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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

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Selling Options on Futures?

Old March 6th, 2016, 09:01 PM   #5331 (permalink)
Market Wizard
OH
 
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I am almost done reading the book, The Big Short. The trades mentioned in the book to short the sub-prime mortgage market are, to put it in our terms, like buying far OTM puts. And they hit it big time.

But that also shows what can happen if you are like the banks and others that sold far OTM puts because you, like them, thought the market will never move that much.

Really cements the fact that you need to have on risk protection for every trade.

I actually liked the movie better than the book. But the book gives more details than the movie.

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Old March 8th, 2016, 01:47 PM   #5332 (permalink)
Trading Apprentice
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First post long time reader

Hello, I would like to thank everyone for their contribution to this forum. I think this is one of the best places on the internet right now for knowledge on selling options on futures. I am currently a chemical engineering student in my last year of university so I don't do much trading but I am planning to put on a trade soon with some money I have scraped up. I would be happy to hear any criticism from anyone as I use it as a chance to learn. First I would like to share a research paper with everyone. I think that the variance risk premium inherent in the commodities market is much larger than found in equities. I first learned about selling options from tasty trade, but they focus on equities mostly and that's where I disagree with them. I am planning to sell a 25/60 short strangle on crude with an expiry of May 17 2016. Any comments would be much appreciated. Once again thank you for all the knowledge you have provided.

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Selling Options on Futures?-prokopczuk__marcel__wese_simen__chardin_variance_risk_premia_in_commodity_markets-1-.pdf  
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Old March 8th, 2016, 02:48 PM   #5333 (permalink)
Market Wizard
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theta125 View Post
Hello, I would like to thank everyone for their contribution to this forum. I think this is one of the best places on the internet right now for knowledge on selling options on futures. I am currently a chemical engineering student in my last year of university so I don't do much trading but I am planning to put on a trade soon with some money I have scraped up. I would be happy to hear any criticism from anyone as I use it as a chance to learn. First I would like to share a research paper with everyone. I think that the variance risk premium inherent in the commodities market is much larger than found in equities. I first learned about selling options from tasty trade, but they focus on equities mostly and that's where I disagree with them. I am planning to sell a 25/60 short strangle on crude with an expiry of May 17 2016. Any comments would be much appreciated. Once again thank you for all the knowledge you have provided.

Welcome. Don't wait so long for your second post.

Since I never took advanced statistics in school, I will need someone to interpret that paper for me.

You may want to look into doing covered options to protect yourself from a Black Swan event that seem to be happening more often lately.

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Old March 8th, 2016, 10:41 PM   #5334 (permalink)
Trading Apprentice
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Any speacil requirements to trade?

I am interested in trading options on futures. Specifically selling options on the Emini S&P500. I want to use the vertical credit spread strategy with deep OTM options. I have traded equity options but am new to options on futures. I just have a few questions. When you first open an account to trade equity options the broker will put you in level 1 or maybe level 2 and they will not allow you to trade vertical credit spreads until you get too level 4 which comes with experience and capital. Is there any such requirement to try this strategy with options on futures? Or can I jump in and make the trade as long as I have the required margin or performance bond? Thank you.

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Old March 8th, 2016, 11:12 PM   #5335 (permalink)
Market Wizard
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OptionSeller13 View Post
I am interested in trading options on futures. Specifically selling options on the Emini S&P500. I want to use the vertical credit spread strategy with deep OTM options. I have traded equity options but am new to options on futures. I just have a few questions. When you first open an account to trade equity options the broker will put you in level 1 or maybe level 2 and they will not allow you to trade vertical credit spreads until you get too level 4 which comes with experience and capital. Is there any such requirement to try this strategy with options on futures? Or can I jump in and make the trade as long as I have the required margin or performance bond? Thank you.

Welcome.

That question is best answered by your broker. They may also require a minimum balance too.

Many brokers do not want option sellers. That should be your first question you ask a broker.

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Old March 11th, 2016, 11:12 AM   #5336 (permalink)
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@ron99 and others


I've made a few trades over the past month and have noticed something that's causing me to leave money on the table and am wondering if there's a better way to do this. I'm being forced to leg out of my spreads and getting a poor fill on the long side. For example.

