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Selling Options on Futures?
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Selling Options on Futures?

  #4201 (permalink)
Elite Member
brooklyn ny usa
 
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ron99 View Post
Yes. It is also in post #2 Quick Summary on the first page.

When your (CURRENT IM + (CURRENT PREMIUM$ - OPENING PREMIUM$)) > (3 * OPENING IM), you exit your trade

I find that when you hit this exit point, you will lose about 25% of the account if it is full of this position. But waiting for this point keeps you from exiting too early and miss keeping on a profitable position.

Hopefully you have picked your positions well and rarely hit this exit point.

Thanks ron
As a option on es trader from 2007
i by time you hit the exit loss will be closer to 40%
basing the strategy on es points could be mistake any testing has to be based on % to have aqqurate numbers as a move like 2011 from 1320 to 1070 is like today from 2100 to in the 1600
Just my 2cent i think if you not following a strategy that has a edge predicting the move than you need yo sell calls to , to be delta neutral and have enough premium from both sides for the times you need to give it back as taking a loss or moving the position

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  #4202 (permalink)
Market Wizard
Cleveland, OH
 
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aron1234 View Post
Thanks ron
As a option on es trader from 2007
i by time you hit the exit loss will be closer to 40%
basing the strategy on es points could be mistake any testing has to be based on % to have aqqurate numbers as a move like 2011 from 1320 to 1070 is like today from 2100 to in the 1600
Just my 2cent i think if you not following a strategy that has a edge predicting the move than you need yo sell calls to , to be delta neutral and have enough premium from both sides for the times you need to give it back as taking a loss or moving the position

Huh? Were you drunk when you wrote this?

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  #4203 (permalink)
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brooklyn ny usa
 
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ron99 View Post
Huh? Were you drunk when you wrote this?

My English is poor as i was born and lived in beligum till few years ago
If you look most off big funds like karen and ljm.partners ..
Are selling puts and calls
( the last few years is not enough to build a strategy in the es as we are in a bull run and this is not going to hold for ever )
I sold thousands off big sp options true ccm on the floor an still selling
Came to this forum to learn how to sell in other markets
And thanks again ron for all you help

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  #4204 (permalink)
Market Wizard
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Sorry about the comment but it was so hard to read with all of the mistakes. And some of those mistakes had nothing to do with not knowing English.


aron1234 View Post
a move like 2011 from 1320 to 1070 is like today from 2100 to in the 1600

Those are not the same percentages and in 2011 your numbers are off. Never settled that low.

Selling calls in ES is just poor use of money because of super high margin required for ES calls compared to puts.

Just because Karen or others sell calls doesn't mean it is the best way to do it. I am making a far higher ROI than Karen.

You just said this 2 months ago, "was hard to go against the professionals but I did what I felt and it worked"

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  #4205 (permalink)
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Advice needed.

All, I made a few experimental trades about 40 days ago based 100% on seasonals with some fundamental confirmation to see how it would go.

Sold OZWM5 C5.95 expires in 5 days. Current price 5.11
Sold ONGM5 C3.6 expires in 9 days. Current price 3.06

Things were going great until my NG started a slow and steady march upward in price and wheat exploded upwards a few days ago. Here's my question given how close these prices are getting to their respective strikes what would you do, exit and take whatever profit you can or wait the handful days before expiration and take the risk?

In the case of wheat my profit will be $138 minus commission. With the NG it will be a complete wash.

Again this is experimental so no big quantities were used and neither position has reached the "ron" exit or even the 2x mark in premium. Just wondering what's the right way to play this type of situation...especially if I have much larger positions in the future.

Thanks,
/rsm005/


Last edited by rsm005; May 17th, 2015 at 11:02 PM.
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  #4206 (permalink)
Market Wizard
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rsm005 View Post
Advice needed.

All, I made a few experimental trades about 40 days ago based 100% on seasonals with some fundamental confirmation to see how it would go.

