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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:570,021 / 5,734
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Selling Options on Futures?

Old March 7th, 2015, 12:18 PM   #4071 (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/


As already said, the expectations were low and therefore the probability of the report exceeding these expectations were quite high. Treasuries and gold moving lower were to be expected.
And as said, 3:1 ratio is not so much protective as just reducing the costs to enter the trade. You are still naked 2 puts.

As for what to do now: what was your exit scenario when entering the trade?
I do not hold any gold position, therefore do not have qualified opinion here. Nevertheless the chance of gold moving lower near term is still very probable. Maybe it make sense to wait until Monday/Tuesday to see if the volatility decreases and/or the price pulls back from the erratic move to exit with slightly better conditions.
In no way hope for anything and do not let the loss to increase to a painful size.

Good luck!


Last edited by rani; March 7th, 2015 at 02:50 PM.
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Old March 7th, 2015, 07:28 PM   #4072 (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/

For what it is worth, in 2+ years of live option selling, I have found that trying to delay/mitigate a loss, whether by rolling the position, selling more at a lower strike, buying opposite options, offsetting with futures, etc. have all been WORSE in the long run than just taking my lumps and exiting when the system says to exit.

I also learned to NEVER sell Gold call or put options. Gold is just too unpredictable, and is prone to extreme moves in both directions.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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Old March 8th, 2015, 04:29 PM   #4073 (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/

Lookup interest rate affect on gold paper in the sposs thread. Pl not hit as hard as gold if bonds keep selling off that position will go further underwater.

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Old March 10th, 2015, 09:29 AM   #4074 (permalink)
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/ES futures

Ron, thanks for taking the time.

Pretty much all commodities have a monthly expiration. however, the /ES contract has not only monthlies but weeklies as well. do you just sell "in bulk" monthly /ES contracts or do you have contracts that expire on a weekly basis ?

thanks

Vijay

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Old March 10th, 2015, 12:19 PM   #4075 (permalink)
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vmaiya73 View Post
Ron, thanks for taking the time.

Pretty much all commodities have a monthly expiration. however, the /ES contract has not only monthlies but weeklies as well. do you just sell "in bulk" monthly /ES contracts or do you have contracts that expire on a weekly basis ?

thanks

Vijay

Monthlies only.

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Old March 12th, 2015, 01:05 PM   #4076 (permalink)
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Any cotton traders out there? Need some advice.

I've been thinking of adding a cotton call to my overall position and wanted some feedback. Based on my research the current downtrend should continue through the summer.

1. Helms and Hightower both give very bearish fundamentals
2. Seasonalgo stressed the downtrend
3. The chart pretty much confirms the above

My biggest "but" is the fact that Cotton is at low, just a few dollars from a historic low of $57, and very oversold. I read that this usually means any could cause the price of cotton to explode up. To those who've traded cotton before, what's your thoughts on the current situation?


I'm looking to sell 6 of the Jun 12th at $80

/rsm005/


Last edited by rsm005; March 12th, 2015 at 01:11 PM.
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Old March 12th, 2015, 01:12 PM   #4077 (permalink)
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rsm005 View Post
Any cotton traders out there? Need some advice.

I've been thinking of adding a cotton call to my overall position and wanted some feedback. Based on my research the current downtrend should continue through the summer.

1. Helms and Hightower both give very bearish fundamentals
2. Seasonalgo stressed the downtrend
3. The chart pretty much confirms the above

My biggest "but" is the fact that Cotton is at low, just a few dollars from a historic low of $57, and very oversold. I read that this usually means any could cause the price of cotton to explode up. To those who've traded cotton before, what's your thoughts on the current situation?


/rsm005/

I bought back my cotton calls yesterday and took profits. There are two further "buts": CT is strongly inversely correlated to the US-$. I have no idea were the Dollar will move in the next couple of weeks. Current prices will result in smaller acreage for cotton this year. First serious estimates for acreage will be published end of March.

Longterm (!), I am bullish cotton, but the turnaround is not in sight.

Myrrdin

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Old March 15th, 2015, 01:52 PM   #4078 (permalink)
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Coffee

Was wondering if anybody is still looking at coffee futures ?

Right now the implied volatility rank is at 100% and even with 26 days to go the front month contract premiums are still pretty juicy. It is oversold but dont think any real big move is coming especially with dollar strength suppressing commodities. Im thinking about selling the May 200 CALLs; delta is 0.02, OI = 3120

full disclosure ive been short the May 230 calls for a couple of weeks now and will just be letting those expire worthless.

thanks


vijay

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Old March 15th, 2015, 05:44 PM   #4079 (permalink)
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vmaiya73 View Post
Was wondering if anybody is still looking at coffee futures ?

Right now the implied volatility rank is at 100% and even with 26 days to go the front month contract premiums are still pretty juicy. It is oversold but dont think any real big move is coming especially with dollar strength suppressing commodities. Im thinking about selling the May 200 CALLs; delta is 0.02, OI = 3120

full disclosure ive been short the May 230 calls for a couple of weeks now and will just be letting those expire worthless.

thanks


vijay

I am not sure what you mean with "implied volatility rank". Implied volatility is in the lower half compared to its values within the last year.

I think the 200 May calls will expire worthless. But be prepared for a short covering bounce in case of some fundamental news (eg. regarding weather or the US$) up to 150 or 160. Your FOTM calls might gain in value significantly.

I just bought the KCN C150.

Best regards, Myrrdin

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Old March 17th, 2015, 06:52 PM   #4080 (permalink)
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Scaling


Not sure if this has been discussed in this thread...I searched but didn't see anything.

How do the more sr. guys scale their operations? Is it as simple as larger positions on each trade? I've made a few other trades since my last post...mostly /ES and /GC...so it's given me time to think.

Given how far out of the money these trades normally are it's difficult to find enough volume to go beyond 5-10 contracts, so do you guys limit yourselves to that amount per trade or do you move closer to the money?

Thoughts welcome.

/rsm005/


Last edited by rsm005; March 17th, 2015 at 07:44 PM.
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