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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 August 22nd, 2015, 11:13 AM   #4771 (permalink)
Market Wizard
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SMCJB View Post
Let me throw a knife at you. See if you can catch it. Or will you jump out of the way?

HFTs can't say they are good for the markets because they increase liquidity and then disappear when the market needs the liquidity the most.
Read that guy's Twitter posts. They are eye opening of the rigging of the markets.


Isn't every single move 'market psychology' to a certain extent?

FYI I performed the following quick analysis earlier hope to do more this weekend. Not sure I can cross post four threads continually though but here goes

Thank you very much for your studies. Good stuff! The quick rebound for day 5 is what I thought happened. I suspect many of the continued losers were from 2008.

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Old August 22nd, 2015, 11:35 AM   #4772 (permalink)
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rsm005 View Post
Ron,

Are you looking to exit on Monday or just ride this out and exit when the margins hit their limit?

When I opened my ESX5 P1700 the IM was 800 and I had 2400 in extra cash. Right now the margin for the position is at 1636. Or ESX5 P1650 the IM was 608 and I had 1812 in extra cash. The margin is what you see above. So I still have runway but as I mentioned in my earlier note to you, I just don't know if I'm going to throw good money after bad by hanging on hoping for a bounce..or what.

/rsm005/

I'm waiting to see what mid day Monday brings. I know people will be bailing out Sunday night and Monday am. The market will turn quick when they are done. I just don't know when that will be. Monday afternoon or later in week.

Till this market calms back down I am going to IMx4 and spreads. They are easily handling this drop. My IMx4 spreads have 842 room till exit point where the IMx3 has 58.

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Old August 22nd, 2015, 11:55 AM   #4773 (permalink)
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jokertrader View Post
2 day large down moves have happened but rarely 3 or beyond. Question is do you follow the rules and take the loss or wait for the bounce
Problem of taking the loss is more psychological and may leave u gunshy. Of course riding it out also is tough because I doubt you will take new positions though for this strategy prob best to initiate new positions when there is fear and vix is high

On a side note to rsm005 where do u get your option Greeks and IM - not from zaner 360 I don't think it has Greeks right? Thanks in advance

Some of the best ROI option selling trades are right after a big move. But it takes guts to do them.

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Old August 22nd, 2015, 12:08 PM   #4774 (permalink)
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ron99 View Post
HFTs can't say they are good for the markets because they increase liquidity and then disappear when the market needs the liquidity the most.
Read that guy's Twitter posts. They are eye opening of the rigging of the markets.

Imagine the conspiracy theories we could get if we got Eric Hunsader, Michael Lewis & ZeroHedge all in the same room.


ron99 View Post
Some of the best ROI option selling trades are right after a big move. But it takes guts to do them.

I think I'm going to get my feet wet on Monday. Going to rerun the analysis i showed you a few months back and see what it says now. Much higher IVs could paint a different picture with regards to best ROI candidates. Will let you know.

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Old August 22nd, 2015, 12:36 PM   #4775 (permalink)
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SMCJB View Post
Imagine the conspiracy theories we could get if we got Eric Hunsader, Michael Lewis & ZeroHedge all in the same room.

Eric Hunsader has facts to back up what he says. Nobody has proved his facts are wrong.

Looking forward to your studies.

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Old August 22nd, 2015, 06:51 PM   #4776 (permalink)
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I wanted to jot down some facts that and a few notes now that I've had a chance to digest what happened yesterday and let the hangover ease up. This is a bit long but it's good to write this down and help me put my thoughts onto paper and formulate a plan, run it by more seasoned folks, and vet my overall psychology.

FACTS:
1. The market reported the largest 2 day % drop in almost 5 years on Thursday and Friday
2. The Dow is in a correction
3. There was no new news that caused this even to happen. The situation in China was known, the currency devaluation was known, the interest rate wishy-washyness was known, and the overall performance of commodities, dollar, and participants in the market rally was known for quite some time. The market simply shrugged off those bits of news as they came up.
4. After a big drop on a Friday it's expected that the trend will continue into the following Monday as people fester and brood over the weekend. We can expect further selling starting on Sunday night and continuing into Monday. Realistically Tuesday will probably be the first day we see some stabilization. Who knows what happens after the fed meeting on Wed.
5. It's apparently rare for 2 day drops of this magnitude to continue into 3 or 4 days
6. When I read the news I look for a general consensus. What is the overall sentiment from a bulk of the outlets, analysts, and op-eds. Yesterday it was "This is the correction we're all looking for and look for this to continue for a while." Today it's "The market over reacted. We may see a few more slips down but the buyers will probably step in soon given the overall strength of the US."
7. The Fed will have another meeting on Wed.
8. Friday was a contract expiration day (not sure if that had anything to do with this selling pressure).

