Selling Options on Futures?

September 2nd, 2014, 09:55 PM

daydayup8

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.

September 2nd, 2014, 09:57 PM

CafeGrande

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.

September 2nd, 2014, 11:32 PM

datahogg

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.

September 3rd, 2014, 12:02 AM

k20a

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.

September 3rd, 2014, 05:41 AM

kevinkdog

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:

Selling Options on Futures?

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

A margin-premium ratio tells you nothing about risk. The delta does that.

ron99

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.

September 3rd, 2014, 09:03 AM

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.

September 3rd, 2014, 09:12 AM

daydayup8

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.

kevinkdog · September 3rd, 2014, 09:13 AM

daydayup8

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%.

September 3rd, 2014, 09:50 AM

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

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%.

kevinkdog · September 3rd, 2014, 10:12 AM

daydayup8

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.

Selling Options on Futures?

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Selling Options on Futures?