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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:570,189 / 5,734
Last Reply:December 9th, 2016 (01:01 AM) Attachments:642

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Selling Options on Futures?

Old January 2nd, 2013, 09:10 AM   #391 (permalink)
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ron99 View Post
OK I have my final results for 2012.

Long options - 44 trades of 862 contracts = 109k loss. I had bought a bunch of ES calls that weren't timed correctly. Plus a few other calls. Trying to predict direction is not easy.

Short futures - 10 trades of 92 contracts = 15k loss.

Futures spreads - 29 trades of 116 contracts = 50k profit. Mainly seasonal spreads.

Short options - 746 trades of 5,034 contracts = 150k profit. A lot less contracts than 2011 but more profit.

Long futures - 216 trades of 949 contracts = 619k profit. Mainly milk futures.

I traded 15 different commodities. CL, C, DA (Milk), DY (Whey), ES, GC, HG, HO, KC, LH, NG, RB, SB, SI, S.

ROI was 75.1%. Not as good as last year. The long options hurt.

But here is the thing that surprised me. Of the 746 trades I sold options, 744 were net profitable. Only 2 trades of 21 contracts lost money. 99.7% winners.

I have an Access database setup into which I enter every trade. Then I am able to do searches to get this data.

Great results Ron. Looking at the short options stats, you are averaging around $30 per contract (due to <0.03 delta i suppose). Would i be right to assume you are continually adding new trades of a small amount (14 trades a week average of 6 contracts) as the margin becomes available to you. No wonder you need a database to keep track.

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Old January 2nd, 2013, 10:27 AM   #392 (permalink)
Market Wizard
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britkid99 View Post
Great results Ron. Looking at the short options stats, you are averaging around $30 per contract (due to <0.03 delta i suppose). Would i be right to assume you are continually adding new trades of a small amount (14 trades a week average of 6 contracts) as the margin becomes available to you. No wonder you need a database to keep track.

Yes that would be correct. And the profit would be net after fees.

One other reason for the quantity of trades is that I am trading several accounts including a couple of IRAs and a trust account. On those I am only doing options with a delta of 0.01 or less because I don't want to blow them up. They don't usually get any futures trades. These accounts do bring down my total ROI. The IRAs and trust made about 25% in 2012. Just looking at the accounts I trade for myself without the IRAs and the trust I made 112%.

I have my money at 3 different brokers for protection in case one of them blows up. OX, OEC and ADM. So that adds to the quantity of trades too.

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Old January 2nd, 2013, 12:26 PM   #393 (permalink)
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Ron:

First, thanks for your generosity, sharing your results with all of us. You are REALLY BIG in the amount of trades and number of contracts (not to mention PROFITS)

I am learning this business and something you mentioned caught my attention: “Trying to predict direction is not easy”. I recently read “You cannot predict the market, you can only ride momentum”.

I see you made quite a lot of money with milk futures and I would like to adapt that to my possibilities of trade but I see the following problems: Huge price swings in one day in the past, very low volume, if I sold the April 20.50 calls (today at $320), it would only be 11% out of the money (I sell options normally at 25-35% out).

The above combination, big swings, low volume and too close to price, gives me a red flag. What is your opinion of my analysis?

Best regards and thanks again.
Alfredo E.

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Old January 2nd, 2013, 12:45 PM   #394 (permalink)
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alfredoe View Post
Ron:

First, thanks for your generosity, sharing your results with all of us. You are REALLY BIG in the amount of trades and number of contracts (not to mention PROFITS)

I am learning this business and something you mentioned caught my attention: “Trying to predict direction is not easy”. I recently read “You cannot predict the market, you can only ride momentum”.

I see you made quite a lot of money with milk futures and I would like to adapt that to my possibilities of trade but I see the following problems: Huge price swings in one day in the past, very low volume, if I sold the April 20.50 calls (today at $320), it would only be 11% out of the money (I sell options normally at 25-35% out).

The above combination, big swings, low volume and too close to price, gives me a red flag. What is your opinion of my analysis?

Best regards and thanks again.
Alfredo E.

I would not recommend to most people to trade milk or whey. It is so different than every other commodity that you need to forget everything you know about trading other commodities when trading dairy products.

When you trade most commodities you are trying to guess where futures are going. With milk you are trying to determine the USDA price. Futures follow the USDA price.

Dairy products are cash settled to the USDA price. The USDA price is determined by a complex formula. The inputs for the formula are partially determined by the daily cash trading of cheese and butter. They are also determined by US prices of whey and nonfat dry milk powder. There are also adjustments made to the cash prices to determine how they fit into the USDA formula.

