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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,515 / 5,734
Last Reply:6 Hours Ago (01:01 AM) Attachments:642

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Selling Options on Futures?

Old January 31st, 2013, 04:22 PM   #621 (permalink)
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britkid99 View Post
Selim,
Here is a quote of my first trade posted here and also Ron's very informative reply.
I was going for deltas in the region o 05-10. I would now be unlikey to go above 05
I am nothing special still just a beginner BUT it is not that difficult and there is good advice and support available here.
Brit
ps: No bets from me on football (soccer) 50:50, you get better odds selling options

Hi Britkid99, you had posted a chart on CL options with price and volume sometime back. Are you able to chart that on IB software or on I/RT using some independent data feed?

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Old February 1st, 2013, 06:48 AM   #622 (permalink)
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Barrington View Post
Hi Britkid99, you had posted a chart on CL options with price and volume sometime back. Are you able to chart that on IB software or on I/RT using some independent data feed?

Hi Barrington,

The option price chart comes direct from IB's Trader Workstation (TWS)

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Old February 1st, 2013, 10:40 AM   #623 (permalink)
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Watching the April Crude 75 puts that are a little out of parity here:

Bids:

The 77 is at .09
The 76 is at .05
The 75 is at .07 - very high OI
The 74 is at .04

April still heading down so it the further OTM puts gain some premium I'll start looking a little lower than the 75's as long as the premium is decent.

The next 'chart target' to the downside is the price area, per how I read the charts, around the 21EMA (See previous chart).

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Old February 1st, 2013, 11:45 AM   #624 (permalink)
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My Plunge Into Options

Sorry in advance for the long post. Hopefully this will be useful to someone on the fence about starting to trade OTM options...

OK, last weekend I made the decision to try out the "sell deep OTM options" strategy. On Monday, I opened an account with OptionsXpress. By Friday (today), I was funded and made my first trades (below). Super quick process.

Some intial thoughts/musings:

I have never traded options before now. But, I already knew all the lingo, calculations and the basics of options. Also, I have been trading futures for over 20 years. So, I wouldn't recommend a newbie jump into this like I did.

OptionsXpress has by far the best customer service of any broker I deal with, and I currently have 3 other futures brokers and 1 forex broker. I dealt with them via e-mail and live chat, and always got quick, straightforward answers.

I found a deal where the first 50 trades (until June 30) are basically commission free. They still hit you with exchange fees, and some other 75 cent "transaction fee," but for a few months I'll be paying aorund $2.20-$2.50 per contract. After the promotion goes, assuming I am still trading this method, I'll ask for a discount like others have. When I do my initial ROI analysis, for now I still assume $15.51 commission per contract (worst case). ROI numbers below will use actual commission I am paying.

If you saw my Big Mike webinar in December, you might remember I was big on "incubation." In a nutshell, the idea is that once you find a trading strategy, you don't use real money for a couple of months, and instead you just watch it in real time. It is a great way to save trading capital when you create one of those "looks great in backtest, fails in real time" type systems.

Obviously, I violated my own rule here (cue foreboding music). I did that because 1) this is not a traditional backtested system and 2) I felt I could only evaluate it by actually using real money. So, in effect I am incubating this approach, but with a small amount of real money. Mid year, if the method (the way I implement it) seems to hold up, I plan of moving an IRA account there, and trading it more heavily.

OptionsXpress Trade Calculator is a pretty neat tool. Even though it has OE margin requirements, I am using it to evaluate spread positions I trade with another broker (who has no online margin calculator).

My initial "test" here will try to get the 3 x margin requirement around $1,000. Most times this will mean selling only 1 contract.

**********************************
So, here are the trades today (I will use the same reporting style as Ron has):

Sold 1 CLJ3 75 put for .07. Margin $327, cash excess $654. 42 DTE. $2.22 fees. ROI 5.0% per month (seems so good, I wonder if I did something wrong)

Sold 1 KCK3 200 call for .21. Margin $344, cash excess $688. 70 DTE. $2.52 fees. ROI 3.2% per month (seems so good, I wonder if I did something wrong)

I have one other open order. If it gets filled today, I will go back and edit this post.



