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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 November 24th, 2014, 01:51 PM   #3831 (permalink)
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effective View Post
The other way, but yes. here is what it would like for crude - short ATM and long PF

oic.

I would argue against it, as you're long the synthetic 4x1 in puts/futures (short four puts at PF strike, short one futures contract). The ATM combo is the origin of skew (up and out strikes are under ATM, of course), so no vol-edge ATM, but no leverage. I suppose you're using the PF as a stop in this case? A quick shot down to the PF strike will benefit from stickiness, for sure. IMO there are better tail-hedges. Let me know how it goes.

Oh crap, ignore the above. I missed that you're trading CL.


Last edited by convexxx; November 24th, 2014 at 02:03 PM.
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Old November 24th, 2014, 03:17 PM   #3832 (permalink)
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myrrdin View Post
Thanks for your suggestions. One of the important issues according to my experience is to roll (or close) the option before it gets the nearby one. (In so far I trade it differently than other options I sell.) In case it gets warmer in December and price and volatility are reduced a bit, I will be out anyway. I consider a profit of approx. 50 % in a couple of weeks an excellent result.

Another important issue is to watch the weather outlook daily. The extreme cold last year was announced, and at that time it was possible to exit short calls at a reasonable price. One of the big mistakes in OTM option selling is assuming that nothing can happen, because they were sold so far OTM. And to stay in all trades.

I will let you know how I procede.

Best regards, Myrrdin

Out with a decent profit. Potential further profit was not enough compared to the substantial risk of this trade.

Best regards, Myrrdin

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Old November 25th, 2014, 12:37 AM   #3833 (permalink)
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kevinkdog View Post
I've learned the hard and expensive way not to fight the trend.

Trader Who Scored $100 Million Payday Bets Shale Is Dud - Bloomberg

I wonder how Andrew Hall's long term trades in crude are doing? If he's long at $75 CL a few years out, maybe he stuck with them?

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Old November 26th, 2014, 01:17 AM   #3834 (permalink)
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convexxx View Post
oic.

I would argue against it, as you're long the synthetic 4x1 in puts/futures (short four puts at PF strike, short one futures contract). The ATM combo is the origin of skew (up and out strikes are under ATM, of course), so no vol-edge ATM, but no leverage. I suppose you're using the PF as a stop in this case? A quick shot down to the PF strike will benefit from stickiness, for sure. IMO there are better tail-hedges. Let me know how it goes.

Oh crap, ignore the above. I missed that you're trading CL.

No problem. I sent you message.

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Old November 26th, 2014, 05:36 PM   #3835 (permalink)
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myrrdin View Post
I intend to sell puts on crude oil futures.

Arguments pro:
Implied volatility is rising and now at the highest level for appox. two years.
Seasonals show a significant low at this time of the year.
Price gets close to an area were some production technologies get problems to make money, and where some governments (eg. Russia, Iran) feel uncomfortable.

Arguments con:
There will be an important OPEC meeting in a couple of days. (This might be a reason for the high volatility.) I expect them to reduce production to get prices higher, but I might be wrong.
Trend is still downwards.

My favorites are the CLK P60 or 65. Delta as of Friday 11.4 % or 18.7 %, respctively. Option premium 1060 US$ or 1870 US$. I prefer the May contract as I expect a longterm rise in crude oil prices. Seasonally it should go upwards until spring.

Any comments on the trade as such, on entry conditions, and on alternative trades are welcome.

Best regards, Myrrdin

Changed my plan and sold the CLZ15 P50 and the CLZ15 C105 at 1600 - 1700 US$.

Implied volatility has risen significantly recently, in my opinion due to tomorrows OPEC meeting. I expect reduction of volatility after the OPEC meeting and, thus, a first profit of the position.

CL is in a downwards trend, but in my opinion the downside is limited to about 65 US$. Price gets close to an area were some production technologies get problems to make money, and where some governments (eg. Russia, Iran) feel uncomfortable. The short call position should take care that losses are in an acceptable range.

Risk on the upside is limited, as I do not think that all oil-producing countries (OPEC and non-OPEC) will be able to decide a cut in production and to produce according to this decision for several months.

I will think about the short put when we get to 65 US$, and I will think about the short call after the establishment of an upwards trend.

Happy Thanksgiving to all of you traders in the US !

Myrrdin

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Old November 28th, 2014, 10:56 AM   #3836 (permalink)
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FYI - I was checking a rarely used email account and noticed something from Liberty Trading / OptionSellers.com

It looks like there is a new edition (3rd edition) of their book out, and Michael Gross, the research guy, is back (with a shaved head).

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Old November 28th, 2014, 01:20 PM   #3837 (permalink)
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New III edition


CafeGrande View Post
FYI - I was checking a rarely used email account and noticed something from Liberty Trading / OptionSellers.com

It looks like there is a new edition (3rd edition) of their book out, and Michael Gross, the research guy, is back (with a shaved head).

Book | Option Sellers

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Old December 16th, 2014, 11:40 AM   #3838 (permalink)
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??

This thread has been very quiet lately. Have these recent sell offs caused problems?
The ES has been in a down trend since the first of December and Cl has been down since mid July.

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Old December 16th, 2014, 02:01 PM   #3839 (permalink)
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Anybody who did sell NG-H5 calls though is probably happy.

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Old December 16th, 2014, 02:28 PM   #3840 (permalink)
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SMCJB View Post
Anybody who did sell NG-H5 calls though is probably happy.

They took my money! At least, so far.

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