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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,198 / 5,728
Last Reply:December 6th, 2016 (05:26 PM) Attachments:642

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Selling Options on Futures?

Old May 29th, 2014, 11:34 AM   #3311 (permalink)
World'sWorstTrader
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Low Volatility

This low volatility is good for existing positions, but makes it difficult to add new positions. OVX is at 16.13 .
What approaches have worked for others in this low IV environment?

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Old May 29th, 2014, 12:53 PM   #3312 (permalink)
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datahogg View Post
This low volatility is good for existing positions, but makes it difficult to add new positions. OVX is at 16.13 .
What approaches have worked for others in this low IV environment?


- Wait.

- Buy options.

- Consider selling closer to the money (higher delta). If you're used to selling options with a delta of 3 or 4 (.03 or .04), I wouldn't recommend going completely out of your comfort zone and selling 20 delta options, but maybe you could double the delta and/or sell farther out in time. Watch the quantities, though, you may want to scale them back until you're comfortable with the adjusted strategy.

- Find some high IV in single name stock options.

- Take a look at what still has decent IV: coffee, lean hogs, wheat, corn, soymeal. The IV in these products is down from the recent past, but it's not at multi-year lows like crude or VIX. I'm torn on nat gas. It's quite low historically speaking, but ATM IV is still about 29 or 30%, almost 2x crude.


Last edited by CafeGrande; May 29th, 2014 at 01:01 PM.
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Old May 29th, 2014, 02:20 PM   #3313 (permalink)
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kevinkdog View Post
100% return selling options is pretty aggressive, based on my personal experience. Obviously, it can be done.


My one piece of advice: take a look at CLs history over past 2 years. Compare it to the period of 2006-2010, with regards to volatility. I wonder how well an aggressive option selling approach would have worked then?

agreed, I've doubled an account in 9.3 months. will never do that again as the volatility and risk of ruin is high. But sometimes you take a small amount of capital and swing for the fences.

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Old May 29th, 2014, 04:16 PM   #3314 (permalink)
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datahogg View Post
This low volatility is good for existing positions, but makes it difficult to add new positions. OVX is at 16.13 .
What approaches have worked for others in this low IV environment?

You can hedge volatility somewhat by adding calendars (options) into your strangles, which essentially means you are buying protection in the back month.

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Old June 1st, 2014, 09:37 AM   #3315 (permalink)
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EliteThink View Post
agreed, I've doubled an account in 9.3 months. will never do that again as the volatility and risk of ruin is high. But sometimes you take a small amount of capital and swing for the fences.

Same here, when I first started I was full of piss and vinegar. I went from 36K to 70K in 8 months, but I was an idiot. Went with coffee summer 2008, coffee calls at 180 and above. Overpositioned to the max, but it worked out well. Made about 23K in two months! Than Nat Gas calls, made like 6-8K there, had a few setbacks with soybeans, but overall eye popping gains if I hit for fences. Also comes with extreme nervousness and sleepless nights too, lol.

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Old June 4th, 2014, 05:18 PM   #3316 (permalink)
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Interesting 6E/EC Expiration

I'm short a few options on the 6E future expiring in 2 days. I've noticed some interesting activity in similar put options. As of 3pm today, 1.33 Put Options are bid $0.05 which is $63. This for an option with a Delta of 1.35% and only 2 days to expiry. I know that it is only 2 days of ROI, but the ROI on that is 38.74%.

What am I missing about the 6E? Is there a major announcement coming up that I don't know about? Why would it be bid so high, so close to expiration?

Here is the option chain that I created to follow it.

-Columns G - M are derived from SPAN files
-Column N is the real-time price from ThinkorSwim
-Column O - R are real-time prices from broker Open E Cry
-Column S is the Option Value based on TOS's price in column N
-Column U is the ROI based on TOS's price in column N
-Column V is the ROI based on the real-time bid price in column P

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Old June 4th, 2014, 05:59 PM   #3317 (permalink)
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mu2pilot View Post
I'm short a few options on the 6E future expiring in 2 days. I've noticed some interesting activity in similar put options. As of 3pm today, 1.33 Put Options are bid $0.05 which is $63. This for an option with a Delta of 1.35% and only 2 days to expiry. I know that it is only 2 days of ROI, but the ROI on that is 38.74%.

What am I missing about the 6E? Is there a major announcement coming up that I don't know about? Why would it be bid so high, so close to expiration?

I imagine the ECB meeting on Thurs and NFP on Friday.

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Old June 4th, 2014, 07:17 PM   #3318 (permalink)
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mu2pilot View Post
I'm short a few options on the 6E future expiring in 2 days. I've noticed some interesting activity in similar put options. As of 3pm today, 1.33 Put Options are bid $0.05 which is $63. This for an option with a Delta of 1.35% and only 2 days to expiry. I know that it is only 2 days of ROI, but the ROI on that is 38.74%.

What am I missing about the 6E? Is there a major announcement coming up that I don't know about? Why would it be bid so high, so close to expiration?

I am short both calls and puts. I exited a few puts at a loss today to lighten my load in front of the ECB meeting. Historically, 2-3 points of movement in 2 days is not that much. Recently, with the lower volatility, it seems like an extreme move. Don't let the big premiums fool you - a surprise ECB announcement could easily send it 2-3 points in either direction. But, it may be just as likely that the market has priced in what is generally considered to be inevitable with Euro rates.

Good luck should you try it. Stay small.

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Old June 4th, 2014, 07:29 PM   #3319 (permalink)
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kevinkdog View Post
I am short both calls and puts. I exited a few puts at a loss today to lighten my load in front of the ECB meeting. Historically, 2-3 points of movement in 2 days is not that much. Recently, with the lower volatility, it seems like an extreme move. Don't let the big premiums fool you - a surprise ECB announcement could easily send it 2-3 points in either direction. But, it may be just as likely that the market has priced in what is generally considered to be inevitable with Euro rates.

Good luck should you try it. Stay small.

With the options priced like they are, I suspected it was event related. In looking at the ECB website, it looks like they meet every 2 weeks. Is tomorrow's meeting different than the one scheduled for 6/17 & 7/3?

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Old June 4th, 2014, 07:35 PM   #3320 (permalink)
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mu2pilot View Post
With the options priced like they are, I suspected it was event related. In looking at the ECB website, it looks like they meet every 2 weeks. Is tomorrow's meeting different than the one scheduled for 6/17 & 7/3?


Just use google news with "ECB." Here's one summary: "very critical" meeting

Stocks rise after ISM data, euro down ahead of ECB meeting | Reuters

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