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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,356 / 5,727
Last Reply:December 2nd, 2016 (12:40 PM) Attachments:642

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Selling Options on Futures?

Old November 12th, 2015, 02:14 PM   #5111 (permalink)
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SMCJB View Post
I trade very few options (at least compared to futures), but I do use strategies and RFQs mostly for verticals and horizontals to roll positions.

Today I was looking to executing both a ES horizontal and a ES vertical+horizontal spread. The 2 way on the XA/ZA horizontal was 50 points wide, and the 2 way on the XA/ZB vertical+horizontal was 100 points wide. When you combine them the 2 way would be 150 points wide.

After reading @mattz post yesterday I decided to combine them into one structure (+2 XA, -1 ZA, -1 ZB). When I issued the RFQ I wasn't surprised to get a 2 way 125 points wide, encouraging you to trade the larger product but still maintaining their pound of flesh margin. What did surprise me though was that when I entered the order in the middle I was filled instantly. Examining the fill prices I was filled at the midpoint of each individual spread. Not sure if this was just luck on my behalf or something that maybe others can expect.

This also highlights that often there is hidden liquidity in quotes, (especially in markets where the 2 way is competing market makers) and just clicking on the bid or ask is a market makers dream.

Sorry for stupid question: what is XA/ZA/ZB?

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Old November 12th, 2015, 02:17 PM   #5112 (permalink)
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uuu1965 View Post
Sorry for stupid question: what is XA/ZA/ZB?

Sorry was trying to be general in nature rather than specific.
XA was November Strike A, ZA was December Strike A, and ZB was December Strike B.
In practice A was the 2050 Call and B was 2100 Call.
Guess I should have just said that.

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Old November 12th, 2015, 02:51 PM   #5113 (permalink)
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SMCJB View Post
Sorry was trying to be general in nature rather than specific.
XA was November Strike A, ZA was December Strike A, and ZB was December Strike B.
In practice A was the 2050 Call and B was 2100 Call.
Guess I should have just said that.

Thanks. So you have + 2 ES X5 Call 2050/-1 ES Z5 Call 2050/-1 ES Z5 Call 2100 (value 460$ debit)?

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Old November 12th, 2015, 03:29 PM   #5114 (permalink)
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uuu1965 View Post
Thanks. So you have + 2 ES X5 Call 2050/-1 ES Z5 Call 2050/-1 ES Z5 Call 2100 (value 460$ debit)?

This is really more of an investment rather than a trade but I'm long ES futures and short ES Calls against them (& short some Puts as well to be honest since I took some of the position off @ 2100).
I collected 1350 ~ $675 for the package, to roll X shorts to Z and to raise average strike 2500 ~ $1250. Hence I raised my effective sales price if exercised by 3175 ~ $1587.5 (1350/2+2500) per option. With S&P500 @ 2055 this is approximately 1.54% for one month - but I don't look at it this way.


Last edited by SMCJB; November 12th, 2015 at 03:37 PM. Reason: Fixed bad math. edit2 More bad math! :-(
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Old November 13th, 2015, 12:12 PM   #5115 (permalink)
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Futures Edge on FIO

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On 10/20/15 I sold one KCh6c185 and bought two KCg6c210 for a net of 0.54. Delta on the short was 7.44. On each leg delta was 2.04. IM was $221.

I finished closing it on 11/13/15 for a net of 0.24.

Monthly ROI is 16.3%. Days held was 24.

If you had on just the naked short the MROI would have been 14.3%. (I'm using 9.02 RT cost each contract and IMx3). So the spread gave me a better ROI even with the additional costs of the longs. Mainly because of the lower IM.

The numbers in blue are my actual premium$ for this trade.

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I put on this spread then because seasonals and fundamentals were bearish.

Since I put on this spread I found out through further research that the longs need to be less DTE, around 40-70 DTE, to get better coverage during a flash move. Like a 30 point move up in 10 days.

I have not yet tested to see about KC put spreads.

These spreads will not cover you if the move is slower. Like up 30 in 25 days. So you still need to do your homework to try to know the general direction of a contract.


Last edited by ron99; November 13th, 2015 at 12:35 PM.
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Old November 25th, 2015, 09:12 AM   #5116 (permalink)
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?

Of these 2 spread data sources (Moore Research Center vs SeasonAlgo) which is the best in terms of
results and data?

Thanks in advance.

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Old November 25th, 2015, 09:41 AM   #5117 (permalink)
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datahogg View Post
Of these 2 spread data sources (Moore Research Center vs SeasonAlgo) which is the best in terms of
results and data?

Thanks in advance.

I use MRCI data for years, and I am very happy with them. In addition to the "normal" seasonal data for outrights and spreads they offer seasonal volatility data (and some other things I do not use). But I do not know Season Algo in detail, and, thus, cannot compare.

I recommend to subscribe to the free trial for MRCI (14 days).

Best regards, Myrrdin

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Old November 25th, 2015, 09:45 AM   #5118 (permalink)
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datahogg View Post
Of these 2 spread data sources (Moore Research Center vs SeasonAlgo) which is the best in terms of
results and data?

Thanks in advance.

I was a subscriber to MRCI for years. It was OK. I didn't like how they called a trade a winner even though it had a drawdown of thousands of dollars.

I tried a demo of SeasonAlgo. It looked much better than MRCI. I did not get in depth with it. It had many things that MRCI did not have.

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Old November 25th, 2015, 09:50 AM   #5119 (permalink)
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ron99 View Post
I didn't like how they called a trade a winner even though it had a drawdown of thousands of dollars.

This is an important note. The trade suggestions of MRCI have a very limited value. Not only do some trades have a severe drawdown, entry and exit points often are not chosen in an optimal way. Also the selection only relies on statistics for the most recent 15 years, and does not take into accout the recent chart or fundamental information.

Best regards, Myrrdin

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Old November 26th, 2015, 02:05 PM   #5120 (permalink)
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