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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,198 / 5,728
Last Reply:December 6th, 2016 (05:26 PM) Attachments:642

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Selling Options on Futures?

Old October 4th, 2014, 07:28 PM   #3711 (permalink)
Trading for Fun
St Paul, MN, USA
 
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dbh21 View Post
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).

In the attachment, there are two snips: One with your trade plugged into a a simple calculator for yesterday and one from a week ago. With a relatively long-dated option at a very low delta, one week's passage of time doesn't help much when IV pops and the futures make an adverse move.

Happens to all of us. I typically do not sell very low delta options to start with, but if my trade goes right, I'm often short some of them ... and then a week like last week happens. Keep in mind, compared to what can and has happened, last week wasn't even that bad. Selling OTM nat gas calls in Dec/Jan/Feb of last year and then getting hosed by a huge pop in volatility and futures prices ... now THAT caused people some serious pain.

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Old October 5th, 2014, 12:23 AM   #3712 (permalink)
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NG calls make me nervous. I was reading the thread completely last month wondering what it was going to be like when it spiked. I was expecting drama... but there was none.

I'm not worried about my trades. Plenty of time and excess margin. Really just trying to get a feel for commodities since I am used to equities.

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Old October 5th, 2014, 11:54 PM   #3713 (permalink)
Trading Apprentice
Atlanta
 
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Favorite Futures: options on futures
 
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Greetings from ATL, a new member of the forum here, finally, after spending many hours over the last 3 weeks reading this entire tread, I would like to introduce myself. Like many here I got into selling options on futures after reading Cordier's book 5 years ago and started selling 4 years ago. One of my 1st trades was ES puts during the flash crash of May 2010, what a start that was! This is the 1st time I have been able to find folks to interact with who also are also selling commodity options and it has been a great experience for me reading the great info ya'll have been kindly willing to share. Over the last 4 years my trading style has evolved into generally selling 1 lot options with around 8 to 10 delta's looking for opportunities for when IV has jumped and when the fundamentals are right. About 50-60% of the time they have been strangles. It has generally worked well, but years such as this year with low vol have made it difficult to find the right trading set up and show the value of Ron's system. I made around 30-40 % year 1 and 2, while I was figuring things out, last year I lost about all my years of profits in 2 days on a massive drop in gold prices, then took 2 months off to regroup proceeded to get it all back plus some over the last year and a half or so.

It was quite interesting while reading the thread to relive the NG market last spring, when calls spiked up to 5.5 - I remember selling 3 - $7 calls and had sweat it out until the market peaked around 6.5 and the insanity was over with. I wish had the guts to buy puts at that time but its hard for me to switch gears sometimes and be a option buyer.

I have been with TOS up until now mainly because of their inexpensive trading costs and pretty amazing platform but after reading the thread, will probably switch over to DeCarley. My bread and butter has been selling CL and 30 year bonds with a few ags and NG, but as my account is starting to grow, I realize the need to diversify more. I am seeking the steady return that Ron's trading style offers and plan to incorporate many of the trading principals. It frankly sounds scary to me to be selling 10 to 50 contracts at a time in 1 market but I am sure many of you would probably never sell a 10 delta contract on anything. JC.

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Old October 6th, 2014, 09:26 AM   #3714 (permalink)
World'sWorstTrader
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Textrader View Post
Greetings from ATL, a new member of the forum here, finally, after spending many hours over the last 3 weeks reading this entire tread, I would like to introduce myself. Like many here I got into selling options on futures after reading Cordier's book 5 years ago and started selling 4 years ago. One of my 1st trades was ES puts during the flash crash of May 2010, what a start that was! This is the 1st time I have been able to find folks to interact with who also are also selling commodity options and it has been a great experience for me reading the great info ya'll have been kindly willing to share. Over the last 4 years my trading style has evolved into generally selling 1 lot options with around 8 to 10 delta's looking for opportunities for when IV has jumped and when the fundamentals are right. About 50-60% of the time they have been strangles. It has generally worked well, but years such as this year with low vol have made it difficult to find the right trading set up and show the value of Ron's system. I made around 30-40 % year 1 and 2, while I was figuring things out, last year I lost about all my years of profits in 2 days on a massive drop in gold prices, then took 2 months off to regroup proceeded to get it all back plus some over the last year and a half or so.