Milk futures started trading in 1996. I have been trading milk futures since 1998. I was a dairyman before I made enough money trading milk futures to sell the dairy farm and trade full time. That's how I got started trading. So I had the background in dairy before I traded milk futures.

Some years you can make good money. Some years you can loss a ton in milk. I know. It is not easy.

I trade very few milk options. Poor volume and you have to be close to the money. But there are a few times you can but its takes years of experience to know when.

Last year in this thread I mentioned a milk trade. It turned out to be a loser. So even with my years of experience I made a wrong recommendation.

If something good comes up I will mention it here. But I have no idea when that will happen.

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Old January 2nd, 2013, 03:07 PM   #395 (permalink)
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Futures Edge on FIO

Are you a NinjaTrader user?

 
Made first trades of the year.

Sold 195 SBh3 16.00 puts for 0.02. Margin 113 cash excess 226. 44 DTE. 5.51 fees. ROI 3.3% per month.

Sold 1 RBg3 2.30 put for 0.0013. It was bid there 1 time. Settled at 0.0008. Futures are way higher today. Margin 751 (OX 20% higher than SPAN) cash excess 1502. 27 DTE. 5.21 fees. ROI 2.4% per month.

Trade in IRA. Sold 1 HOg3 2.35 put for 0.0003. It was bid there 1 time. Settled at 0.0001. Futures are higher today. Margin 108 (OX 20% higher than SPAN) cash excess 216. 27 DTE. 5.21 fees. ROI 2.5% per month.

Trade in IRAs. Sold 65 CLh3 65 put for 0.03. It was bid there 204 times. I would have done more but someone stole the rest. I wish OX had group trades on options. Settled at 0.03. Futures are higher today. Margin 199 (OX 20% higher than SPAN) cash excess 398. 447 DTE. 5.21 fees. ROI 2.8% per month.

Sold 2 HGh3 3.00 put for 0.0025. It was bid there 2 times. Settled at 0.0010. Futures are higher today. Margin 356 cash excess 1068. 55 DTE. 5.21 fees. ROI 2.9% per month.

I may have mentioned this earlier, but my ROI% is assuming the margin stays the same to expiration. Which of course normally it doesn't. I then take take the margin and cash excess money that is no longer needed for that contract and add new contracts. I also reduce the 2X extra when the contract is close to expiration, down to 1X if <10 and maybe down to 0 if the contract is really far out of the money (this is where having your trades in spreadsheets and on a database can help keep track of these different levels of excess for certain contracts). So the actual ROI% is higher.


Last edited by ron99; January 2nd, 2013 at 03:18 PM.
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Old January 2nd, 2013, 03:48 PM   #396 (permalink)
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ron99 View Post
Made first trades of the year.

Sold 195 SBh3 16.00 puts for 0.02. Margin 113 cash excess 226. 44 DTE. 5.51 fees. ROI 3.3% per month.

Sold 1 RBg3 2.30 put for 0.0013. It was bid there 1 time. Settled at 0.0008. Futures are way higher today. Margin 751 (OX 20% higher than SPAN) cash excess 1502. 27 DTE. 5.21 fees. ROI 2.4% per month.

Trade in IRA. Sold 1 HOg3 2.35 put for 0.0003. It was bid there 1 time. Settled at 0.0001. Futures are higher today. Margin 108 (OX 20% higher than SPAN) cash excess 216. 27 DTE. 5.21 fees. ROI 2.5% per month.

Trade in IRAs. Sold 65 CLh3 65 put for 0.03. It was bid there 204 times. I would have done more but someone stole the rest. I wish OX had group trades on options. Settled at 0.03. Futures are higher today. Margin 199 (OX 20% higher than SPAN) cash excess 398. 447 DTE. 5.21 fees. ROI 2.8% per month.

Sold 2 HGh3 3.00 put for 0.0025. It was bid there 2 times. Settled at 0.0010. Futures are higher today. Margin 356 cash excess 1068. 55 DTE. 5.21 fees. ROI 2.9% per month.

I may have mentioned this earlier, but my ROI% is assuming the margin stays the same to expiration. Which of course normally it doesn't. I then take take the margin and cash excess money that is no longer needed for that contract and add new contracts. I also reduce the 2X extra when the contract is close to expiration, down to 1X if <10 and maybe down to 0 if the contract is really far out of the money (this is where having your trades in spreadsheets and on a database can help keep track of these different levels of excess for certain contracts). So the actual ROI% is higher.

Thanks, Ron. This is very helpful. I have been struggling looking further out (DTE) and also trying to get larger premiums. My OX commissions and fees run just under $10 per contract. You are finding some great trades closer in.

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Old January 2nd, 2013, 04:38 PM   #397 (permalink)
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Raven,

If you want a little more premium how about CLj3 65 puts? Margin 348. Trading at .09 today. 73 DTE. 0.0143 Delta.

