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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,918 / 5,728
Last Reply:14 Hours Ago (05:26 PM) Attachments:642

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Selling Options on Futures?

Old June 8th, 2014, 10:10 AM   #3361 (permalink)
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I'm reminded of the old saying "don't confuse brains with a bull market."

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Old June 8th, 2014, 10:53 AM   #3362 (permalink)
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ron99 View Post
If your expected ROI on the RB is only .43% then you surely can find something else that will get you a higher return than that. That is what I am doing, dropping those with low returns left on them and moving on.

I agree. But sometimes, it is better to wait a couple days for a 4% ROI than to quickly replace it with a 1.5-2% ROI.

As I said, I only recently (the past 30-45 days) got comfortable with a fully invested account. I'm now beginning the next level of account management where more active trading is involved.

I'm getting there.

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Old June 8th, 2014, 10:59 AM   #3363 (permalink)
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mu2pilot View Post
I have yet to include a strict diversification component to my trading..... To accomplish this [at least at the current time], I've had to go heavy in energy futures, CL, NG, RB, HO, etc. .....

Maybe stating the obvious here but CL, RB, HO, BZ etc (but not NG) are all highly correlated. Maybe something to consider.

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Old June 8th, 2014, 10:59 AM   #3364 (permalink)
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Zero85
ROI isn't everything. I like making money, pure and simple. In my opinion, the S&P is the most stable out there right now. Coffee, grains, metals. Hell no!!!! Those are widow makers my friend.


Zero85
I made a mini fortune in Feb selling Nat Gas calls with 2 days until expiration.


kevinkdog View Post
Cognitive dissonance

+1.
Mar NG Calls is the ultimate Widow Maker!

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Old June 8th, 2014, 11:08 AM   #3365 (permalink)
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Futures Edge on FIO

SMCJB View Post
Maybe stating the obvious here but CL, RB, HO, BZ etc (but not NG) are all highly correlated. Maybe something to consider.

Thanks SMCJB and yes, I am aware of their correlation and alluded to that in my post.

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Old June 8th, 2014, 11:45 AM   #3366 (permalink)
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Three viewpoints:

It's cognitive dissonance when you lose. See "The Human Condition" by God, Pacha Mama or Zeus.
It's knowing when to break your rules when you win. See "Market Wizards" by Schwager.
It's luck. See "Fooled by Randomness" by Taleb.

The image below is cash Henry Hub NG from expiration week in 2003. This is what kept me out of selling "sure thing" calls with well over 100% IV and just a few days to expiration in 2014. I'm probably not the only one who kept pulling up this chart to see how bad things could get.

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Selling Options on Futures?-ng-cash-2003.png  

Last edited by CafeGrande; June 8th, 2014 at 11:57 AM.
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Old June 8th, 2014, 11:45 AM   #3367 (permalink)
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Old June 9th, 2014, 05:46 PM   #3368 (permalink)
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kevinkdog View Post
Even with the low initial ROI, the way ES has been going up, you can sell a 2% ROI and then a few weeks later buy it back at a price that yields a 5+% ROI.


But still, I think a lot of people will be wiped out if and when volatility suddenly spikes...

I'm confused. How are you calculating ROI?

My understanding:

You start with a ROI of 2% -- for example, you put up $1000 margin to well a short option for $20
Then, a few weeks later, the margin requirement drops to $300 and you can buy your short option back for $5. So, now your ROI is $15/$300 = 5%

Is that the way you are calculating ROI?

Thanks,
Randy

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Old June 9th, 2014, 05:49 PM   #3369 (permalink)
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ron99 View Post
If your expected ROI on the RB is only .43% then you surely can find something else that will get you a higher return than that. That is what I am doing, dropping those with low returns left on them and moving on.

Hmmm, I thought I read somewhere back in these 300+ pages of this thread that you hold to expiration. Did you change the way you trade?

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Old June 9th, 2014, 06:00 PM   #3370 (permalink)
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rrvb View Post
Hmmm, I thought I read somewhere back in these 300+ pages of this thread that you hold to expiration. Did you change the way you trade?

Yes. Found that ROI was greater if you exited early. Depends on if futures are going your way.

My spreadsheet calculates the beginning ROI and the ROI if I exited today. If futures aren't moving against you, you can sometimes make double the ROI by exiting early vs riding to expiration.


Last edited by ron99; June 9th, 2014 at 06:11 PM.
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