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Selling Options on Futures?
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Selling Options on Futures?

  #5311 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
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rsm005 View Post
@ron99

Got a quick question about your spreadsheet vs OX. I placed a small spread on today and OX's IM doesn't line up with the spreadsheet.

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Here's the number from OX

$564 per contract

When I spoke to the futures desk at OX the guy told me their margins don't count the long puts in the spread against margin... very strange. I'll call again tomorrow and double check, maybe the guy I was speaking to was just stupid.

Any thoughts?
/rsm005/

Don't bother calling them again. Yes he was clueless.

It's the same problem they have had at least since 2009. When you do a spread, the Trade Calc gives you an incorrect IM for the first one. But all others after the first one are correct.

Use Trade Calc to get your IM for one short put and 2 long puts. Right down the IM from Trade Calc. (I just got 579.70). Now change the quantities to 4 longs and 2 shorts. Click calculate. Take this IM (939.40) and then subtract the IM you got when you calculated for 2 longs and one short. The difference should round off to 360. 939.40-579.70=359.70

Schwab is too cheap to rewrite the code and fix this problem. I had one VP saying they would fix it. Then he left when Schwab bought OX and it will never get fixed until they rewrite the software. So you have to have extra margin for your first spread.

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  #5312 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
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ys91 View Post
Hi all,

While watching the power lunch session while on treadmill, I saw the add for PUTW etf from wisdomtree and thought I'd bring this up for discussion here on the forum to see how everyone feels about the etf.

The etf aims to implement the put write strategy on S&P500 index, basically writing ATM puts 30 DTE and collect premium. Idea being sold is not really income but "protection" from downside, which is of course true if it works as intended.

Just curious to see how all the seasoned traders here feel about the strategy. The fund only has about $25M in assets (I say only in relation to wisdomtrees ~$44B in AUM), and has only been trading for last 4-5 days.

The main reason I ask is so I can also get more info on the fund and how it might operate from some of the more knowledgable posters here. If the fund does this with Reg-T margins on equity index, then maybe I'm thinking $25M won't make a big dent. But if they aim to do this using SPAN on ES futures (put options) there might be a higher supply of put options in the market (as they're writing) and premiums could fall to account for this. Just wondering if there's any merit to my logic here. I don't think $25M itself would be impactful a great deal, but what if the fund size starts to grow, to say $200M (as it gets bigger in jumps as institutional/pension funds move some of their moneys in). Of course, they'll not be using all money in margin as there's liquidity to be concerned about, but still wanted to have (still "academic") the discussion.

Also going beyond ES and looking at more diversified portfolio, wondering what size account size do you guys think starts to get in the wa of generating slid returns. Say using the strategy we've been talking about here for a long while generates ~2-3% ROI/month, getting to ~35% annually. Do you think that this return profile works for all account sizes? Using the same logic as before (in para above) would you expect you'll no longer be able to efficiently write puts/calls (efficiently = premium/risk profile). Do you think someone managing this for, say, $20M can expect to generate similar returns to someone doing this on $100K. Of course, the market is much much much bigger than $20M so doesn't move much I guess with this volume, but I'm wondering about the scalability of this strategy.

P.S. I'm still quite new to this, so please go easy on me and on my naivete!

Cheers!
Yash

I have never traded an etf so I can't help you there.

Hard to say what account size you can trade and stay diversified. Many of the commodities cannot handle large quantities like ES and CL. But I would think you could do several million and be OK. Just make sure you have good risk controls.

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  #5313 (permalink)
Elite Member
vancouver BC/Canada
 
Futures Experience: Beginner
Platform: Zaner360, OX
Broker/Data: DeCaley
Favorite Futures: options
 
Posts: 234 since Jan 2015
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ron99 View Post
Don't bother calling them again. Yes he was clueless.

It's the same problem they have had at least since 2009. When you do a spread, the Trade Calc gives you an incorrect IM for the first one. But all others after the first one are correct.

Use Trade Calc to get your IM for one short put and 2 long puts. Right down the IM from Trade Calc. (I just got 579.70). Now change the quantities to 4 longs and 2 shorts. Click calculate. Take this IM (939.40) and then subtract the IM you got when you calculated for 2 longs and one short. The difference should round off to 360. 939.40-579.70=359.70

Schwab is too cheap to rewrite the code and fix this problem. I had one VP saying they would fix it. Then he left when Schwab bought OX and it will never get fixed until they rewrite the software. So you have to have extra margin for your first spread.

