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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:567,733 / 5,727
Last Reply:3 Hours Ago (12:40 PM) Attachments:642

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Selling Options on Futures?

Old January 30th, 2013, 06:38 PM   #611 (permalink)
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April Crude Oil:

When I traded Forex I wrote a custom indicator with alerts and all the jazz for the following:

Take a look at any chart you like. Plot only one indicator, the 8EMA. Now, look for the gaps that the price action forms with the 8EMA when the trend is very strong. In a strong uptrend, the low of the price bar sometimes forms a gap above the 8EMA. In a strong downtrend the high of the price bar forms a gap below the 8EMA.

Now, study what happens after the gap...price stalls and the 8EMA catches up to the price bar to fill the gap or the price itself pulls back to fill the gap. These are April 2013 CL charts. The circles are these gaps....take a look a the price action previously and what is happening now, there is a gap along with a little bit of bearish divergence with the RSI.

This is telling me that there is a 'potential' for a price stall or some sort of pullback in price. How much? Who knows? The next moving average is the 21EMA but that has other rules that I follow from my Forex days and things are a little different with writing futures options vs. trading Forex....back to CL

The oil market is up for several reasons:

- Weak dollar and the oil Barron's demand more $ for their oil
- Production costs have gone up
- Global growth has increased
- The hostilities in N. Africa and the middle East

Soooo I'm looking for a pullback in the next several days and will look to sell puts. The trend is UP and there is no need to fight the trend.

The majority of the Q and A in this thread is geared towards how, brokers, margin, etc. That is very valuable stuff. Ron and brit..many continued thanks my friends. I'm just trying to introduce some reasoning as to when, why, and how I look for entries and setups in the markets themselves.

Ron: hoping everything is well with your family and friends soon.

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Selling Options on Futures?-cl-04-13-daily-3_27_2012-10_18_2012.jpg   Selling Options on Futures?-cl-04-13-daily-7_12_2012-1_30_2013b.jpg  

Last edited by opts; January 30th, 2013 at 06:39 PM. Reason: fuhgot the charts
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Old January 30th, 2013, 07:32 PM   #612 (permalink)
Trading for Fun
Houston, Texas
 
Futures Experience: Advanced
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opts View Post
MJ:

May is the next contract and I was looking at the 920's....

Strong day today so just watching now. Price still floundering around the 50% retrace level so that is why I straddled a few weeks back. Sitting tight right now until there is some sort of direction.

Yes indeed it was a strong day. I was looking at the 950's and higher. And I would sell some CL puts myself on the next decent pull back. So cool that created your own indicator too!

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Old January 30th, 2013, 07:40 PM   #613 (permalink)
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Mj888


That's amazing return, to hell with the bank's interest rate and crappy mutual funds I'm going to play with my own money make a nice return and sleep at night, I have to say I'm really glad I found this forum, after reading cordiers book I was a bit skeptical but now I know thanks mj888 for confirming.

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Old January 30th, 2013, 07:54 PM   #614 (permalink)
Trading for Fun
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Thanks: 37 given, 123 received

Selim,

Just a word of caution from my personal trading experience, there is a lot to learn and understand when it comes to selling options on futures. While the possibilities of very handsome returns are possible, discipline and patience is vitally important. Just because 80%-90% or more of trades will be profitable does not mean you have found the Holy Grail or some inside secret to success, because that is not what this is. Each time I took a bigger position when I was not ready to do so or moved my strikes a little closer because I got greedy, I got destroyed. Every time a stop loss was reached and I did not get out properly for a small acceptable loss because I "hoped" the position will reverse, I ended up losing 2x-3x-4x or more than I should have. No one can "teach" you any of these things. I read all about them, lots of experienced options sellers warned me about them but the best way to learn is to experience them for yourself. After you get a margin call waking you up at 7 AM or having an option go in the money and be assigned a futures contract, you will come to respect position sizing, stop losses, and selecting strikes far far far out of the money to sell.

For all the years I have been doing this, I do not even consider myself an expert. There is still a lot for me to learn. If anything, my trading experience has humbled me and each losing trade reminds me that I must leave my ego at the door when trading. I've said this before and I will say it again, it's not about being right, it's about making money.