It was quite interesting while reading the thread to relive the NG market last spring, when calls spiked up to 5.5 - I remember selling 3 - $7 calls and had sweat it out until the market peaked around 6.5 and the insanity was over with. I wish had the guts to buy puts at that time but its hard for me to switch gears sometimes and be a option buyer.

I have been with TOS up until now mainly because of their inexpensive trading costs and pretty amazing platform but after reading the thread, will probably switch over to DeCarley. My bread and butter has been selling CL and 30 year bonds with a few ags and NG, but as my account is starting to grow, I realize the need to diversify more. I am seeking the steady return that Ron's trading style offers and plan to incorporate many of the trading principals. It frankly sounds scary to me to be selling 10 to 50 contracts at a time in 1 market but I am sure many of you would probably never sell a 10 delta contract on anything. JC.

Why do you stay with a 10 delta contract??

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Old October 6th, 2014, 09:54 PM   #3715 (permalink)
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Futures Edge on FIO
Before finding this forum, I really did not know of option selling strategies used by others besides Cordier's book. I have since been enlightened and see some of benefits of selling lower delta options. One of the best benefits I see so far is that a 1 or 2 delta option is not going to get whacked when IV takes off in the way a larger delta option does which permits more selling opportunities even when IV is at historically lower levels. From what I can remember Ron saying, he pays little attention to current IV when starting positions which seems contrary to most option selling strategies I know.

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Old October 6th, 2014, 10:14 PM   #3716 (permalink)
Market Wizard
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Textrader View Post
Before finding this forum, I really did not know of option selling strategies used by others besides Cordier's book. I have since been enlightened and see some of benefits of selling lower delta options. One of the best benefits I see so far is that a 1 or 2 delta option is not going to get whacked when IV takes off in the way a larger delta option does which permits more selling opportunities even when IV is at historically lower levels. From what I can remember Ron saying, he pays little attention to current IV when starting positions which seems contrary to most option selling strategies I know.

I mainly look at fundamentals when deciding which options to sell. I have never looked at IV before selling an option.

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Old October 7th, 2014, 08:48 PM   #3717 (permalink)
Trading for Fun
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Gold/Silver Futures

For those who sell options on gold futures; is it now still a fundamental product or more technical ?

thanks

V

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Old October 8th, 2014, 02:00 AM   #3718 (permalink)
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vmaiya73 View Post
For those who sell options on gold futures; is it now still a fundamental product or more technical ?

thanks

V

Interesting question..George Soros will say it always was and still is fundamental product and Ed Seykota will say it always was and still is a technical product.

Then on the fundamentalist side you will get people saying it's going be rally because it's India wedding gold buying season and you will have people saying it is overvalued because Middle East war threat is under control.

And on the technicalist side you will get people saying it's making a triple bottom at a support that's been held since 2010 and there will be people saying it's in a descending wedge about to break down.

Just curious on what you will do with people's different opinion as I am sure if a lot of people responded you will get many different ones ?

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Old October 9th, 2014, 06:29 PM   #3719 (permalink)
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I got smacked down pretty hard with my oil contracts today. Might be an a stop loss trigger. Anyone have any advice on what is happening? Dollar up, Saudi's competing, economy sucking... I think

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Old October 9th, 2014, 09:53 PM   #3720 (permalink)
Trading for Fun
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dbh21 View Post
I got smacked down pretty hard with my oil contracts today. Might be an a stop loss trigger. Anyone have any advice on what is happening? Dollar up, Saudi's competing, economy sucking... I think

I think it's all of the above, plus we've had an extended period of very low volatility in equities and oil.

An additional twist is that crude dropped about a buck after the U.S. stock markets closed. Pretty big move considering it was the "off hours" and there wasn't any new news that I'm aware of.

Edit: I think there have been a few get-me-out or margin call related trades in CL puts tonight. Settlement IV (after a rough day) was 25% IV for one that I looked at. It's traded tonight at 28% IV.


Last edited by CafeGrande; October 9th, 2014 at 10:43 PM.
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