Selling Options on Futures? (Page 466) - Options on Futures | futures.io
futures.io futures trading
 

Go Back   futures.io

> Futures Trading, News, Charts and Platforms > Traders Hideout > Options on Futures


Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,836 / 5,734
Last Reply:Yesterday (01:01 AM) Attachments:642

Welcome to futures.io.

Welcome, Guest!

This forum was established to help traders (especially futures traders) by openly sharing indicators, strategies, methods, trading journals and discussing the psychology of trading.

We are fundamentally different than most other trading forums:
  • We work extremely hard to keep things positive on our forums.
  • We do not tolerate rude behavior, trolling, or vendor advertising in posts.
  • We firmly believe in openness and encourage sharing. The holy grail is within you, it is not something tangible you can download.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.


You'll need to register in order to view the content of the threads and start contributing to our community. It's free and simple, and we will never resell your private information.

-- Big Mike
     

Reply
 642  
 
Thread Tools Search this Thread

Selling Options on Futures?

Old August 3rd, 2015, 03:10 PM   #4651 (permalink)
Trading Apprentice
Barcelona
 
Futures Experience: Advanced
Platform: NinjaTrader
Broker/Data: TS
Favorite Futures: Future options
 
Posts: 13 since Mar 2015
Thanks: 5 given, 7 received


ron99 View Post
I know many in the media are watching drilling rigs, but it is far more important to watch oil production. The wells being started now are much more productive than in the past.

North Dakota drillers completed an unusually high number of superwells flowing >2000 b/d in July

Production has hardly dropped even though drilling rigs have dropped by quite a but.

This Week In Petroleum Crude Oil Section

RON, do you have an alternative strategy for the time ES will be bearish? I mean, not just a correction but a change of trend. I know it could last between 6 months and 2 years so it could be nice if we could find something similar to that so easy strategy.

I do not expect that to happen in the short term, but you never know

Reply With Quote
     

Old August 3rd, 2015, 03:13 PM   #4652 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,329 since Jul 2011
Thanks: 634 given, 3,909 received


Hills View Post
RON, do you have an alternative strategy for the time ES will be bearish? I mean, not just a correction but a change of trend. I know it could last between 6 months and 2 years so it could be nice if we could find something similar to that so easy strategy.

I do not expect that to happen in the short term, but you never know

We are no where close to long term bearish ES.

Too many things change to make a suggestion now for something that might happen years from now.

Reply With Quote
     
The following user says Thank You to ron99 for this post:
     

Old August 3rd, 2015, 09:43 PM   #4653 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,329 since Jul 2011
Thanks: 634 given, 3,909 received


Interesting tidbit.


Quoting 
the debt-to-equity ratio for S&P 500 companies now sits at 105%, well below the long-term average of 161%.

One thing this means is that an interest rate hike will affect companies less.

Here's a reliable recession warning indicator.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


https://research.stlouisfed.org/fred2/series/T10YFFM

Almost every time the 10 year rate was less than the Fed rate a recession happened soon after.


Last edited by ron99; August 3rd, 2015 at 10:03 PM.
Reply With Quote
     
The following 15 users say Thank You to ron99 for this post:
     

Old August 4th, 2015, 01:25 PM   #4654 (permalink)
Elite Member
Huntington WV
 
Futures Experience: Advanced
Platform: TradeStation
Favorite Futures: ES, CL
 
TheTradeSlinger's Avatar
 
Posts: 402 since Jun 2015
Thanks: 638 given, 500 received


ron99 View Post
Having to roll happens rarely. If you keep the excess when you acquired the position for the entire time you have on the position, you should be covered for at least a 160-170 point drop in ES futures (depends on how fast it drops). That has only happened once since the recession. Once in almost 6 years. And that time (gov shutdown) was very predictable and you should not be holding short puts during that time. Same for the recession.

For example, if the IM when you acquire the option is $700, then you should keep $2,100 of your balance for that position the entire time you hold that contract. That is your safety net.

I keep track of that excess with my Access database. You could also do it in Excel or other spreadsheet.

Doing some searching of this thread to learn more about how margin increases/decreases over the life of the option and found this post.

@ron99, do the majority of losses related to this style of trading come from being wrong (direction/strike/etc) at expiration or mainly from margins going against one's position too much?

From what I have been reading, it seems like the main risk is margin going against one's position, even if one is "correct" that the price will close on the right side of the strike for that option.


Last edited by TheTradeSlinger; August 4th, 2015 at 01:31 PM.
Reply With Quote
     

Old August 4th, 2015, 02:35 PM   #4655 (permalink)
Trading Apprentice
Boston, MA
 
Futures Experience: Advanced
Platform: TOS
Favorite Futures: ES
 
Posts: 6 since Aug 2015
Thanks: 10 given, 3 received

Managing at 25%

Futures Edge on FIO
Hi Ron,

New to the thread and doing my best to catch up.

Was wondering if you have looked at managing your winners more aggressively than 50%, say at 25%?

Reply With Quote
     
The following user says Thank You to rocky64 for this post:
     

Old August 4th, 2015, 03:23 PM   #4656 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,329 since Jul 2011
Thanks: 634 given, 3,909 received


rocky64 View Post
Hi Ron,

New to the thread and doing my best to catch up.

