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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,629 / 5,727
Last Reply:December 2nd, 2016 (12:40 PM) Attachments:642

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Selling Options on Futures?

Old August 26th, 2014, 10:20 PM   #3561 (permalink)
Trading for Fun
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daydayup8 View Post
MJ888, how much capital did you put down to open the acct with OX that they granted you with this good commission rate? I am wondering if I open an 20k acct with them, they don't even consider to lower the commission for me. Any inputs will be appreciated.

ddu

When I opened my account with OX, commissions were not at $3.50 but I was able to have it lowered by negotiating with them. I have since closed my account at OX and moved my commodities options selling to DeCarley. Like Ron said, it is not the cheapest but the service and lower margin requirements more than makes up the difference.

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Old August 26th, 2014, 11:19 PM   #3562 (permalink)
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jtrade View Post
'Trying to understand how many futures contracts would protect the position, although I realise this is dynamic.

JTrade,
Often you will see CL break higher or lower, generally, this is when vol and margin will increase. It does not mean a short strike is threatened but it is often a time when I trade futures for hedging and extra profit if the market sees fit. I find the answer to your question is one of distance from strikes but generally If the market is $5 away from my short strikes and breaking low or higher I will trade 3 future contracts separately as the market moves in the theatening direction for 15 to 20 short strike contracts. So roughly I future contract for 10 option contracts when price is greater that $5 away from the short strike. But as you said this is rough and I am still learning to refine what I do.
Cheers,
BlueRoo

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Old August 27th, 2014, 05:08 AM   #3563 (permalink)
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BlueRoo View Post
JTrade,
Often you will see CL break higher or lower, generally, this is when vol and margin will increase. It does not mean a short strike is threatened but it is often a time when I trade futures for hedging and extra profit if the market sees fit. I find the answer to your question is one of distance from strikes but generally If the market is $5 away from my short strikes and breaking low or higher I will trade 3 future contracts separately as the market moves in the theatening direction for 15 to 20 short strike contracts. So roughly I future contract for 10 option contracts when price is greater that $5 away from the short strike. But as you said this is rough and I am still learning to refine what I do.
Cheers,
BlueRoo

Thanks, BlueRoo. I realise that the best way to learn is to "Just Do It", so intend to start next week if I can find a suitable trade.

I had figured that if an option ever got as far as being ITM, say getting trapped in a "CL call war disaster scenario" then the delta must be 1, but looking at my Quikstrike trial (started yesterday), I see that November CL options ATM have deltas of around 0.5, ie. in such a worst case scenario, 1 long future covers 2 short options & far less long futures are needed as you describe in your more realistic scenario.

It's a long time since I last sold a futures option & clearly my understanding is seriously deficient, so reaching for the dreaded McMillan now....

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Old August 27th, 2014, 05:47 AM   #3564 (permalink)
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So using Quiktrade to build a short Dec CL strangle 25 strikes or so OTM yields this :

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Deltas are >0.03, but this threshold is "not applicable" to CL.

Would any of the experienced FOP writers consider this trade & if not, why not, pls !?

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Old August 27th, 2014, 08:41 AM   #3565 (permalink)
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Are you a NinjaTrader user?

 
Do you still use some tools from OX? I just opened one small acct $8k with them yesterday (I only used Scottrade for short time and IB for a few years before) to restart the option selling, since I once got margin call from IB before, I will use the small acct to test the strategy I learn from here so far, hope I can gain back some confidence.
I heard DeCarley is good, I plan to move my IRA with them later if I do good in my OX acct. I think OX may have more tools that is good for options, not sure though.

(I will close my acct at IB, they charge $10 monthly if you generate commission less than $10 a month, if your balance<2000, they will charge additional $10 a month for maintenance fee. I called OX, they won't charge all of this, so, I prefer to have an acct with them if they have some good tools.The margin is much better compared with IB even still not the best:-).



MJ888 View Post
When I opened my account with OX, commissions were not at $3.50 but I was able to have it lowered by negotiating with them. I have since closed my account at OX and moved my commodities options selling to DeCarley. Like Ron said, it is not the cheapest but the service and lower margin requirements more than makes up the difference.



Last edited by daydayup8; August 27th, 2014 at 10:16 AM.
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Old August 27th, 2014, 10:38 AM   #3566 (permalink)
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Ron, so you used ($12.88/270) instead of (12.88/810) because you think 1000 is very far OTM, you don't leave excess with this position?

also, can any body teach me how to write in color? I use Google Chrome, I did not find the tool to mark the words in color.


ron99 View Post
I tried something a little different the last month.

On 3/19 I sold 5 ESm3 1000p options for 0.50 or $25 in one of my very low risk IRA accounts. ES was 1542 that day. Delta was .0040. Very low. They were very far OTM (542). 95 DTE

I immediately placed a GTC order to buy them back at 0.10 or $5. Today 2 of them traded.

So I held those 2 for 24 days.

Per contract.
3/19 IM 128 excess 256 If kept to expiration 1.8% monthly ROI. Or 3.4% real ROI per month. Decent but not that great.
4/12 IM 52 excess 104

So if you average the 384 IM + excess when i put them on and the 156 IM + excess when I bought them back you get an average of 270 IM + excess held for that position for 24 days.

I netted 12.88 each. $12.88 / 270 = 4.8% ROI for 24 days or 6.0% for 30 days. That's a real good ROI for something that low risk.

Ron,
Of course ES went 40 points in my favor so that shortened the time held. But even if I held them 30 days the 4.8% ROI for a month is very good.

I'm sure you could move to a higher strike and do as well. You just wouldn't want to move too high because options about 95 DTE are more volatile since they are closer to ITM.

Some traders in this thread have been selling and then buying back before expiration. I wondered the ROI of that and paying another set of fees vs riding to expiration. It looks good to me. Thanks for teaching me something new.

I'm sure my brokers will be happen to get a lot more commissions.


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Old August 27th, 2014, 10:57 AM   #3567 (permalink)
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daydayup8 View Post
Ron, so you used ($12.88/270) instead of (12.88/810) because you think 1000 is very far OTM, you don't leave excess with this position?

also, can any body teach me how to write in color? I use Google Chrome, I did not find the tool to mark the words in color.

The 270 includes excess.

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Old August 27th, 2014, 11:13 AM   #3568 (permalink)
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I read two more times the original post and eventually understood 270 IM+ excess means 270 (IM+excess). https://futures.io/images/smilies/animated/becky.gif


ron99 View Post
The 270 includes excess.


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Old August 27th, 2014, 11:24 AM   #3569 (permalink)
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So Ron, what was that one loss? did you sell GC put and cover it with loss in your IRA?

Thanks.


ron99 View Post
Options with a .0500 delta are just too risky. Ask anybody who had puts with a delta far less than that before Friday.

Besides somebody is manipulating the GC market we have no clue what they will do next. Better to be safe than sorry. We were at 1600 15 days ago so saying we can't get back above 1500 is something I can't agree with. We already traded above 1400 today.

I agree with
But that is assuming volatility goes down. We don't know that. I'm thinking the next 1.5 months will be very volatile.

I am a low risk trader. Yesterday were the first short options that I had to bail at a loss in my IRA accounts since Sep 2011. I enjoy going 18 months without a loser. So what you are suggesting doesn't match what I do. But if you are OK with it then go ahead.

OT I'm curious. What Hawaii time do you get up and start trading?


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Old August 27th, 2014, 11:31 AM   #3570 (permalink)
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daydayup8 View Post
So Ron, what was that one loss? did you sell GC put and cover it with loss in your IRA?

Thanks.

yes

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