This is pretty interesting. Should work out much better than credit spreads because you now sell the highest IV and buy the lowest (closest to ATM). Instead of a credit spread where you sell the lowest and hedge with the highest...
I thought I would share how I am learning how to diversify my trading instead of being focused only on CL. I have already had winning trades in Soyabeans and Hogs for April and May. So I thought I should better understand possible trade scenario's in some of these commodities. I looked at trying to keep all variables in line and see what margin would be required. An attempt to keep the following parameters for each trade the same where probability, strikes at 20% spread of underlying, approximately 10 lots, and a target premium of $2000.00. Then to look at IV and Margin to gather some kind of better understanding of how these trades might look and work. Here are the summary tables. The first based on 60DTE and the second based on 30DTE. I welcome comments and criticisms.
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Here is a link to the full document behind these tables. This is by no means a study based on confidience intervals or statistical sampling. It is an attempt to compare a similar trade across four different commodities.
If the data is recent, the option prices look OK, but the IVs are off. Corn too low, beans too high in the 60 DTE. I wouldn't trade (or model) May hogs. They should kill that contract. Very little activity in the underlying, even less so in the options.
Try these guys for free end of day prices, imp volatility, vol skew curves and some basic volume and open interest data for futures options. I've mentioned them before. I'm a paid subscriber but I have no connection to them and receive no compensation. They're relatively new at "retail" and I just want them to stick around, because it's hard to find good, reasonably priced futures options information.
OptionsXpress might be fine for execution and their margin policy, but I've never been comfortable with their options chains, esp. with thinner contracts. Too many gaps, which is bad enough, but I'd prefer a gap to meaningless (garbage) numbers.
You have a good, systematic approach. Just make sure you're using good data. If you don't find decent candidates, wait a month or so. Like clockwork, IV in the grains will rise, at least through Jul and often into August.
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I am new to this forum, i am studying james cordier & michael gross' book on option selling and have applied for an account with options express.
Is anyone here with optionsxpress in australia ? how do you qualify to increase your trading level with this online broker to be able to sell option premium ? when my account is activated i believe i will be rated at level 1 which restricts me to buying and selling basic stock.
Hey, is anyone else having problems with OptionsXpress in regards to viewing ICE future quotes?
I want to view the coffee futures, but I can't. Here's what I was told:
"If you wish to continue to receive these quotes, please send an email to email@example.com. Please provide the last 4 digits of the account number, the account title, and that you authorize optionsxpress to provide ICE exchange quotes and that you agree to the $85 per month fee for ICE exchange quotes."
So basically, we will have to pay an additional $85 a month to OX in order to be able to trade these options, wtf!
Last edited by Zero85; April 29th, 2014 at 11:24 PM.