ROI% using the 12/31 settlement of 0.11 gets you 4.1%.

CL has dropped in Jan 6 years in a row. An average of $10. I sold the Marchs because they are far enough out of the money that the normal drop will not affect them because the DTE is low. Apr puts may be affected if we get the normal drop.

If you are worried about that then wait until about Jan 22nd when the bottom usually happens in CL in Jan.

But I suspect this year we won't have as much a drop because OI dropped dramatically on many commodities. CL OI dropped 80,000 in Dec. Grains dropped a ton. Probably because of traders worried about the FC.

The specs will need to add positions in the new year. More than likely they will add longs. Driving the price higher.

Problem is that the end of Feb we have to worry about the debt ceiling talks in Congress. Man I am so sick of the US Congress and how they screw the markets.

Ron

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Old January 2nd, 2013, 04:42 PM   #398 (permalink)
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Ron99 thanks for sharing your 2012 results and posting your first trades of the New Year. And before I forget, thank you for replying to an earlier post of mine from two weeks ago.


ron99 View Post
Made first trades of the year.

Trade in IRAs. Sold 65 CLh3 65 put for 0.03. It was bid there 204 times. I would have done more but someone stole the rest. I wish OX had group trades on options. Settled at 0.03. Futures are higher today. Margin 199 (OX 20% higher than SPAN) cash excess 398. 447 DTE. 5.21 fees. ROI 2.8% per month.

On your new trades for 2013, I have some questions about the CLh3 position. As you stated, CL futures were higher today. In fact, CL futures has been on an uptrend since around December 7th but yet you choose to sell puts into this uptrend. Wouldn't a pullback affect your position? I mean I highly doubt CL will drop below $75-$80 but even a $7-$8 sell off would cause your position to go negative. Why not sell some far OTM calls? Like maybe the April 130 or 135 calls. Delta is below 0.02 and the premium is about the same if not a bit higher than the March CL 65 puts. Just curious as to your thought process for this position. Does the current trend higher not worry you? Or are you basing your trade on the seasonal tendencies of CL trading higher this time of year? And since you have the March 65 puts in place, are you interested in establishing a strangle by selling an equal amount of March CL calls? Possibly the March 120 or 125 calls?

Wow! Your margin is indeed much much lower at OX compared to mine at IB. To put on the same trade at IB, my IM would be $681 and my MM would be $544 for each. $199 is quite good even though it is 20% above SPAN. So multiply by 65 contracts and what a huge difference! Although my fees would only be $2.32 per but obviously not having to tie up 2x-3x of my money in margin would more than make up for difference in commissions.

Once again thanks for your input!

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Old January 2nd, 2013, 04:43 PM   #399 (permalink)
Market Wizard
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ron99 View Post
Made first trades of the year.

Sold 195 SBh3 16.00 puts for 0.02. Margin 113 cash excess 226. 44 DTE. 5.51 fees. ROI 3.3% per month.

Sold 1 RBg3 2.30 put for 0.0013. It was bid there 1 time. Settled at 0.0008. Futures are way higher today. Margin 751 (OX 20% higher than SPAN) cash excess 1502. 27 DTE. 5.21 fees. ROI 2.4% per month.

Sold this option for 0.0013. It settled today at 0.0004.

Trade in IRA. Sold 1 HOg3 2.35 put for 0.0003. It was bid there 1 time. Settled at 0.0001. Futures are higher today. Margin 108 (OX 20% higher than SPAN) cash excess 216. 27 DTE. 5.21 fees. ROI 2.5% per month.

Trade in IRAs. Sold 65 CLh3 65 put for 0.03. It was bid there 204 times. I would have done more but someone stole the rest. I wish OX had group trades on options. Settled at 0.03. Futures are higher today. Margin 199 (OX 20% higher than SPAN) cash excess 398. 447 DTE. 5.21 fees. ROI 2.8% per month.

Sold 2 HGh3 3.00 put for 0.0025. It was bid there 2 times. Settled at 0.0010. Futures are higher today. Margin 356 cash excess 1068. 55 DTE. 5.21 fees. ROI 2.9% per month.

Sold this option for 0.0025. It settled today at 0.0005.

If futures are up and you see puts bid higher than settlement, grab them. Instant profit in your pocket.

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Old January 2nd, 2013, 04:44 PM   #400 (permalink)
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Coffee update


Nice push higher today after bullish divergence. Now moved back in to 147/155 range. This is the first proper attempt to create a HH (Higher High) after a series of LH and LL's. If we can muster a Higher Low or stay in the range that will be good for my 120/200 strangle which has already eroded over 50% each side. Anyone else still in?

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