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Selling Options on Futures?
Started: by ron99 Views / Replies:585,057 / 5,780
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Selling Options on Futures?

  #3701 (permalink)
Trading for Fun
St Paul, MN, USA
 
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Dudetooth View Post
Jenny,

SPAN is updated by CME around 10:30am, 12pm, 4pm and the settlement SPAN usually comes out around 7pm. Most brokerages, like OX, will use the most recent SPAN when they give you your margin requirements on the webpage, though it could be a little delayed. You should be able to see what your margin looks like tonight to help you make your decision.

That's interesting. I knew FCMs could increase margins whenever they felt like it, but I thought that was based solely on their own risk models (SPAN+ for lack of a better term). I did not know the exchanges had two or three intra-day official updates.

In my experience, even the larger FCMs vary quite a bit in the level of detail they provide for intra-day and end of day margins; I suspect if someone has an account with a small/less technologically sophisticated FCM, they might only have access to end of day net margin by product (not by contract).

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  #3702 (permalink)
Trading Apprentice
San Diego, CA
 
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CL is down +3% today. I'm trying to understand why, but I'm not seeing much from my normal newsfeeds (yahoo, marketwatch, google news, tos). Can't be because its the last day of the month can it? Where is a good source for real-time news on commodities?

Seems like a good time to enter a trade as vol should be up (but I might be naive)

Thanks

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  #3703 (permalink)
Market Wizard
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CafeGrande View Post
That's interesting. I knew FCMs could increase margins whenever they felt like it, but I thought that was based solely on their own risk models (SPAN+ for lack of a better term). I did not know the exchanges had two or three intra-day official updates.

Couple of points here...
Normally the exchanges will advise of margin increases a day (or more) in advance, so you know it's happening. But in times of high volatility they can and do not only increase them intra-day but also increase them several times as @Dudetooth mentions. I'm not sure what the exact rules are on this but I believe the exchanges can (and do) force clearing firms to post more margin intraday. I assume that clearers can in turn pass that on to clients but do not know whether/how often that happens.

CafeGrande View Post
In my experience, even the larger FCMs vary quite a bit in the level of detail they provide for intra-day and end of day margins; I suspect if someone has an account with a small/less technologically sophisticated FCM, they might only have access to end of day net margin by product (not by contract).

Not only do intra-day limits vary by clearer but at many clearers they vary by client as well. A proven successful trader will probably be given high intra-day limits than a newer trader.

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  #3704 (permalink)
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dbh21 View Post
CL is down +3% today. I'm trying to understand why, but I'm not seeing much from my normal newsfeeds (yahoo, marketwatch, google news, tos). Can't be because its the last day of the month can it? Where is a good source for real-time news on commodities?

Seems like a good time to enter a trade as vol should be up (but I might be naive)

Thanks

Sell-off like this is scary, I looked at the chart for the past three years and found it not unusual. Just need to put more for margin.

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  #3705 (permalink)
Market Wizard
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Futures Edge on FIO

Which products do you trade?

 
Back in Sep 2011 Gold futures dropped over 200 in 3 days. Painful for many option sellers including me.

Well now we know why. A large spec unloaded positions equal to 10% of the market!


Quoting 
Shak briefly won fame in early 2011 when SHK liquidated a gold trade spread trade - with a notional value of some $850 million - that caused tremors in the gold market. Open interest in U.S. gold futures fell by the most on record as he closed out positions equivalent to a 10th of the market.

No bluff: Lifetime ban sought against poker player

EDIT. This was the 1/24/11 trade not Sep 2011. OI for all GC futures contracts dropped 81,752 in one day. 14%. Surprisingly futures were up 3.50 that day.

Somebody else screwed us in Sep 2011.


Last edited by ron99; October 1st, 2014 at 07:44 PM.
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  #3706 (permalink)
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ron99 View Post

Somebody else screwed us in Sep 2011.

Probably some combination of Greece, Super Mario & the Angelas, and the U.S. Congress, i.e. the US debt ceiling, the European debt bomb and the subsequent volatility and broad sell-offs in many markets in Aug and Sep 2011.

From memory, I sold some crude oil options at about 50% IV and some silver options at about 85% IV in October 2011. We haven't been anywhere close to those IV levels since.

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  #3707 (permalink)
Trading for Fun
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FWIW, in a number of physical commodities, you are now getting paid more for selling options:

Crude Oil, Nat Gas, Silver, Coffee, Cocoa and Lean Hog options (30-90 day options) all have implied volatilities in the 80th to 100th percentile using a 12-month look-back.

Sugar is also up a bit recently but only getting back to the 50th percentile. Corn, wheat, soybeans and soymeal are mostly less than the 50th percentile and likely heading into (continuing?) a period of relative slumber.

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  #3708 (permalink)
World'sWorstTrader
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CafeGrande View Post
FWIW, in a number of physical commodities, you are now getting paid more for selling options:

Crude Oil, Nat Gas, Silver, Coffee, Cocoa and Lean Hog options (30-90 day options) all have implied volatilities in the 80th to 100th percentile using a 12-month look-back.

Sugar is also up a bit recently but only getting back to the 50th percentile. Corn, wheat, soybeans and soymeal are mostly less than the 50th percentile and likely heading into (continuing?) a period of relative slumber.

Yes I noticed, and last Thursday (10/02/14) for better or worse, I sold some CL CLF5/LOF5 64 P @ $60.00. DELTA=0.01
EXP-12/17.

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  #3709 (permalink)
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datahogg View Post
Yes I noticed, and last Thursday (10/02/14) for better or worse, I sold some CL CLF5/LOF5 64 P @ $60.00. DELTA=0.01
EXP-12/17.


I think you're safe with $60. If we get near there we'll probably have bigger problems like a big recession and a plunging stock market.

But this has been a good reminder that crude, after a long period at plus or minus $100, can drop $10 fairly quickly. Anyone that sold a $75 or $80 put during the calm period when ATM IV was 15-17% (now it's 22% and a five delta put is 28%) is feeling some pain over the last week.

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  #3710 (permalink)
Trading Apprentice
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CafeGrande View Post
I think you're safe with $60. If we get near there we'll probably have bigger problems like a big recession and a plunging stock market.

But this has been a good reminder that crude, after a long period at plus or minus $100, can drop $10 fairly quickly. Anyone that sold a $75 or $80 put during the calm period when ATM IV was 15-17% (now it's 22% and a five delta put is 28%) is feeling some pain over the last week.

This is my first time with CL, but I have CLX4 84s (very very small position), CLZ4 72 and 74s, and CLF5 70s that I put on before the drop in CL and the rise in vol. I noticed that the CLF5 70's were the hardest hit. I thought they were supposed to be more resilient, but maybe I put them on too cheaply (I sold for 0.08 and they are worth 0.2 now... might load up on some more).

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