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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,803 / 5,734
Last Reply:23 Hours Ago (01:01 AM) Attachments:642

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Selling Options on Futures?

Old October 14th, 2014, 04:29 PM   #3731 (permalink)
Trading for Fun
Reno, USA
 
Futures Experience: Intermediate
Platform: esignal
Favorite Futures: Oil
 
Posts: 70 since Jul 2011
Thanks: 14 given, 9 received

Crude Oil options?

Given the sell off in oil would anybody be selling calls at least? Im thinking of selling the DEC 107 calls (as per Rons rule of 25 pts out) . Seasonally, i know oil goes up in december but given currrent environment and technically its in a downtrend I just dont see it really causing a problem. Of course, everything changes if things in middle east get worse.

any opinions appreciated

thanks

V

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Old October 14th, 2014, 08:48 PM   #3732 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
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hummingbird View Post
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.

Yes you can trade out of spreads.

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Old October 14th, 2014, 08:54 PM   #3733 (permalink)
Trading Apprentice
Yreka, CA United States
 
Futures Experience: Advanced
Platform: TradeStation
Favorite Futures: stocks
 
Posts: 11 since Sep 2014
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ron99 View Post
Yes you can trade out of spreads.

Thank you kind sir.

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Old October 14th, 2014, 08:54 PM   #3734 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,329 since Jul 2011
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vmaiya73 View Post
Given the sell off in oil would anybody be selling calls at least? Im thinking of selling the DEC 107 calls (as per Rons rule of 25 pts out) . Seasonally, i know oil goes up in december but given currrent environment and technically its in a downtrend I just dont see it really causing a problem. Of course, everything changes if things in middle east get worse.

any opinions appreciated

thanks

V

They are only 2 cents. Not worth the risk for that small possible profit. Maybe sell a further out month and get out quickly if things start to reverse.

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Old October 15th, 2014, 10:59 AM   #3735 (permalink)
Elite Member
tennessee/USA
 
Futures Experience: Intermediate
Platform: Quotetracker, TOS
Broker/Data: OX TOS
Favorite Futures: ES
 
Posts: 83 since Aug 2014
Thanks: 267 given, 8 received

ES selling off

Futures Edge on FIO
Anybody feels the pain like me? I bought back some with loss yesterday, may have to buy back more if no bounce today.


Last edited by daydayup8; October 15th, 2014 at 11:05 AM.
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Old October 15th, 2014, 11:25 AM   #3736 (permalink)
Elite Member
Dallas, TX
 
Futures Experience: Advanced
Platform: T4, Zaner360, TOS
Broker/Data: DeCarley Trading
Favorite Futures: Options
 
Posts: 104 since Sep 2013
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I suspect there are lots of traders experiencing pain in the big oil move. I know I have been. I'm out of all my put positions (taking some significant losses) except one, a 73 put that expires tomorrow. I thought that this put was completely safe until the last couple of days, but even it has seen an uptick in trading price.

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Old October 15th, 2014, 03:45 PM   #3737 (permalink)
Trading for Fun
St Paul, MN, USA
 
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Platform: Abacus
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Favorite Futures: Commodity Futures & Options
 
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mu2pilot View Post
I suspect there are lots of traders experiencing pain in the big oil move. I know I have been. I'm out of all my put positions (taking some significant losses) except one, a 73 put that expires tomorrow. I thought that this put was completely safe until the last couple of days, but even it has seen an uptick in trading price.

It's one of those weeks (actually about a month) that's necessary to keep the universe in balance. Without the occasional five or ten-bagger, option buyers wouldn't keep buying.

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Old October 15th, 2014, 03:59 PM   #3738 (permalink)
World'sWorstTrader
Knoxville Tennessee USA
 
Futures Experience: Intermediate
Platform: TOS
Favorite Futures: ES, NQ, CL, /6E futures options.
 
Posts: 257 since Oct 2012
Thanks: 126 given, 75 received

Ouch

Was that a bus or truck that hit me? I have had a few losses but manageable.

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Old October 18th, 2014, 08:55 PM   #3739 (permalink)
Trading Apprentice
Las Vegas
 
Futures Experience: Advanced
Platform: TOS, IB
Broker/Data: TOS
Favorite Futures: ES, Oil
 
Posts: 11 since Jan 2010
Thanks: 11 given, 13 received

CL trades

Thanks to Ron and other posters on this thread.

I have not had time to read this thread so what I am posting may have already been covered.

I have traded options on futures for about 8 years. My approach or strategy is quite different. I am selling what some label a synthetic strangle. My trades are entered Delta Neutral -- for example: CL long 1000 deltas and short 1000 deltas. I am ATM in most cases. Therefore I collect the highest amount of premium and of course benefit from the most time decay as I am a seller of options. Of course it would seem that I am thereby assuming the most risk.

For example say I sell 2 ATM CLZ4 Call options and receive more than $4,500 in premium which goes in part to offset my margin. My margins are relatively low due to SPAN margin on my Portfolio TOS account.

Now a typical trade I will sell the ATM calls and at the same time buy a CL futures contract creating a synthetic strangle. This will also lower margins because I have a "covered" position -- I am both long and short the CL. I am trading the active month futures with about 30 days to expiration.

Obviously if I had sold OTM options I would be collecting about $1000 in premium on 2 contracts. So far less premium but less apparent risk.

Managing the trade is my "job" during the time in the trade. I manage the deltas by taking profits on the position when the market permits. The more volatile the trading the more opportunity I have to capture profits but even without movement I am collecting about $100 per day in theta (more of course when closer to expiration). When I have profits of $300 or so on one side of the trade my deltas have increased and so I buy back the profitable calls and then sell further out of the money calls to again put the trade at close to neutral deltas. Last Friday October 17, 2014 -- I had the opportunity to make several trade adjustments which netted me $970 for the day.

Having both sides of the market (Short Calls vs. Long Futures) will allow me to book realized profits on one side of the trade and hold the other side as an "unrealized" loss waiting for the market to reverse direction and then "rinse and repeat". This method does require more monitoring than just holding till expiration but since I do not have to be glued to the screen it is not stressful. I do hold to about 10 days to expiration and have alerts in place to ring my phone should the trade ever require management when I am away from the computer.

Thanks again to all on this thread for your helpful posts which indicates a knowledgeable group of posters. I may have to spend more time with BM group and even pop for an elite membership

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Old October 19th, 2014, 08:45 AM   #3740 (permalink)
Elite Member
Brussels / Dublin
 
Futures Experience: Intermediate
Platform: ninjatrader
Favorite Futures: Stdev + 2
 
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@ticks how do u deal with option market been closed yet futures open. Do you just do this in futures or stocks also I presume just futures as more volatile? Have you tested this with option vue or otherwise ?

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