Sold OZWM5 C5.95 expires in 5 days. Current price 5.11
Sold ONGM5 C3.6 expires in 9 days. Current price 3.06

Things were going great until my NG started a slow and steady march upward in price and wheat exploded upwards a few days ago. Here's my question given how close these prices are getting to their respective strikes what would you do, exit and take whatever profit you can or wait the handful days before expiration and take the risk?

In the case of wheat my profit will be $138 minus commission. With the NG it will be a complete wash.

Again this is experimental so no big quantities were used and neither position has reached the "ron" exit or even the 2x mark in premium. Just wondering what's the right way to play this type of situation...especially if I have much larger positions in the future.

Thanks,
/rsm005/

For the wheat I would highly doubt prices move up 84 cents in 5 days.

But the option was at one tick on May 1st. Not worth the risk waiting 21 days for so little money.

Why did you do such a low volume and OI option like 5.95 instead of 6.00?

I don't understand the NG option. It is at one tick. What did you sell it for that getting out at one tick is a complete wash? It was at one tick on 4/23.

Current price of NGM5 is 3.01 not 3.06. I doubt it goes to 3.60 in 6 trading days.

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  #4207 (permalink)
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ron99 View Post
For the wheat I would highly doubt prices move up 84 cents in 5 days.

But the option was at one tick on May 1st. Not worth the risk waiting 21 days for so little money.

Why did you do such a low volume and OI option like 5.95 instead of 6.00?

I don't understand the NG option. It is at one tick. What did you sell it for that getting out at one tick is a complete wash? It was at one tick on 4/23.

Current price of NGM5 is 3.01 not 3.06. I doubt it goes to 3.60 in 6 trading days.


Hey Ron,

The entire premise of these 2 trades was to try a commodity that I wasn't familiar with. I had no idea what "far out of the money" meant for Wheat or Nat Gas so I went with a very small position as far as I could go where premiums would cover the cost of the trade and maybe make a few bucks. NG was opened at 2 ticks but at the time I didn't really focus on the dollars and more on the

"is sesonalgo and hightower enough to justify this and hopefully it's far enough out of the money, if not I lose ~$150 at exit".

Also,when I made the trade for wheat the Zaner platform showed volume at 5.95 but nothing at 6. Maybe I needed to refresh the Options Chain window or restart but that's what it showed at time the trade went through.

The waiting for the 1 tick part...totally understand. I should have exited that trade a while ago, after reading your ES posts it sunk in that much more.

Side Note: I'm just not a big fan of the Zaner platform. Apparently the margin calculator is junk, it has been so far off with the margins and the amount that I would make from a trade that I've had to call in and confirm more than a few times. Carley verified multiple times that I probably shouldn't put too much faith in it and do my own math. I actually use thinkorswim for charting. The only think I really like about it is that it gives me a direct link to excel so I can build my own tools.

Thanks,
/rsm005/

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  #4208 (permalink)
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rsm005 View Post
Hey Ron,

The entire premise of these 2 trades was to try a commodity that I wasn't familiar with. I had no idea what "far out of the money" meant for Wheat or Nat Gas so I went with a very small position as far as I could go where premiums would cover the cost of the trade and maybe make a few bucks. NG was opened at 2 ticks but at the time I didn't really focus on the dollars and more on the

"is sesonalgo and hightower enough to justify this and hopefully it's far enough out of the money, if not I lose ~$150 at exit".

Also,when I made the trade for wheat the Zaner platform showed volume at 5.95 but nothing at 6. Maybe I needed to refresh the Options Chain window or restart but that's what it showed at time the trade went through.

The waiting for the 1 tick part...totally understand. I should have exited that trade a while ago, after reading your ES posts it sunk in that much more.

Side Note: I'm just not a big fan of the Zaner platform. Apparently the margin calculator is junk, it has been so far off with the margins and the amount that I would make from a trade that I've had to call in and confirm more than a few times. Carley verified multiple times that I probably shouldn't put too much faith in it and do my own math. I actually use thinkorswim for charting. The only think I really like about it is that it gives me a direct link to excel so I can build my own tools.

