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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,534 / 5,727
Last Reply:December 2nd, 2016 (12:40 PM) Attachments:642

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Selling Options on Futures?

Old March 5th, 2015, 03:33 PM   #4061 (permalink)
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I just wanted to let people know, if you are thinking about going to IB for writing options (As I did some time ago after following this thread), IB implemented a fee for large worst case loss scenarios. They call it 'exposure fee', and it badly kicks in on eg, writing naked puts on ES. I have been doing this for years without problem, but starting tomorrow (I believe) the fee will start taking effect.

This is odd considering their margin is tens of times higher than min SPAN, eg $4300 margin for an april 1800 put (3.3 delta) right now. I'm not sure when the fee kicks in, or whether its at a certain % of account risk. But selling eg, 5 april 1800 puts imposes a daily fee of $0.98 cents on my account, but it ramps up substantially and can become a factor for worthwhile DTE. If you cap your risk at all by lowering position delta, the fee is drastically reduced or removed all together, so I have switched to verticals or backwards diagonals. Even if the spread loss is huge / strikes are very far apart (like a vertical with max loss of 66% my account!) it shuts up the fee.

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Old March 5th, 2015, 05:10 PM   #4062 (permalink)
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dmh24 View Post
I just wanted to let people know, if you are thinking about going to IB for writing options (As I did some time ago after following this thread), IB implemented a fee for large worst case loss scenarios. They call it 'exposure fee', and it badly kicks in on eg, writing naked puts on ES. I have been doing this for years without problem, but starting tomorrow (I believe) the fee will start taking effect.

This is odd considering their margin is tens of times higher than min SPAN, eg $4300 margin for an april 1800 put (3.3 delta) right now. I'm not sure when the fee kicks in, or whether its at a certain % of account risk. But selling eg, 5 april 1800 puts imposes a daily fee of $0.98 cents on my account, but it ramps up substantially and can become a factor for worthwhile DTE. If you cap your risk at all by lowering position delta, the fee is drastically reduced or removed all together, so I have switched to verticals or backwards diagonals. Even if the spread loss is huge / strikes are very far apart (like a vertical with max loss of 66% my account!) it shuts up the fee.

I had an account with IB, but left them when I recognized how they treat option sellers.

There are many brokers around which are much better suited for traders selling options.

Best regards, Myrrdin

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Old March 5th, 2015, 05:23 PM   #4063 (permalink)
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well aware, just wanted to share that there is more than poor ROI, now a direct fee involved

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Old March 5th, 2015, 07:36 PM   #4064 (permalink)
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reverse calendars saw on youtube

https://www.youtube.com/user/DavidRiveraTrading

This guy does reverse calendars.. where he sells the back month since it has more time value and has more theta decay
on futures options..

any thoughts? does it make sense


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Old March 6th, 2015, 10:31 AM   #4065 (permalink)
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/CL Calls

Futures Edge on FIO
Yes Ron, sorry you are correct. i forgot to load up the OI when I looked at that strike.

Couldnt place the trade yesterday as had errands to run and now with the jobs report excellent and the dollar going to new highs, oil isnt doing well but still put a an order to buy /CL 75 calls May expiration at 0.05

will see if any takers but wont go chasing.

thanks

vijay

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Old March 6th, 2015, 11:27 AM   #4066 (permalink)
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jokertrader View Post
https://www.youtube.com/user/DavidRiveraTrading

This guy does reverse calendars.. where he sells the back month since it has more time value and has more theta decay
on futures options..

any thoughts? does it make sense


If you do a reverse calendar, like he says, with options 60 days apart and the same strike, the delta on the long option is so much lower than the short option that I don't think it is going to do much to protect you.

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Old March 6th, 2015, 06:09 PM   #4067 (permalink)
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ron99 View Post
If you do a reverse calendar, like he says, with options 60 days apart and the same strike, the delta on the long option is so much lower than the short option that I don't think it is going to do much to protect you.

i also do this at times (I call em backwards diagonals) and completely agree, not really gaining any protection. worth the effort i suppose if it frees up a significant chunk of margin

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Old March 6th, 2015, 06:47 PM   #4068 (permalink)
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Will the reverse calendar hurt though

Since the long option is nearer month.. and since we are not getting much protection due to the low delta.. is it worth putting it on just to free up margin?
We do give up a few ticks in premium/commission but is there any downside to putting this on?
Can we be SLIGHTLY more aggressive on the short option since we have this hedge thereby more than making up for the loss of premium/commission due to the long option

thanks all

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Old March 6th, 2015, 08:30 PM   #4069 (permalink)
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So the price of gold took a giant dump today and the options value soared past my exit point.

Sold 3 May GC P1000
Bought 1 May GC P1010

My protective put didn't do much to help. God knows why 1000 changed so much vs the 1010. I'm not as freaked at this trade as I was with my oil trade earlier because the position size is more manageable but an exit will still sting. What I don't want to make a panicked charge for the door and end up paying dearly for the privilege. So here's my thoughts and I'd love some feedback from the more seasoned folks here.

1. Watch what the price does over the first few days next week.
2. Sell on the call side. Something I was looking to do last week if the opportunity came up.
3. Reduce the number of contracts from 3 to 2 and then exit completely in an orderly fashion. My hope is the market overreacted but I can't bank on that.
4. Keep the protective put for as long as reasonable to maximize that gain.

thoughts? feedback?

/rsm005/

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Old March 7th, 2015, 02:11 AM   #4070 (permalink)
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rsm005 View Post
So the price of gold took a giant dump today and the options value soared past my exit point.

Sold 3 May GC P1000
Bought 1 May GC P1010

My protective put didn't do much to help. God knows why 1000 changed so much vs the 1010. I'm not as freaked at this trade as I was with my oil trade earlier because the position size is more manageable but an exit will still sting. What I don't want to make a panicked charge for the door and end up paying dearly for the privilege. So here's my thoughts and I'd love some feedback from the more seasoned folks here.

1. Watch what the price does over the first few days next week.
2. Sell on the call side. Something I was looking to do last week if the opportunity came up.
3. Reduce the number of contracts from 3 to 2 and then exit completely in an orderly fashion. My hope is the market overreacted but I can't bank on that.
4. Keep the protective put for as long as reasonable to maximize that gain.

thoughts? feedback?

/rsm005/

According to the CME site, the price for the GCK P1010 moved 0.7, for the GCK P1000 moved 0.6 . Seems to be very regular. You cannot expect the one P1010 to compensate the losses of three P1000 - the strike prices are too close to each other.

Please be careful being in a short option trade on the day of a report that has the potential to move your underlying severely to the wrong direction. In my opinion, the probability was high (too high to be short puts in Gold) that yesterday's report shows figures above expectation, and, thus, Gold price would move downwards.

What you should do now ? I do not have an opinion on the gold price in the near future, and thus I am not invested here. In my opinion, the probability for Gold moving lower is too high to stay in the trade. Although it might move up again. I do not know. In option selling it is important not be on the wrong side. Thus, I would liquidate the whole position. In this thread you can read the story of someone who erased his account by not quitting a Gold trade when it was still possible with acceptable losses.

I quit many short option trades with minor losses or some profits long before my standard limit (double premium) is reached. In case an important resistance is violated, the fundamentals have changed, or before an important report which seems too "dangerous" to me.

Good luck !

Best regards, Myrrdin

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