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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,356 / 5,727
Last Reply:December 2nd, 2016 (12:40 PM) Attachments:642

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Selling Options on Futures?

Old October 31st, 2014, 11:17 AM   #3771 (permalink)
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Natural Gas

I know there's lots of people who watch NG due to it's high volatility and rich option premiums so as we near winter I wanted to give you guys a fundamental update.

Yday the EIA reported we injected 87 BCF into storage last week. That was the most ever/the last 10 years for this week of the year.

ICE Storage futures for next week are currently 85/92 which would also be the largest injection forever/the last 10 years.

So far this year we have injected more gas into storage than in any year previously.

Despite these massive injections this year we are still 294 BCF below last years storage level and 310 BCF below the 5 year average level!

So like every year, it looks like it will all come down to weather again... On the subject of weather, I saw an interesting presentation from StatWeather recently (no affiliation). They apparently correctly predicted the very cold winter we had last year, and interestingly are predicting something similar again this year. Could be interesting if they are right.

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Old October 31st, 2014, 05:25 PM   #3772 (permalink)
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Has anyone tried spreads?

I was wondering if anyone on the thread has sold FOP's with higher delta's and bought lower delta's for hedges? And if you have, does it work similar to equity option spreads where the risk in completely defined and doesn't fluctuate like SPAN requirements do? My main issue is my capital allocated to trading FOP's is not huge, and while I realize it is not highly likely that we have events like flash crashes, it still worries me that I would get wiped out on a big move that's hard to recover from. Any thoughts or experience would be much appreciated.

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Old November 1st, 2014, 11:54 AM   #3773 (permalink)
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TraderLuke63 View Post
I was wondering if anyone on the thread has sold FOP's with higher delta's and bought lower delta's for hedges? And if you have, does it work similar to equity option spreads where the risk in completely defined and doesn't fluctuate like SPAN requirements do? My main issue is my capital allocated to trading FOP's is not huge, and while I realize it is not highly likely that we have events like flash crashes, it still worries me that I would get wiped out on a big move that's hard to recover from. Any thoughts or experience would be much appreciated.

If you sell, let's say, a 1500 ES put and then buy a 1400 ES put your risk is limited to the difference in strikes minus the net premium you collected. SPAN margin requirements for this spread do change daily.

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Old November 1st, 2014, 04:28 PM   #3774 (permalink)
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Natural Gas, con't

Happy Heating Season!

Attached is a modified and updated chart from the EIA "uncertainty" report:

Attached Thumbnails
Selling Options on Futures?-nat-gas-forecast.png  
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Old November 1st, 2014, 05:32 PM   #3775 (permalink)
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Futures Edge on FIO

Are you a NinjaTrader user?

 
Sell those NGH700c's!

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Old November 1st, 2014, 05:54 PM   #3776 (permalink)
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SMCJB View Post
Sell those NGH700c's!

And a side order of $500/ton soybean meal calls.

Then buy a plane ticket ...

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Old November 1st, 2014, 07:09 PM   #3777 (permalink)
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Option spreads and IB's margining


TraderLuke63 View Post
I was wondering if anyone on the thread has sold FOP's with higher delta's and bought lower delta's for hedges? And if you have, does it work similar to equity option spreads where the risk in completely defined and doesn't fluctuate like SPAN requirements do? My main issue is my capital allocated to trading FOP's is not huge, and while I realize it is not highly likely that we have events like flash crashes, it still worries me that I would get wiped out on a big move that's hard to recover from. Any thoughts or experience would be much appreciated.

I opened an account with IB in July, and only trade FOP's. With my previous broker, using SPAN margining, I did quite well selling far out-of-money options on the ES futures. One has to be a lot more vigilant with realtime margining and it irks me that they don't use SPAN.

So what I do instead is a sort of backward calendar. Sell far out-of-money option, buy nearest term option at same strike. If the strike is about 100 points out of the money, then a reasonable cushion is $3300. That is with $10,000 I trade 3 contracts. Have you looked at how to do "what-if" scenarios to see what the margin would be? I use the "what if" all the time. (This "what if" is not the same as a dummy account. I'm still getting used to their (awfully complicated for me) platform but the what-if screen was one of the first I found LOL.)

But need to either close the entire position before the near-term expires, or do some rolling.

BTW I've been an occasional lurker at this site for years, and this is actually my FIRST post! So please let me know nicely if I screw up procedure. :-)

Soozl

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Old November 3rd, 2014, 09:35 AM   #3778 (permalink)
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susan View Post
I opened an account with IB in July, and only trade FOP's. With my previous broker, using SPAN margining, I did quite well selling far out-of-money options on the ES futures. One has to be a lot more vigilant with realtime margining and it irks me that they don't use SPAN.

So what I do instead is a sort of backward calendar. Sell far out-of-money option, buy nearest term option at same strike. If the strike is about 100 points out of the money, then a reasonable cushion is $3300. That is with $10,000 I trade 3 contracts. Have you looked at how to do "what-if" scenarios to see what the margin would be? I use the "what if" all the time. (This "what if" is not the same as a dummy account. I'm still getting used to their (awfully complicated for me) platform but the what-if screen was one of the first I found LOL.)

But need to either close the entire position before the near-term expires, or do some rolling.

BTW I've been an occasional lurker at this site for years, and this is actually my FIRST post! So please let me know nicely if I screw up procedure. :-)

Soozl

No screw ups that I see!

So what strikes/months are you doing these at?

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Old November 3rd, 2014, 07:35 PM   #3779 (permalink)
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Right now it's gone awry - mkt went up way too fast. And I've been paranoid about a crash. SO I'm short Dec 1550 puts, long Nov 1550 puts. Will soon buy to close at small profit. Could have made more closer to the money but I'm paranoid.
But the calls - I'm short the Dec 2025 calls, long the Nov 2025 calls. Opened the spread when eminis were around 1900! Instead of a "stop loss" I have a "stop loss strategy". So in a couple of weeks I'll roll the shorts up in strike and out in time. How far will depend on how close to break-even I can get. That is, should be able for example to buy back dec 2025's and sell Jan 2050's for a profit. That trade is not profitable now but (all else being equal - which I know it never is), it has good chance of being profitable closer in a couple of weeks. And might roll the longs straight across so it'll turn into a diagonal requiring more margin. But right now the entire initial margin is only about $1516 so I've got plenty of cushion.
Sorry took so long to answer - internet provider has been having problems all day. LOL had to get my son to teach me how to use the smartphone for internet.

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Old November 4th, 2014, 04:57 PM   #3780 (permalink)
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Did you mean sell NG calls? I thought NG would go higher from the previous reports and charts, I maybe wrong, I am very new in NG, just noticed it went higher at the end of last year and early this year.

SMCJB View Post
Sell those NGH700c's!


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