Thanks,
/rsm005/

According to my experience, a provider of seasonal charts and the Hightower report are not enough to be successful option seller in wheat or natural gas. I will explain for the current situation in wheat.

The COT data show that funds are extremely bearish. Thus, we have to assume that they will react strongly on any bullish news. Therefore, when selling short calls, you should wait for a strong bounce as we see it now.

The seasonal charts for different time frames (eg. 5, 15, 30 years) differ from each other in May. This is a signal that the longterm downwards trend might be broken in May. (As we currently see.)

I respect the Hightower Report, but I use additional fundamental information from my broker RJO. In addition I have a close look at the COT data and a very detailed understanding of seasonals.

For most short option trades the price level where you enter the trade is important (Exception: ES puts). (Although Cordier & Gross write the opposite). If you sell calls too early you are quickly stopped out.

I intend to sell the WN C6 on the current bounce, and hold the NGN C3.5 as well as the NGQ P2.

Best regards, Myrrdin

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  #4209 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,653 since Jul 2011
Thanks: 770 given, 4,589 received
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rsm005 View Post
Hey Ron,

The entire premise of these 2 trades was to try a commodity that I wasn't familiar with. I had no idea what "far out of the money" meant for Wheat or Nat Gas so I went with a very small position as far as I could go where premiums would cover the cost of the trade and maybe make a few bucks. NG was opened at 2 ticks but at the time I didn't really focus on the dollars and more on the

"is sesonalgo and hightower enough to justify this and hopefully it's far enough out of the money, if not I lose ~$150 at exit".

OK now I get it. This was a paper experimental trade but you actually traded it.

I suspect that you weren't far enough out in DTE to get far OTM on the NG. Even though a seasonal is for a certain month contract you can play further out in time options and just exit your seasonal play when the seasonal says to exit.


Also, when I made the trade for wheat the Zaner platform showed volume at 5.95 but nothing at 6. Maybe I needed to refresh the Options Chain window or restart but that's what it showed at time the trade went through.

You need to look for OI not vol when picking a strike. There may have been vol at 5.95 that day but OI will give you a better picture of how much trading is being done on a strike.

The waiting for the 1 tick part...totally understand. I should have exited that trade a while ago, after reading your ES posts it sunk in that much more.

It rarely happens, but occasionally when I would be waiting for the last tick the market would move against me and I was forced out at a loss. I learned the hard way that waiting for the last tick was not worth it.

Side Note: I'm just not a big fan of the Zaner platform. Apparently the margin calculator is junk, it has been so far off with the margins and the amount that I would make from a trade that I've had to call in and confirm more than a few times. Carley verified multiple times that I probably shouldn't put too much faith in it and do my own math. I actually use thinkorswim for charting. The only think I really like about it is that it gives me a direct link to excel so I can build my own tools.

Thanks,
/rsm005/

I use PC-SPAN for margin calculations. I don't use Zaner.

I'm not seeing much of a seasonal play in NGm for April. Some years up. Some years down. What were you seeing?

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On a side note and nothing to do with post above, NGm is a perfect example of a commodity where 15+ seasonal averages do not match recent (5 yr) averages. Markets do change. Years ago the price jumped massively higher in March & April. But it doesn't anymore.

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  #4210 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
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Favorite Futures: Options on Futures
 
Posts: 2,653 since Jul 2011
Thanks: 770 given, 4,589 received
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One thing I have found with seasonals is that you need to play a lot of them throughout the year to be profitable on them. A seasonal could have made money the last 7 years in a row but something could affect the commodity this year that will throw things off.

For example, July Cocoa seasonally drops in May. But not this year.

I have a group of 136 seasonals that I watch. Every year the majority follow the seasonal, but some don't. If you are just picking a few of the seasonals your chances of being profitable drop.

So what I am saying is that seasonals are probably the 4th thing I look at when deciding whether to make a trade. Fundamentals (way ahead of the rest), trends, DCOT are ahead of seasonals.

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