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Selling Options on Futures?
Started: by ron99 Views / Replies:583,655 / 5,777
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Selling Options on Futures?

  #3591 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
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Favorite Futures: Options on Futures
 
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daydayup8 View Post
I am not familiar the post style yet, my reply can't even be posted. "
The message you have entered is too short. Please lengthen your message to at least 1 characters."

Edit: IB is a great broker with a lot of good tools, I have been with them since 2008. The only reason I leave is because the margin issue with option selling.

Edit: I have about 10 books about option greeks and strategies and I read most of them, but they are all for option buying, Cordier's book is the first and only one about option selling. His book is by far the best:-)

I would highly recommend not being with IB for a new option seller.

#1 is the high margin requirements and the market exit margin calls. You don't need that hanging over your head as a new trader.

Do the basic selling techniques for a while before you move to the more advanced stuff. If ever. They are not needed to sell options.

Getting bang for the buck is important to the strategy and needs to be watched. You can't get any bang for the buck at IB.

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  #3592 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
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Favorite Futures: Options on Futures
 
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CafeGrande View Post
I think the Cordier book is pretty good (it also doesn't have a lot of competition). If I recall,

(1) a lot of his examples brought in $300 to $700 per option in credit, so they were probably less than 20% out of the money and more than 20 delta.

This is totally wrong. I had an account with him. He never traded >20 delta. He went further out DTE to have premium and be far OTM.

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  #3593 (permalink)
Trading Apprentice
TPE, TW
 
Futures Experience: Beginner
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datahogg View Post
A naked put with a delta of 0.25 is playing with fire. Also a weekly put with a delta of 0.25 is playing with a nuclear bomb. I monitor Ron99's exit point and also one used probably by lots of others. If I sell $400.00 of premium, and my losses reach $800.00 for this posiiton (independent of others), then I close the position. This is very easy to monitor. Wish you the best of luck.

If selling a weekly put with delta of 0.25 is a nuclear bomb then perhaps we should be BUYING those nuclear bombs to make explosive $$$ ? It's all in how the trader plays & manages them, don't put blame on the instruments.

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  #3594 (permalink)
Trading for Fun
St Paul, MN, USA
 
Futures Experience: Advanced
Platform: Abacus
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k20a View Post
If selling a weekly put with delta of 0.25 is a nuclear bomb then perhaps we should be BUYING those nuclear bombs to make explosive $$$ ? It's all in how the trader plays & manages them, don't put blame on the instruments.

Right. Under the 'no free lunch' principle, if you had enough money and patience to keep buying those, over a long horizon, you should do as well as the seller.

That's part of Taleb's theory, although he/his former employees do it with well out of the money options. If I recall, he believes way OTM options are systematically under-priced so he expects to come out ahead.

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  #3595 (permalink)
Trading for Fun
Lancashire UK
 
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Futures Edge on FIO

Which products do you trade?

 

kevinkdog View Post
FWIW, my ratio is 5.3 over approx 340 trades over the last year. I have no idea if this is good or bad.

I try to follow Ron's advice from here: https://futures.io/options-cfd-trading/12309-selling-options-futures-233.html#post366842


ron99 View Post
A ratio over 5:1 means your ROI is low. A 2:1 ratio means good ROI.

Mine's about 4.4 since June 2013.

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  #3596 (permalink)
Elite Member
tennessee/USA
 
Futures Experience: Intermediate
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First Selling since Feb 2014

Plan to sell ES 1580 exp Dec 19, with delta=0.0307. Since I am very familiar with ES, start with ES first.
Any suggestions, Ron? other crew here? IB with IM=$2363, MM=$1890. I will start to use OX today, not sure the margin, I guess it will be much lower. Thanks.


Last edited by daydayup8; September 3rd, 2014 at 10:13 AM.
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  #3597 (permalink)
Market Wizard
Cleveland, OH
 
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daydayup8 View Post
Plan to sell ES 1580 exp Dec 19, with delta=0.0307. Since I am very familiar with ES, start with ES first.
Any suggestions, Ron? other crew here? IB with IM=$2353, MM=$18xx. I will start to use OX today, not sure the margin, I guess it will be much lower. Thanks.

Those are fine. IM is 782.

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  #3598 (permalink)
Elite Member
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daydayup8 View Post
Plan to sell ES 1580 exp Dec 19, with delta=0.0307. Since I am very familiar with ES, start with ES first.
Any suggestions, Ron? other crew here? IB with IM=$2353, MM=$18xx. I will start to use OX today, not sure the margin, I guess it will be much lower. Thanks.

With OX, margin will be $782. Your ROI, based on 3x margin requirement, will be 1.99%.

I counted 10 other potential options with a higher ROI, and a lower delta. 1560-1630 November expirations, ROI of 2.0% - 2.2%.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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  #3599 (permalink)
Elite Member
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STO 2 @$2.00exp Nov 2014, not filled yet, what is that $1.14 other fees except commission? can that be waived Kevin?

Edit: any potential trading alerts, guys? I want to take a look, thanks :-)


kevinkdog View Post
With OX, margin will be $782. Your ROI, based on 3x margin requirement, will be 1.99%.

I counted 10 other potential options with a higher ROI, and a lower delta. 1560-1630 November expirations, ROI of 2.0% - 2.2%.



Last edited by daydayup8; September 3rd, 2014 at 11:07 AM.
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  #3600 (permalink)
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daydayup8 View Post
STO 2 @$2.00exp Nov 2014, not filled yet, what is that $1.14 other fees except commission? can that be waived Kevin?

Edit: any potential trading alerts, guys? I want to take a look, thanks :-)


I pay $4.07 per side per contract for ES options, commissions, exchange fee and NFA fee.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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