1. When I Sell to Open a position I enter an automatic order to Buy to Close at 50% of the price
2. I can't enter a limit price to Sell to Close the long position because I don't know what the price will be
3. The platform closes the short automatically..happened this morning when the market rallied and it hit my exit.
4. The long is still there until I get to a computer and close it out with a Sell to Close.

The problem is that during my time away from the computer the market kept moving against me and the long decreased in value lowering my P/L before I could get out. Is there a better way to do this? I dread the idea of a market order so I'm wondering what others do here.


For now I'm back on the sidelines waiting until the Fed makes it's statements next week before looking at my options. Thanks for the help.

/rsm005/

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Old March 11th, 2016, 12:00 PM   #5337 (permalink)
Market Wizard
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rsm005 View Post
@ron99 and others


I've made a few trades over the past month and have noticed something that's causing me to leave money on the table and am wondering if there's a better way to do this. I'm being forced to leg out of my spreads and getting a poor fill on the long side. For example.

1. When I Sell to Open a position I enter an automatic order to Buy to Close at 50% of the price
2. I can't enter a limit price to Sell to Close the long position because I don't know what the price will be
3. The platform closes the short automatically..happened this morning when the market rallied and it hit my exit.
4. The long is still there until I get to a computer and close it out with a Sell to Close.

The problem is that during my time away from the computer the market kept moving against me and the long decreased in value lowering my P/L before I could get out. Is there a better way to do this? I dread the idea of a market order so I'm wondering what others do here.


For now I'm back on the sidelines waiting until the Fed makes it's statements next week before looking at my options. Thanks for the help.

/rsm005/

I don't use GTC orders for spreads because of the problem you stated. But I sit at my computer all day.

Send an email to Carley Garner and see what she says.

BTW next week ES futures should go up. From the close on Friday before future contract expiration (today) to next Friday around 8-9 am ET (Mar ES quits trading at 9:30 am ET), ES futures have been up 81% of the time since 2004 including the last 10 future's expirations in a row. Last Dec it was up 19.25. I would trade June not March futures. More Vol.

The risk would be if Fed raised interest rates but I doubt that happens.

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Old March 11th, 2016, 12:34 PM   #5338 (permalink)
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rsm005 View Post
@ron99 and others

I've made a few trades over the past month and have noticed something that's causing me to leave money on the table and am wondering if there's a better way to do this. I'm being forced to leg out of my spreads and getting a poor fill on the long side. For example.

1. When I Sell to Open a position I enter an automatic order to Buy to Close at 50% of the price
2. I can't enter a limit price to Sell to Close the long position because I don't know what the price will be
3. The platform closes the short automatically..happened this morning when the market rallied and it hit my exit.
4. The long is still there until I get to a computer and close it out with a Sell to Close.

The problem is that during my time away from the computer the market kept moving against me and the long decreased in value lowering my P/L before I could get out. Is there a better way to do this? I dread the idea of a market order so I'm wondering what others do here.


For now I'm back on the sidelines waiting until the Fed makes it's statements next week before looking at my options. Thanks for the help.

/rsm005/


ron99 View Post
I don't use GTC orders for spreads because of the problem you stated. But I sit at my computer all day.

Why don't you enter a GTC for the spread/strategy rather than just for the short leg? I just checked and you can definitely do it (well I can in XTrader).

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Old March 11th, 2016, 01:16 PM   #5339 (permalink)
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SMCJB View Post
Why don't you enter a GTC for the spread/strategy rather than just for the short leg? I just checked and you can definitely do it (well I can in XTrader).

You cannot do it on the Zaner360 platform, which is used by most of Carleys customers (including myself).

But contact Carley - she can place these spread orders for your account.

Best regards, Myrrdin

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Old March 15th, 2016, 12:52 PM   #5340 (permalink)
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@ron99

So I put on a smallish position 4 days ago against ES and have noticed some interesting behavior.

Position
ESM6P1620 Price = $8
ESM6P1370 Price = $2.20


Since the position was opened the market has remained fairly flat but what I've seen is the long put decay much faster than the short.

As of today the prices reflect
ESM6P1620 Price = $8
ESM6P1370 Price = $1.90


Margin hold is about the same at OX.

It's unnerving to watch the longs decay that since i'm counting on them to protect me from a market shock. I'm using position sizing to mitigate the loss against a long grind down. Just thought I'd share.

Thanks,
/rsm005/

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