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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:570,062 / 5,734
Last Reply:Yesterday (01:01 AM) Attachments:642

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Selling Options on Futures?

Old October 22nd, 2014, 11:00 AM   #3761 (permalink)
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What you said makes a lot of sense, thank you very much for your time. It looks like I really need to figure out SPAN program which I thought difficult because I am not good at EXCEL or any IT related (those long names or codes make me dizzy:-)

edit: when I look at my acct now, it is something like this, and the future requirement $477.9 is more close to what was required for my 9 short put EWV41500p yesterday, but when I checked the trade calculator', the IM now is 0.00. so I have one last question, we should look at our accumulated "Total Requirement" to manage all our positions, but this number seems always be less than the 'Future Requirement' in acct summary, sometimes, we may still have fund available as excess, but the Buying Power in the acct summary could be negative because of the delay, then what going to happen? will OX issue a margin call? anybody had any experience? Thanks!

trade calculator:
Sell -9 (EWV41500P) 0.05 ($22.50)
Requirements
Total Cost ($22.50)
Initial Requirement $0.00
Maintenance Requirement $0.00
Total Requirements $22.50
Estimated Commission $16.55


Acct Summary:
Futures Requirements
$477.90

Initial Margin Requirements
$477.90
Maintenance Margin Requirements
$436.50

Buying Power

Cash Available to Withdraw
5
$20,746.54

Option
$20,746.54

Stock
$41,493.08

Futures
$20,746.54

Total Account Value
*
$21,201.94


Dudetooth View Post
Brokerages like OX rely on risk files from the exchanges when they calculate your initial margin. The exchange risk files have a ton of info in them like futures price, option price, volatility, delta, and days to expiration, to name a few. Some of the most important bits of info are the 16 different 'what-if' risk scenarios that look at what happens to the risk of an option with changes in the price of the underlying or in volatility.

So for your EWV4 puts, OX would be looking at the risk files published by CME (these are the pa2 files that we refer to in the PC-SPAN thread). The pa2 files are published at certain times throughout the day and are snapshots of the futures price, option price and volatility at that point in time. CME normally publishes them at 10:30am, 11:30am, 4pm and then the closing pa2 around 7pm.

It looks like OX grabs the pa2 files from CME shortly after they are published and plug them into their system. When you look at your balances page it will calculate the futures requirements based on last pa2 file that was loaded into their system. The trade calculator is similar, but instead of using the option price from the pa2 file it appears to use the current market price. This creates the difference in the calculation that you noticed.

So, let's say you were looking at your balance page on OX around 3pm on 21 Oct, OX would have still been using the pa2 file that CME published at 11:30am for their calculations. ESZ4 had rallied an additional 10 points since that time and your puts would have had a lower value, but that would not be reflected on the balances page. The trade calculator was more accurate because it was using the market price of the option. Two hours later, CME would have published the 4pm pa2 file and the calculations on the OX balances page would have been closer to what you were seeing with the trade calculator.

That was the delay I was trying to describe. Hope this makes sense.



Last edited by daydayup8; October 22nd, 2014 at 11:17 AM.
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Old October 22nd, 2014, 03:08 PM   #3762 (permalink)
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Dudetooth,

I could be wrong but I never saw OX update the SPAN IM requirements through the day. They only use the SPAN IM from the prior night. I have been checking an option today on the Trade Calculator and it has the same SPAN IM now as it had at 9 am.

When I was trading there I never saw their Buying Power or IM disagree with mine which was calculated using the prior night's numbers.

The CLF15 price at 9 am was 82.29. At 2 pm it was 80.68.

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Old October 22nd, 2014, 03:24 PM   #3763 (permalink)
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daydayup8 View Post
so I have one last question, we should look at our accumulated "Total Requirement" to manage all our positions, but this number seems always be less than the 'Future Requirement' in acct summary, sometimes, we may still have fund available as excess, but the Buying Power in the acct summary could be negative because of the delay, then what going to happen? will OX issue a margin call? anybody had any experience? Thanks!

When I first opened my account in OX I got too aggressive with a small account and received a margin call when the markets reversed. At that time, the margin call was based on the closing risk. I was contacted the next day that I needed to add more funds or close positions.

If you are looking to use Ron's method for risk management it will be difficult if you don't have a method to track the margin for each position. I'm not sure why the trade calculator would be showing 0 for IM.

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Old October 22nd, 2014, 03:26 PM   #3764 (permalink)
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daydayup8 View Post
I have a question for the margin requirement. I only have 9 EWV41500P in my OX acct, I checked the IM at OX, it shows the IM is $455.4, but the 'future requirement' is $1728 for these 9 short puts. My total acct value is $21224.44, so the fund available for me to put more position is (21224.44-1728=)19496.44, but I feel like if the $455.4 is IM for these positions, I should have (21224.44-455.4*3)=$19585.24 to use based on the 3x method used in the thread.

