
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datahogg,

My exit criteria would be what Ron would do. I would set aside 3x cash excess and if that is breached, I would exit.

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Old February 26th, 2014, 01:05 PM   #3080 (permalink)
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MJ888 View Post
datahogg,

My exit criteria would be what Ron would do. I would set aside 3x cash excess and if that is breached, I would exit.

do you sell calls to ?

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