Thanks Ron, that absolutely sucks but I think something else is going on also. Right now when I log in and check my "balances" the requirements are

$17,911.00 for

-30 ESM61500P
+60 ESM61250P

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Even with the information you mentioned the numbers don't seem to add up.


/rsm005/

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  #5314 (permalink)
Trading Apprentice
Chicago, IL, USA
 
Futures Experience: Beginner
Platform: ThinkorSwim Tradestation
Favorite Futures: ES, CL, GC
 
Posts: 14 since Nov 2015
Thanks: 36 given, 7 received


ron99 View Post
I have never traded an etf so I can't help you there.

Hard to say what account size you can trade and stay diversified. Many of the commodities cannot handle large quantities like ES and CL. But I would think you could do several million and be OK. Just make sure you have good risk controls.

Thanks @ron99 ! I was just wondering if the entry of another bigger player could cause any sort of a premium drop for put-write strategy. Guess, we'll have to see, but I think I'd want to see how they perform given their ATM 30DTE put options writing defined mandate given they'll be exposed to a lot of short term risk. I'd be surprised if they do better than breakeven after fee, etc. over a relatively long term.

Hope you've been well!

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  #5315 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
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Thanks: 770 given, 4,580 received
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rsm005 View Post
Thanks Ron, that absolutely sucks but I think something else is going on also. Right now when I log in and check my "balances" the requirements are

$17,911.00 for

-30 ESM61500P
+60 ESM61250P

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Even with the information you mentioned the numbers don't seem to add up.


/rsm005/

The 17,911 includes the premium of the options. 6,900. 11,011 is the IM.

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  #5316 (permalink)
Elite Member
rutherford NJ
 
Futures Experience: Intermediate
Platform: Sierra Qtrader
Broker/Data: Amp and Optimus and CQG
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Posts: 378 since May 2013
Thanks: 296 given, 137 received

Ron this is very clear


ron99 View Post
The 17,911 includes the premium of the options. 6,900. 11,011 is the IM.

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What tool or platform is this?
It gives all the margins and the Greeks in simple straightforward fashion

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The following user says Thank You to jokertrader for this post:
 
  #5317 (permalink)
Elite Member
rutherford NJ
 
Futures Experience: Intermediate
Platform: Sierra Qtrader
Broker/Data: Amp and Optimus and CQG
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Look on IB what it says thats why people move away

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So silly

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  #5318 (permalink)
World'sWorstTrader
Knoxville Tennessee USA
 
Futures Experience: Intermediate
Platform: TOS
Favorite Futures: ES, NQ, CL, /6E futures options.
 
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Thanks: 126 given, 75 received


rsm005 View Post
@ron99

Got a quick question about your spreadsheet vs OX. I placed a small spread on today and OX's IM doesn't line up with the spreadsheet.

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



Here's the number from OX

$564 per contract

When I spoke to the futures desk at OX the guy told me their margins don't count the long puts in the spread against margin... very strange. I'll call again tomorrow and double check, maybe the guy I was speaking to was just stupid.

Any thoughts?
/rsm005/

Maybe the person only thinks you are long an option, and does not consider that your position is a spread?

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  #5319 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,651 since Jul 2011
Thanks: 770 given, 4,580 received
Forum Reputation: Legendary


jokertrader View Post
What tool or platform is this?
It gives all the margins and the Greeks in simple straightforward fashion

It's OptionsXpress (OX).

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  #5320 (permalink)
Silver bullet
Kassel / Germany
 
Futures Experience: None
Platform: MC
Broker/Data: IB
Favorite Futures: ES
 
PK 1's Avatar
 
Posts: 52 since Aug 2011
Thanks: 113 given, 32 received



jokertrader View Post
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So silly

via Strategylab. Checking manually I've got exact the same amount (IM 742)

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Edit: by entering the order and choosing the amount of 30 the result is 17825 IM. So hard to understand your shown IM, except the number of contracts was wrong.


Last edited by PK 1; March 1st, 2016 at 11:08 AM.
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