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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,146 / 5,728
Last Reply:December 6th, 2016 (05:26 PM) Attachments:642

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Selling Options on Futures?

Old October 10th, 2014, 09:14 AM   #3721 (permalink)
World'sWorstTrader
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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

What were your stikes and expiration dates??

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Old October 10th, 2014, 09:40 AM   #3722 (permalink)
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datahogg View Post
What were your stikes and expiration dates??

I have the CLZ4 72 and 74s and CLF5 70s. The CLZ4's have hit my stops.

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Old October 10th, 2014, 11:11 AM   #3723 (permalink)
World'sWorstTrader
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CL



dbh21 View Post
I have the CLZ4 72 and 74s and CLF5 70s. The CLZ4's have hit my stops.

I have some Dec 65 P that are not far from my exit point.

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Old October 10th, 2014, 07:30 PM   #3724 (permalink)
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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

The fundamentals have been predicting this for months.

The US is producing 1 mil barrels/day more than a year ago.

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Canada is producing more. There have been no major events shutting down oil production world wide. US gasoline consumption is staying at low levels.

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Specs have been reducing their longs and adding shorts for months.

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Old October 10th, 2014, 08:15 PM   #3725 (permalink)
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ron99 View Post
The fundamentals have been predicting this for months.

The US is producing 1 mil barrels/day more than a year ago.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


Canada is producing more. There have been no major events shutting down oil production world wide. US gasoline consumption is staying at low levels.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


Specs have been reducing their longs and adding shorts for months.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


"The fundamentals have been predicting this for months."

Should people (like me) just have been avoiding selling crude puts for a while now? And if so, when should someone have stopped selling, based on these charts? Selling crude puts has been pretty favorable all year long, up until this week...


I am having trouble drawing what I think are meaningful conclusions from the charts you posted, Ron. Here's what I see, can you help me by telling me what you see from a timing point of view? By that I mean I see the general idea (higher supply, lower demand) but I have trouble turning this into "hey, don't sell crude puts starting in October for a while."

Chart 1: OK, it is easy to see that supply broke to a new high in say July 2012 and just kept going up from there. So, does that mean starting in JUly 2012 is way a bad idea to sell puts? Selling crude puts worked pretty well for a while, at least until this week. I guess I am having trouble seeing how this chart could be used for anything concrete timing wise...


Chart 2: Looks like we are near a multi year low in demand. But 2 years ago, we were in a similar situation (supply reaching new highs, demand reaching multi year lows). Yet, it still would have been OK to sell puts. Even earlier this year, we were low on demand, high on supply, but still price did not react.

Chart 3: I see times when a drop in spec interest precedes a drop in price, but I see other times where a drop in spec interest has no impact on price. What in your opinion makes this recent drop differently?


Sorry to anyone if these are dumb questions. But my issue with any fundamental data is that it may predict general future, but it is hard to use as a timing mechanism. And maybe, I have just been looking at this all wrong.


THANKS!

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Old October 10th, 2014, 08:57 PM   #3726 (permalink)
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kevinkdog View Post
"The fundamentals have been predicting this for months."

Should people (like me) just have been avoiding selling crude puts for a while now? And if so, when should someone have stopped selling, based on these charts? Selling crude puts has been pretty favorable all year long, up until this week...


I am having trouble drawing what I think are meaningful conclusions from the charts you posted, Ron. Here's what I see, can you help me by telling me what you see from a timing point of view? By that I mean I see the general idea (higher supply, lower demand) but I have trouble turning this into "hey, don't sell crude puts starting in October for a while."

Chart 1: OK, it is easy to see that supply broke to a new high in say July 2012 and just kept going up from there. So, does that mean starting in JUly 2012 is way a bad idea to sell puts? Selling crude puts worked pretty well for a while, at least until this week. I guess I am having trouble seeing how this chart could be used for anything concrete timing wise...