Was wondering if you have looked at managing your winners more aggressively than 50%, say at 25%?

Welcome. Here is my initial research.
https://futures.io/options-cfd-trading/12309-selling-options-futures-412.html#post490400

Here is what @uuu1965 found.
https://futures.io/options-cfd-trading/12309-selling-options-futures-461.html#post508160

I hope to do some more long term studies of the exit point and spreads when I find the time.

Reply With Quote
     
The following 6 users say Thank You to ron99 for this post:
     

Old August 4th, 2015, 03:28 PM   #4657 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,329 since Jul 2011
Thanks: 634 given, 3,909 received


TheTradeSlinger View Post
Doing some searching of this thread to learn more about how margin increases/decreases over the life of the option and found this post.

@ron99, do the majority of losses related to this style of trading come from being wrong (direction/strike/etc) at expiration or mainly from margins going against one's position too much?

If you are far OTM then yes it is margin calls that will force you out not going ITM.

From what I have been reading, it seems like the main risk is margin going against one's position, even if one is "correct" that the price will close on the right side of the strike for that option.

Beginners to option selling think that as long as futures don't hit their strike then they are good to go. But that is rarely the case. Not having enough excess to ride out losses in premium and increases in margin is the main problem.

IMx3 is a good start to having enough excess. IMx4 is even better but you will give up profits for the safety. Personal preference of amount of safety will decide risk and reward.

Reply With Quote
     
The following 5 users say Thank You to ron99 for this post:
     

Old August 4th, 2015, 03:39 PM   #4658 (permalink)
Trading Apprentice
Boston, MA
 
Futures Experience: Advanced
Platform: TOS
Favorite Futures: ES
 
Posts: 6 since Aug 2015
Thanks: 10 given, 3 received

Ron,

Thanks for the study links. I did notice that on both studies, managing at 40% had a greater ROI than 50%.

So, it does beg the question if managing even more aggressively will continue to raise the ROI.

Reply With Quote
     

Old August 4th, 2015, 03:49 PM   #4659 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,329 since Jul 2011
Thanks: 634 given, 3,909 received


rocky64 View Post
Ron,

Thanks for the study links. I did notice that on both studies, managing at 40% had a greater ROI than 50%.

So, it does beg the question if managing even more aggressively will continue to raise the ROI.

Till the increased costs to trade, more trades, become too large a percentage of the profit.

My study's summary was just a simple average of each month's ROI. I want to see a long term study what the comparable numbers turn out to be.

Reply With Quote
     
The following user says Thank You to ron99 for this post:
     

Old August 4th, 2015, 04:07 PM   #4660 (permalink)
Elite Member
Huntington WV
 
Futures Experience: Advanced
Platform: TradeStation
Favorite Futures: ES, CL
 
TheTradeSlinger's Avatar
 
Posts: 402 since Jun 2015
Thanks: 638 given, 500 received



ron99 View Post
Beginners to option selling think that as long as futures don't hit their strike then they are good to go. But that is rarely the case. Not having enough excess to ride out losses in premium and increases in margin is the main problem.

IMx3 is a good start to having enough excess. IMx4 is even better but you will give up profits for the safety. Personal preference of amount of safety will decide risk and reward.

Thank you for taking your time to answer my questions, along with everyone else's!

From the studying I've done, I believe IMx3 would be right up my alley.

I'm going to be opening up an options on futures account soon to explore this style of trading in real time soon. I'll post here and in my journal some of my first few trades.

@ron99 and others, what's a good rule of thumb for a "large" movement in margin? Are we talking doubling if the underlying goes heavily against you, tripling, quadrupling? I'm beginning to understand how this methodology works, just trying to get a grasp on exactly how much margin moves can affect a position.

Reply With Quote
     

Reply



futures.io > Futures Trading, News, Charts and Platforms > Traders Hideout > Options on Futures > Selling Options on Futures?

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)
 

Trading Technologies: ADL hands-on

Dec 13

Normal webinar schedule resumes after the holidays

January

Ernie Chan: Risk Management

Elite only

Dedicated Trading Servers: Advantages/Disadvantages w/sam028

Elite only

An Afternoon with FIO member Massive I

Elite only

Leo Murphy: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Crude Oil (CL) futures inverse pairing options Big Mike Commodities Futures Trading 8 December 12th, 2013 12:00 PM
Recommend futures, options Broker? sam1197 Brokers and Data Feeds 17 March 27th, 2013 01:42 AM
Trading Futures with options as protection Gooffy2010 Commodities Futures Trading 6 October 2nd, 2012 05:55 PM
Selling Njniatrader sam1197 NinjaTrader 22 June 28th, 2012 01:40 PM
Zen-Fire Futures options tici88 Brokers and Data Feeds 1 July 30th, 2011 10:16 AM


All times are GMT -4. The time now is 02:57 AM.

Copyright © 2016 by futures.io. All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
 
no new posts
Page generated 2016-12-10 in 0.15 seconds with 20 queries on phoenix via your IP 54.167.129.169