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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,106 / 5,727
Last Reply:December 2nd, 2016 (12:40 PM) Attachments:642

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Selling Options on Futures?

Old January 25th, 2013, 05:05 PM   #561 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
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kevinkdog View Post
Hi Ron -

Your willingness to share has inspired me to consider options on futures - something I have never done before. Maybe in an IRA acct. Of course, I can already hear the established players licking their chops at this new fresh meat coming their way!

Anyhow, in 2012 you had 746 short option trades. I am assuming that includes trades where you add on positions as expiration draws closer, correct? If I am correct, do you have a count of how many "unique" trades you put on? So, for example if you sold May Coffee puts today, and then sold more (same expiration, maybe different strikes) a month from now, that would only count as 1 unique trade.

I'm just trying to get a sense of how many opportunities you find per year.

THANKS, and stay warm in cold Ohio!

Here is my summary of all of my short option trades that closed or expired in 2012.

There were 81 contract months or "unique trades". There could be several strikes for each contract month.

For example CLg2 is CL Feb 2012 options. That is counted as 1 unique trade no matter how many strikes I did for CL Feb.

Counting each strike traded there were 256 different strikes traded and closed in 2012.

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Old January 25th, 2013, 06:05 PM   #562 (permalink)
Market Wizard
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CL margins drop 12% on Jan 30th.

NG margins drop 7% that same day.

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Old January 25th, 2013, 06:12 PM   #563 (permalink)
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Selim View Post
Hey everybody I was just wondering if you guys have heard of sucden international they seem to focus on commodities and options, they are based in London and they seem to be very professional. Thanks

Selim,

I have been in discussion with them as I am considering opening a second account with them as they also do UK pension accounts, as an alternative to Interactive Brokers.

They work on SPAN x 1.4 basis and require you to use a maximum of 60% for margin for futures options, so not bad in that respect. Their commissions are quite expensive but can be negotiated down with volume to a bit less than optionsxpress basic costs.

So far so good, now for the bad news. At the moment their trading platform does not allow for options trading so it is telephone only for now which limits you to UK trading hours. They are currently beta testing a new version of software which will allow options trading.

As soon as this is released I will be opening an account with them and will be able to tell you more then.

Brit

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Old January 25th, 2013, 06:23 PM   #564 (permalink)
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ron99 View Post
CL margins drop 12% on Jan 30th.

NG margins drop 7% that same day.

I assume you own PC-SPAN, since you are always able to calculate the SPAN margins. Does it also provide info as shown above, or are you getting that from the exchange websites?

Thanks

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Old January 25th, 2013, 06:53 PM   #565 (permalink)
Market Wizard
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Futures Edge on FIO
I do own PC-SPAN. New daily files with new margin rates are usually available at 7pm ET.

But I have subscribed to the exchanges to send me margin changes by email.

CME
CME Group Advisory Emails

ICE
https://www.theice.com/Subscription.shtml

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Old January 26th, 2013, 07:26 AM   #566 (permalink)
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Sucden international

Hey britkid99,

So it's just the telephone we can trade with, am I to understand that we can only buy and sell options within uk trading hours!!!! That would put us in a huge disadvantage. If a trade were going against us we would have to wait for opening hours!! We should wait for the platform.

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Old January 26th, 2013, 08:42 AM   #567 (permalink)
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Anybody who trades oil

I have a question I hope someone can inform me. During the financial crisis oil went from roughly 140 to 40 dollars a barrel. If you sell far otm options we can assume you sell 30 to 50 percent below market price. So say you sold puts at 50% below market value so 50/100 * 140= 70 dollars a barrel. You realize you are losing this trade but you have a lot of cash on reserve so you decide to rollover. So now you sell 50% below 70 dollars which is 50/100 * 70= 35 dollars a barrel. In this scenario you could have made money had you stayed in the trade from the biggest oil drop in history. I know this is simplistic cause there is also margin to consider and I have no idea what the margin was like during the crisis but is it hypothetically correct assuming you had a lot of cash on reserve, cheers.

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Old January 26th, 2013, 10:20 AM   #568 (permalink)
Market Wizard
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Selim View Post
I have a question I hope someone can inform me. During the financial crisis oil went from roughly 140 to 40 dollars a barrel. If you sell far otm options we can assume you sell 30 to 50 percent below market price. So say you sold puts at 50% below market value so 50/100 * 140= 70 dollars a barrel. You realize you are losing this trade but you have a lot of cash on reserve so you decide to rollover. So now you sell 50% below 70 dollars which is 50/100 * 70= 35 dollars a barrel. In this scenario you could have made money had you stayed in the trade from the biggest oil drop in history. I know this is simplistic cause there is also margin to consider and I have no idea what the margin was like during the crisis but is it hypothetically correct assuming you had a lot of cash on reserve, cheers.

It all depends on the timing of your moves. You probably lost money on the 70s. Things got extremely tight on the 35s.

Since the market was so volatile, the margin and margin premiums would have been inflated. That would have increased your loss on the 70s.

On 7/26/08 Dec futures were 146.68. The Dec 70 put was 0.25.

The Dec 08 70 put was 0.14 on 9/02. Futures were 110.97. So even though futures dropped ~$36 the short option made 0.11. But that is where it ended. The option was 9.78 on 10/28. Futures were 62.73. It settled at 12.96.

A Feb 09 35 put went from 0.19 on 11/28 to 3.26 on 12/24 but it settled at 0.00. But there would have been no way you could have ridden that out. The premium went 3,170 against you. I'm sure the margin went up significantly. You wouldn't have had that much excess for that option.

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Old January 26th, 2013, 11:03 AM   #569 (permalink)
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Ok I see the margins would have been inflated to death from the volatility. Ron99 can you give me an example of an oil trade you did that was very low delta far otm that gave you sleepless night. James cordier has a YouTube video of selling a crude put where oil was trading at 106 and he sold a three month option at 75 for 80 points. The only thing was he did not talk about margins. Since the last few years has been so volatile and you traded through it it can stand as a reference point. Thanks.

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Old January 26th, 2013, 08:48 PM   #570 (permalink)
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MJ888 View Post
This is one of the only trading forums that I am a member of. And yes, this thread is one of the best sharing of ideas that I have come across on the net.

Thanks Big Mike for keeping it this way. And thanks to the regulars on this thread for keeping it civilized.

From my experience, I have found that when there is a lot of disrespect and ripping within a thread, it usually involves people who are not actually trading and are there just to bash people.

I particularly like that everyone here is respectful of each other's ideas and trading style. Trading is NOT about being right or wrong, it is about MAKING MONEY.

I was part of another forum called the Forex Factory. I posted over there as 'Palmer' and had about 3K posts under a 4hr trading thread. I developed a website specific to that trading strategy and managed a private forum. The FF is top notch as is Big Mike's....very good people. I helped a lot of people with FOREX and with that method and I received plenty in return also. I had to say goodbye to all my friends there because both of my parent's were diagnosed with dementia about five years ago. All of my 'FOREX time' which was a considerable amount of hours per week needed to be dedicated to my parents. Selling futures options is a lot slower paced versus trading on a 1 minute to 4hr EURUSD chart but the goal is the same: a positive % return on your account.

I'm very grateful to have found this thread and for all of the people that contribute to it.

Thank you all.

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