Q1:
The available fund to trade from OX is 19496.44 which is less than $19585.24 which is from our method, that means if I use 3x IM to put on trade and assume I use all the $19585.24, I will put myself to a margin call immediately, is that right?

Q2:
I called OX to ask why the IM is $455.4 but the item 'future requirement' is $1728, they said $1728 is SPAN requirement for these positions. Since I don't have SPAN program, can someone help to check for that? what is the SPAN for 9 EWV41500P? and also please help answer the Q1 if you understand, thanks!

sorry, PS: EWV41500P

The 3X method has nothing to do with how OX calculates your Buying Power or determining if you are on margin call. So the answer to Q1 is no. They only use IM and the value of the option.

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Old October 22nd, 2014, 03:38 PM   #3765 (permalink)
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Futures Edge on FIO

daydayup8 View Post
edit: when I look at my acct now, it is something like this, and the future requirement $477.9 is more close to what was required for my 9 short put EWV41500p yesterday, but when I checked the trade calculator', the IM now is 0.00. so I have one last question, we should look at our accumulated "Total Requirement" to manage all our positions, but this number seems always be less than the 'Future Requirement' in acct summary, sometimes, we may still have fund available as excess, but the Buying Power in the acct summary could be negative because of the delay, then what going to happen? will OX issue a margin call? anybody had any experience? Thanks!

The SPAN Initial Requirement for that option is 51 each for today.

The OX Trade Calculator has had issues for years. Looks like they still have issues.

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Old October 22nd, 2014, 03:43 PM   #3766 (permalink)
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Ron, like Dudetooth said, there is delay between item "Future Requirements' of balance summary and 'Total Requirements' from trade calculator, there was a moment last week that my buying power was negative but actually I still had excess since I had other positions that had not hit the exit point yet. I called OX, they told me 'Future requirements' was from SPAN margin, but I did add up all my positions based on the current IM, then x3, my number was less than the 'Future requirements', that means if I manage my position based on IMx3 from trade calculator and trade aggressively, under extreme market situation, I could get a margin call even I still have excess. That's my understanding. Dudetooth said managing positions based on accumulated 'Total Requirements', I will try that.

Anyway, I will have to learn SPAN, otherwise, not too aggressive.



ron99 View Post
The 3X method has nothing to do with how OX calculates your Buying Power or determining if you are on margin call. So the answer to Q1 is no. They only use IM and the value of the option.


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Old October 22nd, 2014, 03:50 PM   #3767 (permalink)
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That means they use IM more currently now, but buying power may still use prior night's numbers.


ron99 View Post
Dudetooth,

I could be wrong but I never saw OX update the SPAN IM requirements through the day. They only use the SPAN IM from the prior night. I have been checking an option today on the Trade Calculator and it has the same SPAN IM now as it had at 9 am.

When I was trading there I never saw their Buying Power or IM disagree with mine which was calculated using the prior night's numbers.

The CLF15 price at 9 am was 82.29. At 2 pm it was 80.68.

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Old October 22nd, 2014, 03:56 PM   #3768 (permalink)
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ron99 View Post
I could be wrong but I never saw OX update the SPAN IM requirements through the day. They only use the SPAN IM from the prior night. I have been checking an option today on the Trade Calculator and it has the same SPAN IM now as it had at 9 am.

When I was trading there I never saw their Buying Power or IM disagree with mine which was calculated using the prior night's numbers.

It would appear as though you are correct ... it looks like all they are updating throughout the day is the current market value of the option and the Total Requirements. Admittedly, I don't normally track IM or Buying Power on OX ... I watch the Futures Requirements which were changing throughout the day. I know that RJO uses intraday risk files, so when I saw the Futures Requirements change at OX I thought they were doing the same. My mistake.

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Old October 24th, 2014, 06:05 PM   #3769 (permalink)
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My Meeting Today

Today for lunch, I was fortunate today to meet with the creator of this thread, and all around good guy, @ron99 .

He is as humble as they come, even though he is a terrific trader (maybe there is a correlation here?).

Anyhow, anyone reading this thread is lucky that he started it, and I'm sure I am not the only one who profited from Ron's unselfish sharing and advice.

Thanks Ron! Let's do it again soon!

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Old October 31st, 2014, 11:07 AM   #3770 (permalink)
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CL


What will CL act here? break down or false break down then pull up or bottom here for this round?
Looks dangerous again like it was around $90.

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