Plan of Action
1. If I buy back all of my contracts at the settle price on Friday the total draw-down will be approx. 33% of my account. I will call this my disorderly, "oh shit" exit.
2. I still have a decent chunk of margin excess left. 1.1x.
3. An orderly exit will probably see me do the following.
a. unload 50% of the 1700 and 1650 puts at the mid-point of the bid/ask
b. that will free up enough excess to see if the market bounces by the end of the week and cooler heads prevail.
c. if not then I will exit the remaining 50% of the 1700 puts at the mid-point of the bid/ask
d. Exit the 1650 puts the following week if the market still doesn't look to reach properly.
The thought process here is to manage the exit over time and unload the most expensive positions, margin wise, first. After all time is the friend of this method of trading. The further we get from the sell off event the more stabiliy, hopefully, the market gains. If stability or a bottom isreached then the position will simply decay over time and give me a more controlled exit, if needed, without a crippling blow to my capital.

Lesson going forward...1 way or another
1. I'm going to trade with 5xIM for a bit. I just feel it will let me sleep better at night.
2. I will probably take small positions in CL just to get some diversity but still thinking on that
3. The emotional toll of losing 33% of my account in one shot, especially after starting this just 6 months ago is going to be rough. It's a good thing I live in Vancouver and toking up is legal..... I need to come up with ways to better manage that over time and make sure that I don't get so discouraged that I stop. The purpose of me doing this is to build generational wealth and a consistent stream of income over time. Mistakes and market moves like this will happen but it need not kill me.

If there is anyone that would like to add their thoughts or suggest changes to the "plan of action" then please feel free to let me know.
/rsm005/


Last edited by rsm005; August 22nd, 2015 at 06:57 PM.
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Old August 22nd, 2015, 07:45 PM   #4777 (permalink)
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good post rsm005. It's good to put thoughts down for further reference later. You always want to learn when things go bad and why you reacted as you did. Then don't make same wrong moves in future.

We were all expecting crazy in Sep. It happened in Aug.

Be careful if you try to unload Sunday night because bid/ask spread will be wide. I doubt you will be filled at mid point.

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Old August 22nd, 2015, 08:11 PM   #4778 (permalink)
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ron99 View Post
I have been selling options on futures for years. But it is rare to find others doing it. I was wondering if there are others here doing it.

I have been doing it for 5 years. Learned it from James Cordier's book.

I have sold energy, grain, softs and metal options. Far out of the money. Usually less than 90 days from expiration.


ron99 View Post
I guess I am on a deserted island. Anybody know a place that discusses selling options on futures?

Thx Ron for this thread I just came upon it a few weeks ago. Glad you keep going, it has a life of its own now.

Reading the third edition right of the James Cordier book now here on vacation. Love it to death!!! I'm definitely going to sell option once I read the book to the end. It's right up my alley. I feel I have things in good order to take advantage of these strategies as far as acct size and the correct time in my life etc.

Again Thx for this great thread and I look forward to posting here.

Ron

Doubt kills more dreams than failure ever will. Perfect: the enemy of Done. per·fec·tion·ist: ultimately one lacking self-confidence

Quoting 
The steed of this Valley is patience; without patience the wayfarer on this journey will reach nowhere and attain no goal.

Buy Low And Sell High (read left to right or right to left....lol)
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Old August 22nd, 2015, 08:28 PM   #4779 (permalink)
Market Wizard
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Blash View Post
Thx Ron for this thread I just came upon it a few weeks ago. Glad you keep going, it has a life of its own now.

Reading the third edition right of the James Cordier book now here on vacation. Love it to death!!! I'm definitely going to sell option once I read the book to the end. It's right up my alley. I feel I have things in good order to take advantage of these strategies as far as acct size and the correct time in my life etc.

Again Thx for this great thread and I look forward to posting here.

Ron

Welcome.

Make sure you read this entire thread before you trade. There are some things in Cordier's book that aren't the best ways of doing things. Learn from his book and then advance yourself by reading everybody's experience selling options.

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Old August 22nd, 2015, 08:37 PM   #4780 (permalink)
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Selling Options on Futures?



ron99 View Post
Welcome.



Make sure you read this entire thread before you trade. There are some things in Cordier's book that aren't the best ways of doing things. Learn from his book and then advance yourself by reading everybody's experience selling options.



Thank you kind sir ...WILL DO......

Ron

Doubt kills more dreams than failure ever will. Perfect: the enemy of Done. per·fec·tion·ist: ultimately one lacking self-confidence

Quoting 
The steed of this Valley is patience; without patience the wayfarer on this journey will reach nowhere and attain no goal.

Buy Low And Sell High (read left to right or right to left....lol)

Last edited by Blash; August 22nd, 2015 at 09:04 PM.
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