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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:567,812 / 5,727
Last Reply:7 Hours Ago (12:40 PM) Attachments:642

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Selling Options on Futures?

Old September 3rd, 2014, 11:35 AM   #3601 (permalink)
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kevinkdog View Post
I pay $4.07 per side per contract for ES options, commissions, exchange fee and NFA fee.

That sounds kinda high, $8.14 for a full turn? I'm sure you know that there are many brokers offering better commission rates.

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Old September 3rd, 2014, 11:44 AM   #3602 (permalink)
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mu2pilot View Post
That sounds kinda high, $8.14 for a full turn? I'm sure you know that there are many brokers offering better commission rates.

Yes, that is true. But:

1) Many times, I just let it expire, so there is no 2nd side

2) Many of the cheaper brokers don't offer SPAN margins (IB is an example). OX does on many things, but not everything. This will almost always outweigh any extra commissions.

3) Most Importantly: Many brokers, or their clearing firms, shy away from people who sell naked options, especially if you try to do any volume. They are just not friendly to that kind of trading. When I researched this last year, I eliminated many firms after asking a few pointed questions about option selling.


All things considered, I am satisfied with my choice of OX. I'm also very happy with DeCarley, who charges more than OX (unless you trade out), but has the best service I have ever experienced in 20 years of trading.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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Old September 3rd, 2014, 12:23 PM   #3603 (permalink)
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kevinkdog View Post
Yes, that is true. But:

1) Many times, I just let it expire, so there is no 2nd side

2) Many of the cheaper brokers don't offer SPAN margins (IB is an example). OX does on many things, but not everything. This will almost always outweigh any extra commissions.

3) Most Importantly: Many brokers, or their clearing firms, shy away from people who sell naked options, especially if you try to do any volume. They are just not friendly to that kind of trading. When I researched this last year, I eliminated many firms after asking a few pointed questions about option selling.


All things considered, I am satisfied with my choice of OX. I'm also very happy with DeCarley, who charges more than OX (unless you trade out), but has the best service I have ever experienced in 20 years of trading.

No disagreement on any of your points, just curious. I've also had a good experience with DeCarley although Carley has struggled with Crossland/Wedbush to open up the margins needed so that I can put my trades on. She has been successful and things are going just fine now, but it has been a challenge for her and an annoyance for me.

I'm also with DeCarley/Open E Cry and it is has been smoother sailing there.

The other important factor to choosing a broker is the financial stability of the FCM. In that light, I would rather be with IB or TOS, but their margins are prohibitively high. Gain and Wedbush are a reasonable alternative.

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Old September 4th, 2014, 06:53 PM   #3604 (permalink)
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in the money

Hi Guys,

Been a while since i posted. From the move of the Euro overnight i now have some euro options that i sold that are are expiring tomorrow and are in the money. I expect i will end up with some long euro futures contracts, is this correct?

Cheers,

bakes

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Old September 4th, 2014, 07:07 PM   #3605 (permalink)
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Bakes View Post
Hi Guys,

Been a while since i posted. From the move of the Euro overnight i now have some euro options that i sold that are are expiring tomorrow and are in the money. I expect i will end up with some long euro futures contracts, is this correct?

Cheers,

bakes

Depends on where futures are tomorrow. I believe they base it on the price at the close of the pit hours (don't quote me on that). If you are in the money at that point then you should have long futures contracts assigned sometime on Monday, likely mid-morning. I'm not sure if that is done at the exchange or the brokerage to tell you the truth, but I have had some assigned in the past.

If futures bounce back and it closes with your options being OTM, but still kind of close, you could still have them assigned if the buyer chooses to do so (had that happen once with a CL option).

Best of luck with that.

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Old September 5th, 2014, 10:48 AM   #3606 (permalink)
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Minor error in Summary Page

I just corrected the minor error in the summary page:

When your (CURRENT IM + CURRENT PREMIUM - OPENING PREMIUM) > (3 * OPENING IM), you exit your trade

For example, if I sell an option for $100 and the margin required is $500, I will have $1000 excess.

If the margin increases to $1200 and the premium is higher than $400 then the cash excess is gone and it is time to exit.

I saw the discrepancy regarding margin between the summary of this thread and another short version of this thread. I printed out the two summaries and compared with the examples and eventually figured them out. So I corrected this minor error in this summary to avoid confusion for other novice traders like me.

Cheers~


Last edited by daydayup8; September 5th, 2014 at 11:03 AM.
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Old September 5th, 2014, 11:51 AM   #3607 (permalink)
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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."

When you reply make sure you type your reply outside of the QUOTE box's. Many of your posts your reply is inside the QUOTES.

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Old September 5th, 2014, 11:54 AM   #3608 (permalink)
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daydayup8 View Post
I don't understand this, how to do that? for example, if I want to sell 1 ES put 1650 with 90 DTE, the IM will possible be $3000, if I use the 3x rule, I maybe only sell 2 at most in my 20K acct, it will be hard to have outsized returns. You are right, I am pretty new to option selling, but not very new to option. I started by day trading option buying in 2008 when I just started to trade (a very different beginning with most traders), I lost a fortunate by doing that. Now I am pretty conservative with the trading (lesson learned in a hard way). Thank you very much for the suggestions.

If I am reading this right you are saying you are prepared to risk 90% of your account on one trade? (3x2x$3k=$18k/$20k)

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Old September 5th, 2014, 12:08 PM   #3609 (permalink)
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Dudetooth View Post
If futures bounce back and it closes with your options being OTM, but still kind of close, you could still have them assigned if the buyer chooses to do so (had that happen once with a CL option).

@Dudetooth, In this case, where the option is OTM but close and you are assigned, would you not make money?

Example: You write a CL call option for a strike price of 100.00. On the day of expiry, CL closes at 99.75; it is OTM. The option is still assigned. You purchase a long position for 99.75 and sell it for 100.00. Am I missing something? (Maybe the buyer of the option is hoping that the price increases between when CL closes and you actually purchase the future contract(s)?)

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Old September 5th, 2014, 01:37 PM   #3610 (permalink)
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Believe it or not, that was exactly what I did before.

I had been doing that from last October. I traded only ES weekly options, sometimes selling call, sometimes selling put or sometimes i just short strangle. The performance was so-so since IB charged very high margin, but I was OK with that until one time, the market went against my position badly and I got margin call from IB. The position was liquidated with market order, I lost about 25% of my acct, until then I started to consider the option selling risks seriously, actually I had never heard of SPAN until I came here.

In summary, I consider myself being a bold trader before and now transferred to a more intelligent trader.

Thanks go to this Thread and all the people contribute here, esp RON!

Cheers:-)


SMCJB View Post
If I am reading this right you are saying you are prepared to risk 90% of your account on one trade? (3x2x$3k=$18k/$20k)


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