Below is how I plan to "watch" these trades. Much slower pace with options than my normal futures, so my monitoring method may change.



Comments/questions/criticism will be VERY appreciated. Especially criticism - please feel free to challenge me on my trades and my calculations.

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Selling Options on Futures?-capture.jpg  

Last edited by kevinkdog; February 1st, 2013 at 12:28 PM.
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Old February 1st, 2013, 12:12 PM   #625 (permalink)
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Futures Edge on FIO

Are you a NinjaTrader user?

 
That's really low margin requirement. I was looking at the same trade in IB and it's requiring me $1688

If you don't mind sharing, where did you find the deal?

Thanks

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Old February 1st, 2013, 12:26 PM   #626 (permalink)
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sluhur View Post
That's really low margin requirement. I was looking at the same trade in IB and it's requiring me $1688

If you don't mind sharing, where did you find the deal?

Thanks

You can google "options xpress promotion" if this link doesn;t work.

Options trading, stocks & futures trading with an options specialist - optionsXpress

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Old February 1st, 2013, 01:15 PM   #627 (permalink)
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kevinkdog View Post
Mid year, if the method (the way I implement it) seems to hold up, I plan of moving an IRA account there, and trading it more heavily.

Hi Kevin,

Thanks for sharing your experience, but I doubt they would allow you to sell naked puts in your IRA account. Are you sure?

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Old February 1st, 2013, 01:57 PM   #628 (permalink)
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walker View Post
Hi Kevin,

Thanks for sharing your experience, but I doubt they would allow you to sell naked puts in your IRA account. Are you sure?

Earlier in the thread, Ron explains that he does it, so I'm guessing it is finding the right trustee to administer it.

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Old February 1st, 2013, 03:24 PM   #629 (permalink)
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kevinkdog View Post
Earlier in the thread, Ron explains that he does it, so I'm guessing it is finding the right trustee to administer it.

This is usually allowed because selling futures options is not considered to be "shorting stock" like selling a call in equities is.

In my UK IB pension account I can freely trade futures and options on futures but can not trade equity credit spreads let alone naked equity calls.


Last edited by britkid99; February 1st, 2013 at 03:42 PM.
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Old February 1st, 2013, 04:14 PM   #630 (permalink)
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kevinkdog View Post
I found a deal where the first 50 trades (until June 30) are basically commission free. They still hit you with exchange fees, and some other 75 cent "transaction fee," but for a few months I'll be paying aorund $2.20-$2.50 per contract. After the promotion goes, assuming I am still trading this method, I'll ask for a discount like others have. When I do my initial ROI analysis, for now I still assume $15.51 commission per contract (worst case). ROI numbers below will use actual commission I am paying.

Mid year, if the method (the way I implement it) seems to hold up, I plan of moving an IRA account there, and trading it more heavily.

OptionsXpress Trade Calculator is a pretty neat tool. Even though it has OE margin requirements, I am using it to evaluate spread positions I trade with another broker (who has no online margin calculator).

[/B]

Great that you have decided to give selling OTM options a try!

I am looking at the same KCK3 200 call strike too but I do not have a position yet, probably Monday I will put in an order.

I did ask OX about rolling over my 401K. The bad news is that they told me that I cannot sell options on futures in my 401K/IRA account at OX. I am not sure where Ron99 has his IRA account but I do not think it is with OX. I am sure he can answer that when he is back.

When I opened my account with OX, they were very willing to negotiate my commission structure. I am certain that it helped me to mention the extremely low commission I was getting at IB. I did not expect OX to match IB but I was pleasantly surprised that OX went from $12.99 to $3.99 (exchange fees are separate) without any quota requirements on how many trades I must make. So it does pay to negotiate with OX.

And yes, Trade Calculator is indeed a very neat tool. I have been using it a lot to get an idea about what my margin requirements would be. I like to use the Trade & Probability Calculator too although I don't think it is entirely accurate some times.

MJ888

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