Doubling your money is not all that far fetched if you combined Cordier's "staggering" method and trade 5-6 different markets plus Ron99's style of selecting strikes with very very low Delta's, under 0.04 or lower.
MJ888


Last edited by MJ888; January 30th, 2013 at 08:04 PM.
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Old January 30th, 2013, 10:31 PM   #615 (permalink)
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MJ888 View Post
Selim,

Just a word of caution from my personal trading experience, there is a lot to learn and understand when it comes to selling options on futures. While the possibilities of very handsome returns are possible, discipline and patience is vitally important. Just because 80%-90% or more of trades will be profitable does not mean you have found the Holy Grail or some inside secret to success, because that is not what this is. Each time I took a bigger position when I was not ready to do so or moved my strikes a little closer because I got greedy, I got destroyed. Every time a stop loss was reached and I did not get out properly for a small acceptable loss because I "hoped" the position will reverse, I ended up losing 2x-3x-4x or more than I should have. No one can "teach" you any of these things. I read all about them, lots of experienced options sellers warned me about them but the best way to learn is to experience them for yourself. After you get a margin call waking you up at 7 AM or having an option go in the money and be assigned a futures contract, you will come to respect position sizing, stop losses, and selecting strikes far far far out of the money to sell.

For all the years I have been doing this, I do not even consider myself an expert. There is still a lot for me to learn. If anything, my trading experience has humbled me and each losing trade reminds me that I must leave my ego at the door when trading. I've said this before and I will say it again, it's not about being right, it's about making money.

Doubling your money is not all that far fetched if you combined Cordier's "staggering" method and trade 5-6 different markets plus Ron99's style of selecting strikes with very very low Delta's, under 0.04 or lower.
MJ888


Agree:

Take the time to learn. It is very appealing to see option premiums out there for the taking but you have to fathom all of the external variables that can move that premium for or against you. Writing options is a very slow paced and sometimes boring way to trade compared to trading the Forex markets on a 1 minute or 10 second chart; been there done that.

If you have never done this before, hell I don't know....sell one option in the grain market so far OTM, has 0.1% chance of going ITM, takes 30 days to expire and after all the fees and commissions are deducted from the trade you end up with...$5. Yes, that is $5. If you have the patience to wait 30 days to make $5 then you're have learned something...patience. You must 'possess' this trait to sell options. That option might be too far away to even move in price pending the underlying movement. Take note of the premiums, 10%, 20%, even 50% away from the underlying price and see how those premiums move in that 30 days.

Don't subscribe to a newsletter or alert service either. All the info here is free...and probably a lot better too


Depending on your level of trading experience, some brokerage houses may not let you write options uncovered as soon as you open an account. Check with them beforehand. They have their initiation policies also....


Last edited by opts; January 30th, 2013 at 10:32 PM. Reason: oh yeah
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Old January 31st, 2013, 12:14 AM   #616 (permalink)
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Jakarta indonesia
 
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Ron,

My deepest condolences....

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Old January 31st, 2013, 02:52 PM   #617 (permalink)
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Ron, I am deeply sorry to hear about the death in your family.

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Old January 31st, 2013, 03:07 PM   #618 (permalink)
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Per previous posts....

Interesting day today:

Crude oil filling the 8EMA gap

Wheat giving back all the gains from yesterday

"Patience young Skywalker."

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Old January 31st, 2013, 03:30 PM   #619 (permalink)
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Britkid99. Sucden

Hey britkid99, sucden sent me this.


Dear Mr Farah,
*
It really depends on what you would like to trade, your trading strategy, size and frequency.
*
The STAR Platform will enable trading all types of market strategies (for example put and call spreads, butterflies, iron condors etc) whereas the SMART Platform will only allow for singular trade to be entered.* The STAR Platform would be better suited to a professional trader with high trade frequencies as opposed to a private individual who might be looking to trade a few times per month.
*
There are a number of differences, particularly in terms of product availability and strategy, so without knowing more about your trading requirements I could not suggest one over the other at this point.
*
Please do not hesitate to come back to me should you have any further queries.
*
I look forward to hearing from you.
*
Kind Regards
*
Barnes

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Old January 31st, 2013, 04:18 PM   #620 (permalink)
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Selim View Post
Hey britkid99, sucden sent me this.


Dear Mr Farah,
*
It really depends on what you would like to trade, your trading strategy, size and frequency.
*
The STAR Platform will enable trading all types of market strategies (for example put and call spreads, butterflies, iron condors etc) whereas the SMART Platform will only allow for singular trade to be entered.* The STAR Platform would be better suited to a professional trader with high trade frequencies as opposed to a private individual who might be looking to trade a few times per month.
*
There are a number of differences, particularly in terms of product availability and strategy, so without knowing more about your trading requirements I could not suggest one over the other at this point.
*
Please do not hesitate to come back to me should you have any further queries.
*
I look forward to hearing from you.
*
Kind Regards
*
Barnes

Ah Mr Barnes, Sounds like you are communicating with the same guy as me. Here is part of his email to me...

"The SMART Platform does not currently support Options but soon will do we are currently going through the testing phase at the moment. There is another Platform that is able to support Options Trading called STAR, but STAR comes alongside a 250 per month Platform fee." My emphasis

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