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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,446 / 5,734
Last Reply:2 Hours Ago (01:01 AM) Attachments:642

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Selling Options on Futures?

Old January 2nd, 2013, 04:56 PM   #401 (permalink)
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ron99 View Post
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

I guess you answered part of my question on your CL position as I was asking it!

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Old January 2nd, 2013, 05:13 PM   #402 (permalink)
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ron99 View Post
If futures are up and you see puts bid higher than settlement, grab them. Instant profit in your pocket.

Now that's my kind of trading. Very nice, if only I wasn't stuck in a boring office all day.

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Old January 2nd, 2013, 05:17 PM   #403 (permalink)
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MJ888 View Post
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.

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.

If the drop of 7-8 is slow, it will not affect a 65 put that is <45 days from expiration. Higher time erosion of the premium of an option close to expiration will offset the futures drop.

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?

Yes I am thinking about selling Mar calls too. I just wanted to grab the puts that were bid at the previous days' settlement while I could.

Mar CL has dropped in Jan 6 years in a row. But it then rises quite strongly in Feb. But US CL inventory is 50 mil barrels over the 5 yr ave. That should keep pressure on prices from rising too much.

So oil inventories keep a lid on prices. Getting past fiscal cliff puts upward pressure on prices. Spec buying puts upward pressure on buying. Seasonal trend for Jan is down then strong up in Feb.

Net effect is probably flat for Jan and up in early Feb. So strangles could be good.


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!

SPAN margin for the CLh3 65 put is $166. So IB is charging 310% over SPAN?

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Old January 2nd, 2013, 05:21 PM   #404 (permalink)
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britkid99 View Post
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?

I still have my Mar 250s. With the steady downward trend in futures I wasn't up for selling puts. But I think now may be the time to sell them. May 110s? Of course I should have done that on Monday.

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Old January 2nd, 2013, 05:24 PM   #405 (permalink)
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ron99 View Post
SPAN margin for the CLh3 65 put is $166. So IB is charging 310% over SPAN?

yeah yeah! I need to MOVE my account out of IB. Margin is sick and is killing my ROI

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Old January 2nd, 2013, 05:29 PM   #406 (permalink)
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ron99 View Post
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

I think those would work great. I am also going to look at the calls. As you mentioned the fundamentals (high inventories) should keep a lid on CL over the next few months.

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Old January 3rd, 2013, 12:55 AM   #407 (permalink)
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Ron99, you mentioned that you also traded some futures contracts. Did you trade them using OX? I signed up for a Virtual Account just now and I am testing it. So far I am not at all impressed with their futures trading setup. Unless the real account platform is something different, it would be hard to day trade any futures contract thru OX. I have to wait for the page to refresh to get real time data.

What I really wanted to do with the Virtual Account was to try out trading futures options but I was told that OX does not have it for the Virtual Account. I suppose it should be fine for trading far OTM options but I still don't like that the page needs to be refreshed to get real time quotes.

Am I missing something here?

MJ888

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Old January 3rd, 2013, 01:09 AM   #408 (permalink)
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MJ888 View Post
Ron99, you mentioned that you also traded some futures contracts. Did you trade them using OX? I signed up for a Virtual Account just now and I am testing it. So far I am not at all impressed with their futures trading setup. Unless the real account platform is something different, it would be hard to day trade any futures contract thru OX. I have to wait for the page to refresh to get real time data.

What I really wanted to do with the Virtual Account was to try out trading futures options but I was told that OX does not have it for the Virtual Account. I suppose it should be fine for trading far OTM options but I still don't like that the page needs to be refreshed to get real time quotes.

Am I missing something here?

MJ888

They have streaming realtime charts for futures. You can trade off of that page. The options chains page can be set to streaming for realtime quotes.

Admittedly it is not as fast as other places, but since I don't day trade, I don't need the speed.


Last edited by ron99; January 3rd, 2013 at 01:14 AM.
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Old January 3rd, 2013, 09:42 AM   #409 (permalink)
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britkid99 View Post
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?

Hi Brit

I have Feb 135 X 200 and Mar 120 X 200 Both doing well although the 135 got a little hot for awhile.
Whats your outlook going into spring for Coffee? I'm thinking prices will stay down.
Cheers & good trading

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Old January 3rd, 2013, 12:23 PM   #410 (permalink)
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ron99 View Post

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.

Margin on IB for this is 3298 to sell 1 option!!

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