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Selling Options on Futures?
Started: by ron99 Views / Replies:585,114 / 5,780
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Selling Options on Futures?

  #3991 (permalink)
Trading Apprentice
Richmond, VA/USA
 
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Gotcha. Looks like it is time to hit the history charts and fundamentals!

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  #3992 (permalink)
Market Wizard
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ron99 View Post
Sometimes. That is why I sell far OTM because no one can project markets accurately. Being far OTM gives me some leeway if I am somewhat wrong.

Seasonals are a tool. They should not be your primary info to decide what to trade. Fundamentals should be the primary.

I fully agree. Supply & Demand, seasonals, Weather, COT data etc. are all parts of the puzzle. When they fit together I enter a trade. S&D for me is the most important part.

Selling OTM options allows for moderate errors or changes in the fundamentals.

Best regards, Myrrdin

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  #3993 (permalink)
Market Wizard
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At the top of this webpage https://www.theice.com/softs

is a pdf link to the free monthly soft commodities analysis by J Ganes Consulting.

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  #3994 (permalink)
Market Wizard
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psears View Post
Hey everyone,
Anyone have any thoughts on selling options on Lean Hogs lately? According to the hogs guy on Commodity Charts.com the volatility is sky high right now (limit move up yesterday, and sharp decline today) so I figure the premiums must be pretty fat right now (although I can't say for sure because I haven't been following them). His forecast is for further weakness. Would you be selling calls, because the price is moving away, or would you be selling puts because the premiums should be going up (I realize this is a "catching a falling knife" scenario...).
Which brings me to my next question: looking at the seasonal hogs charts from 5 to 30 years, hogs should be traditionally going UP into April, then leveling off for a few months. This however flies directly in the face of this guy's downward call, as well as the current chart action for 2015 so far. How are you supposed to trade seasonals if the current charts are completely out of whack with the historic charts? This seems to be happening in cattle as well, where recently the only trend has been straight up!
Very frustrating!
Someone please clue me in!

I had a closer look at the fundamentals of hogs, and came to the conclusion not to enter a trade.

1. Hogs are in a clear downtrend, thus selling puts would be trying to catch the falling knife.
2. One very important reason for the weak prices is the port strike at the West Coast, and, thus, significantly reduced exports. In case the strike is settled, prices for hogs might jump upwards. Not circumstances where I would sell calls.

There are more promising trades around.

Best regards, Myrrdin

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  #3995 (permalink)
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Thanks to Ron MJ for all these posts

Futures Edge on FIO
Hello all,

I am new to futures options but been trading options and futures for a while. Right now mainly focusing on outrights with a low risk.. decent reward strategy on CL.

I really did not like equity option trading since the premiums were so low and i was always going too close while selling them and taking big losses after many small winners. So been reading this futures options thread with more interest as i think even with far OTM option selling, still we can made decent premium..

questions would be
a) What happens to margins if we sell Iron Condors to limit risk? Is it worth it or again too little premium?
b) Does anyone use Open E cry (futures online) for options (considering since they also offer exchange traded spreads) - any broker that offers both recommended?
c) Is there a skype chat group for similar minded traders that we can discuss??

I would finally like to get 2015 to be the year that I can trade consistently with options with receiving the right premium and low risk

thanks to all for keeping this thread alive
J

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  #3996 (permalink)
Market Wizard
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jokertrader View Post
Hello all,

I am new to futures options but been trading options and futures for a while. Right now mainly focusing on outrights with a low risk.. decent reward strategy on CL.

I really did not like equity option trading since the premiums were so low and i was always going too close while selling them and taking big losses after many small winners. So been reading this futures options thread with more interest as i think even with far OTM option selling, still we can made decent premium..

questions would be
a) What happens to margins if we sell Iron Condors to limit risk? Is it worth it or again too little premium?

Margins decrease but so does premium. You just have to play around and see if you can get enough premium without having to get too close to ITM.

b) Does anyone use Open E cry (futures online) for options (considering since they also offer exchange traded spreads) - any broker that offers both recommended?

I use DeCarley (Carley Garner) and trade at OEC (owned by Gain). Great customer service by Carley.

c) Is there a skype chat group for similar minded traders that we can discuss??

IDK

I would finally like to get 2015 to be the year that I can trade consistently with options with receiving the right premium and low risk

thanks to all for keeping this thread alive
J

.

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  #3997 (permalink)
Elite Member
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Thanks Ron for such a quick reply

Still reading the thread and excited.. i cannot thank you enough for all your posts

Will read this everyday now

J

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  #3998 (permalink)
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How did u guys navigate the big fall in CL

Ron, Others

I know we want to sell options at about 0.02 delta say about 60 days out.
a) How did u navigate the big fall in CL.. is 20 bucks below enough.. maybe now yes.. but what about when oil was falling?
b) what kinda of position would u open right now?
say May (51 days) 30 puts? gives about 0.12
if oil falls say even 5 bucks that would be 0.33.. if today
but i do see thats its not bad if its gradual
and if its only by March 20th its 5 bucks below.. still we would have made money (value would be at 0.06)

So i guess patience


Last edited by jokertrader; February 24th, 2015 at 07:35 AM.
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  #3999 (permalink)
Market Wizard
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jokertrader View Post
Ron, Others

I know we want to sell options at about 0.02 delta say about 60 days out.
a) How did u navigate the big fall in CL

I didn't have any on then.

.. is 20 bucks below enough.. maybe now yes.. but what about when oil was falling?

20 is never enough for CL. I state in thread that 25 on puts is my minimum.

b) what kinda of position would u open right now?
say May (51 days) 30 puts? gives about 0.12
if oil falls say even 5 bucks that would be 0.33.. if today
but i do see thats its not bad if its gradual

The change in premium is not as important as the change in margin. A $5 drop in CL futures would at least double the margin required.

and if its only by March 20th its 5 bucks below.. still we would have made money (value would be at 0.06)

So i guess patience

But you will have about zero cushion left if it drops further.

IMO the deltas for CL are too low and I ignore them and use at least 25 below on puts and 30 above on calls.

June 25s is where I would be now. Take profit on them when the premium gets to .03-.04. Make 5-10% monthly ROI depending on your costs and how long you have to hold before exiting.

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  #4000 (permalink)
Market Wizard
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Wow. We made it to 4,000 posts. Thanks to everyone who contributed.

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