Chart 2: Looks like we are near a multi year low in demand. But 2 years ago, we were in a similar situation (supply reaching new highs, demand reaching multi year lows). Yet, it still would have been OK to sell puts. Even earlier this year, we were low on demand, high on supply, but still price did not react.

Chart 3: I see times when a drop in spec interest precedes a drop in price, but I see other times where a drop in spec interest has no impact on price. What in your opinion makes this recent drop differently?


Sorry to anyone if these are dumb questions. But my issue with any fundamental data is that it may predict general future, but it is hard to use as a timing mechanism. And maybe, I have just been looking at this all wrong.


THANKS!

You are correct that you will not get exact timing from fundamentals. But it should direct you which way the market may move when it does move.

The thing I didn't show there is world conflicts which would trump these fundamentals. Libya stopped exporting for a while.

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And now they are ramping up production.

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Plus other things that went on in other oil producing countries like Iran. Then you had Japan importing more oil because they shut down nuclear power after the earthquakes. You also had no hurricanes this year affecting the Gulf.

I look at fundamentals to give me the tendency for which way it probably will move from current prices. I then either don't sell on that side or I move further OTM on that side.

Like right now I would not sell KC or Cocoa calls. I would sell puts.

I wouldn't have sold grain puts this summer. But calls would have been OK.

I wouldn't have sold calls in LH and LC this year because of fundamentals. 13% of US hogs died from the PED virus. Cattle inventories were very low.

It's all about putting the odds in your favor.

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Old October 10th, 2014, 09:08 PM   #3727 (permalink)
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ron99 View Post
You are correct that you will not get exact timing from fundamentals. But it should direct you which way the market may move when it does move.

The thing I didn't show there is world conflicts which would trump these fundamentals. Libya stopped exporting for a while.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


And now they are ramping up production.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


Plus other things that went on in other oil producing countries like Iran. Then you had Japan importing more oil because they shut down nuclear power after the earthquakes. You also had no hurricanes this year affecting the Gulf.

I look at fundamentals to give me the tendency for which way it probably will move from current prices. I then either don't sell on that side or I move further OTM on that side.

Like right now I would not sell KC or Cocoa calls. I would sell puts.

I wouldn't have sold grain puts this summer. But calls would have been OK.

I wouldn't have sold calls in LH and LC this year because of fundamentals. 13% of US hogs died from the PED virus. Cattle inventories were very low.

It's all about putting the odds in your favor.


Thanks. If you care to share, what were you doing the past year with Crude calls and puts?

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 October 11th, 2014, 03:37 AM   #3728 (permalink)
Market Wizard
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Slightly further off topic than you already are, but since you guys are talking about Crude have you seen whats happened to the back of the curve in the last year...
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Until recently the curve moved up and down almost in parallel, then in the last 3 months Dec has collapsed versus the back as illustrated by the Z14-Z19 spread

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Or drawn another way
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Old October 11th, 2014, 12:31 PM   #3729 (permalink)
Trading for Fun
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Crude Oil, con't

In addition to some of the information posted above, implied volatility was telling a story:

- a significant increase in ATM values

- a significant change in the shape of the curve. It went from being close to a typical smile to being sharply skewed "to the left" (more demand, higher price for the puts)

- Risk Reversals went from positive to negative. Risk Reversals can be a trading strategy, but they're also a good way to plot the IV curve/skew as a time series (it saves having to click through x number of days to watch the shape change).

You can calculate them using any delta, but a couple of common calcs are RR10 (IV of a 10-delta call minus the IV of 10-delta put) and RR25.

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Old October 14th, 2014, 01:34 PM   #3730 (permalink)
Trading Apprentice
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Looks like some really knowledgeable option traders on this thread. I'm just starting out. Only looking to supplement my trading using simple option spreads but can find a good book on the basics. The books I have only discuss profit at expiry, but never give scenarios that explain what happens when option trades are closed prior to expiry. I especially would like to know what happens when an options spread is closed before expiry, or even if that is allowed.

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