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Selling Options on Futures?
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Selling Options on Futures?

  #371 (permalink)
Market Wizard
Cleveland, OH
 
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Mark59 View Post
Great discussion!

I agree with Brit Re; IB. I do the same thing and try to run apx 50% margin. So far this has been fine for any move against me. It gives me enough cash to adjust if needed. Also With the low commissions I just get out if Ive made 75% or better and still have 30 days or more to go. In Canada IB is the only choice, so have to find ways to be creative!

Currently Short SI, CL, KC & HG
Thanks to all for posting!

Short puts?

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  #372 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
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psears View Post
Thanks for the great info everyone!
Ron, you replied that you tracked Cordier's recommendations over 5 years and that he was about 76% correct. I presume that you are talking about general market direction?

I looked at his recommendation and usually he gave what month contract he was looking at and a general price. I picked an option that fit that and tracked if it went ITM or not. If in the money I considered it a loss no matter where the futures ended up at expiration.

76% sounds pretty good to me for general market direction-do you consider that pretty good? Or are you doing even better on your own?

I'm running about 90%. In 2011 when I had an account at Liberty he lost 28%. That's why I closed the account. But he did do well in 2009 +98% and OK in 2010 +25%. But my trading in my account beat him every year. And I didn't have to pay his exorbitant fees. 30-40%.

In 2011 he made a lot of trades that I never would put on. In fact rarely in 2011 did I put on the same contracts that he did. They just didn't make sense. I haven't tracked 2012 but there weren't many newsletters by him this year compared to prior years.

So look at what he says as a starting point and decide if it is worthwhile. I wouldn't blindly put on all of his trades.


I'm thinking of maybe following a newsletter like Cordier's and selling DOTM options like you based on where the newsletter thinks the market isn't going. Over time, I will learn the markets and eventually make my own calls. In the meantime, 76% and proper money management sounds like a winning system to me.
What do you think?

I wouldn't do every trade he puts in the newsletter. Research it out and pick the best ones. Keep track of the ones you didn't do to see what happened.

Also, you said in a previous post that you don't follow IV. Do you sell options just when they are historically expensive based on actual dollar value, or does that not
matter to you? Or do you sell when expensive and buy when cheap?

Thanks!

I don't look at premium pricing compared to past history at all. I pick the commodity and strike price and just do it. Most commodities options that I trade don't have enough volume to worry about picking if they are historically expense. I just feel good if I can get a buyer at a fair price and get the option sold.

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  #373 (permalink)
Elite Member
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ron99 View Post
I haven't tracked 2012 but there weren't many newsletters by him this year compared to prior years.
.

Well I have the following from 2012, Jan, Feb, May, June, July, Aug/Sept, Nov/Dec.
It looks like he has gone bi-monthly at the moment and of course he had broker problems.
I've attached the latest few if anyone wants to see what they are like.

NOTE: This is for info only, I am not in any way making a recommendation to use them

Attached Thumbnails
Selling Options on Futures?-liberty-2012-nov-dec.pdf   Selling Options on Futures?-liberty-2012-aug-sept.pdf   Selling Options on Futures?-liberty-2012-july.pdf   Selling Options on Futures?-liberty-2012-june.pdf   Selling Options on Futures?-liberty-2012-may.pdf  
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  #374 (permalink)
Trading Apprentice
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ron99 View Post
Short puts?

Ron , Yes sold puts in these Markets.

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  #375 (permalink)
Elite Member
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Ron,

How much margin required, for example, to sell 1 ES contract. Is not it too dangerous because of unlimited losses?
Or you cannot lose more than the margin amount taken from your balance?

Why you prefer futures to equities, are there any significant advantages?

Are there weekly options on futures or monthly only?

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  #376 (permalink)
Market Wizard
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Chipmunk View Post
Ron,

How much margin required, for example, to sell 1 ES contract. Is not it too dangerous because of unlimited losses?
Or you cannot lose more than the margin amount taken from your balance?

Why you prefer futures to equities, are there any significant advantages?

Are there weekly options on futures or monthly only?

The margin required to sell an option depends on margin amount for the future contract, time to expiration, distance the option strike is from the futures price, volatility. The margin amount can change daily.

Selling options is less dangerous than doing a future. They both do have unlimited loss. But the option does not lose money as fast as a future contract.

Futures are just a different type of contract with different fundamentals that can be researched just like equities. But I find them to be more predictable.

No weekly commonly used options.

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  #377 (permalink)
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Entertaining all opinions here:

I'm wondering how the fiscal cliff might impact commodity prices...You would think that the metals and energies would fall due to the increase in taxes = less spending by you and me and less production. I unloaded my CL puts last week and currently have no open positions. I'm waiting to see how all of this "Wash DC still not doing anything and getting a pay raise" works out...or not.

I'm watching the energies and silver but not doing anything until the FC is resolved or not.

RTR...


Last edited by opts; December 30th, 2012 at 10:04 AM.
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  #378 (permalink)
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Chipmunk View Post
Ron,

How much margin required, for example, to sell 1 ES contract. Is not it too dangerous because of unlimited losses?
Or you cannot lose more than the margin amount taken from your balance?

Why you prefer futures to equities, are there any significant advantages?

Are there weekly options on futures or monthly only?

Hi Chipmonk,

As Ron already said the margin varies due to many factors also including the broker used. So it is difficult to give an exact figure except to say it will be less than the margin on a futures contract.

If you have sold an ES option and the price goes away from you the value of the option decreases(you are making money). If it comes towards your strike price the value of the option rises but not as fast as a futures contract would rise. So you definately could lose more than the margin amount if you left it and did nothing. Eventually if it went well past your strike it would start to lose 1:1 the same as a future(potentially unlimited loss).

The advantages of futures options over equity options are that it is possible to go futher OTM and still receive a good premium for reasonable margin and less contracts are used so commissions are less.

There are some weekly futures options, two which i have used are ES and EUR (6E). CME Group have weekly options on ags and cattle see link below

Weekly Options on Agricultural Futures

Brit

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  #379 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
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Favorite Futures: Options on Futures
 
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opts View Post
Entertaining all opinions here:

I'm wondering how the fiscal cliff might impact commodity prices...You would think that the metals and energies would fall due to the increase in taxes = less spending by you and me and less production. I unloaded my CL puts last week and currently have no open positions. I'm waiting to see how all of this "Wash DC still not doing anything and getting a pay raise" works out...or not.

I'm watching the energies and silver but not doing anything until the FC is resolved or not.

RTR...

I have had few positions this month because of the FC. So far that has been the wrong decision because futures haven't dropped much. So far.

I'm guessing they get something done but not much. I am more worried about the debt ceiling. That really dropped futures July/Aug 2011.

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  #380 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,717 since Jul 2011
Thanks: 792 given, 4,759 received
Forum Reputation: Legendary



ron99 View Post
The margin required to sell an option depends on margin amount for the future contract, time to expiration, distance the option strike is from the futures price, volatility. The margin amount can change daily.

Selling options is less dangerous than doing a future. They both do have unlimited loss. But the option does not lose money as fast as a future contract.

Futures are just a different type of contract with different fundamentals that can be researched just like equities. But I find them to be more predictable.

No weekly commonly used options.

I guess there are some weekly options but you can't trade them at OX.

And trying to sell them safely is just not possible. You have to be far too close to futures to make any money. Mar Corn settled Friday at 694. There is no OI below 680 puts for Week 1. The delta on the 680 is 0.2000. That's 6 times as high as I trade.

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