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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,649 / 5,734
Last Reply:10 Hours Ago (01:01 AM) Attachments:642

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Selling Options on Futures?

Old January 16th, 2013, 04:43 PM   #501 (permalink)
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This is what I got on OX:

Feb 1470 call Init: $3,401 Maint: $3,092
Mar 1470 call Init: $3,353 Maint: $3,048
Dec 1470 call Init: $4,580 Maint: $4,164

MJ888

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Old January 16th, 2013, 05:05 PM   #502 (permalink)
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Thanks MJ888, it's not quite as bad as the 3 or 5 times margin requirements I read earlier in this thread about the fotm options, but OS still fares much better.

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Old January 16th, 2013, 05:14 PM   #503 (permalink)
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marcl View Post
Thanks MJ888, it's not quite as bad as the 3 or 5 times margin requirements I read earlier in this thread about the fotm options, but OS still fares much better.

It really depends on what is being traded. But even 2x or 3x the margin required is still rather high. The money can be used to put on other positions or you can put on double the size at OX compared to IB. Not saying that that is what I plan to do but that's the math.

From a pure ROI perspective, OX is much better use of your money.

MJ888

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Old January 17th, 2013, 10:24 AM   #504 (permalink)
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Question for the board--and I apologize if its already been answered somewhere--if a particular commodity is overbought/uptrending would you sell a deep OTM call or deep OTM put ?

thanks

V

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Old January 17th, 2013, 12:55 PM   #505 (permalink)
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vmaiya73 View Post
Question for the board--and I apologize if its already been answered somewhere--if a particular commodity is overbought/uptrending would you sell a deep OTM call or deep OTM put ?

thanks

V

You are really asking two different questions here.

If up trending and you expect it to continue up, or at least not go down in your timeframe, then sell DOTM puts, as you don't know where the top will be.

If overbought and you expect it to consolidate or reverse, perhaps due to seasonals, fundamentals etc, then sell DOTM calls.

If you can make a case for consolidation and get DOTM value on both sides you could strangle, ie sell both puts and calls

Brit


Last edited by britkid99; January 17th, 2013 at 07:08 PM.
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Old January 17th, 2013, 03:35 PM   #506 (permalink)
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vmaiya73 View Post
Question for the board--and I apologize if its already been answered somewhere--if a particular commodity is overbought/uptrending would you sell a deep OTM call or deep OTM put ?

thanks

V

I agree with everything britkid99 said. My answer is the same. It depends on where the trend is and what is causing it. Will the trend continue or is it a one time sudden event? With certain commodities seasonal factors come into play. For example, the grains began their drought rally in mid June last year and the rally lasted until about Labor Day when harvesting started. If you had sold grains DOTM calls in July and early August, your position would've taken some heat but depending on how far your strikes were, you may have been fine.

It's not an exact science. Crude Oil has been rallying higher recently so is it time to sell DOTM calls? Earlier this week I was looking at the June CL 125 calls but now I am liking the June CL 130 calls because the premium has become attractive. Just remember this, there is no way to predict the exact top or bottom and chances are I don't need to if I am selling DOTM strikes. But just in case, there needs to be some sort of stop in place should the position go against you.

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Old January 17th, 2013, 06:18 PM   #507 (permalink)
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britkid99 View Post
If you can make a case for consolidation and get DOTM value on both sides you could strangle, ie sell both puts and calls

Brit

As an example, I sold Coffee Mar KC 120 puts and 200 calls when the price started slowing down around the 150level after its steep decline from 300, a 50% retracement. I reasoned we were near the bottom and thought we would consolidate and maybe reverse. Yesterday I closed out my last remaining 120 puts for 1 tick. KC is still around 155 having dipped to a low of 141

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Old January 17th, 2013, 06:30 PM   #508 (permalink)
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MJ888 View Post
Just remember this, there is no way to predict the exact top or bottom and chances are I don't need to if I am selling DOTM strikes.

Excellent point.

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Old January 17th, 2013, 10:53 PM   #509 (permalink)
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Appreciate the all the input guys

thanks

V

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Old January 18th, 2013, 02:51 PM   #510 (permalink)
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Just a quick update on my April CL strangle, back in December I sold three April CL 70 puts @ 0.72 and sold three April 105 calls @ 0.62. At the time, April CL was trading at around $87-$88, today it traded above $96.

I covered the 70 puts @ 0.06 and the 105 calls @ 0.61 for a total profit of $1,982.16

I was uncomfortable with how close to the money the 105 calls were so making one tick and getting out of the way and not having to worry about CL rallying to $100 or beyond is a relief.

I must admit that this strangle was placed before I joined this thread and thanks to the insight of ron99 and britkid99, I have realized that I may be selecting strikes that are too close to the money. I will evaluate and make some adjustments.

Taking a look at some June CL calls, maybe the 130 or 135 strikes. Also looking at May KC, May ZC, and June GC options.

Sadly, this is probably my last commodities options trade using IB. I will miss IB's trading platform but the margin requirements are just simply too high compared to OX.

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