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Selling Options on Futures?
Started: by ron99 Views / Replies:620,777 / 5,898
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Selling Options on Futures?

  #631 (permalink)
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MJ888 View Post
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

Ron mentions in the post below how he does his IRA:
https://futures.io/commodities-futures-trading/12309-selling-options-futures-13.html#post222850

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  #632 (permalink)
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ron99 View Post

I too have self-directed IRAs (one for my wife and one for me through Millenium Trust) at OX. I trade those even more cautious than I do my regular account because if you blow that one up you just can't add unlimited money back into them. I usually do deltas of < 0.0100 on the options I sell in those accounts.

Ron

Hmmmm. I could be wrong or maybe I did not ask OX clearly. But I will call them again next week to verify.

MJ888

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  #633 (permalink)
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MJ888 View Post
Hmmmm. I could be wrong or maybe I did not ask OX clearly. But I will call them again next week to verify.

MJ888

I have a self directed IRA with OX. It has to go through a trustee like Millennium Trust (or others). Whenever I add or withdraw funds I have to go through Millennium. Otherwise I trade it just like I do my regular OX account.

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  #634 (permalink)
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Hi, i noticed deepdiscounttrading recommended by a few futures and fop traders on another forum, at least one mentionning he prefers it to ib to sell fop. Ron or other traders do u have any experience with them ? Their website show margin requirements for futures but no indication abt fop margin req. i like ib product range but the margin is worrysome indeed when one checks otm fop. Ox rates r a deal breaker though especially that on other products they offer no margin advantage

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  #635 (permalink)
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I use DDT as my main account exclusively to sell options on futures clearing through crosslands using the RTrader platform, been with them for about a year, they use exchange minimum SPAN margins. Been very happy with them. I also diversified into a second account with Optimus using the same platform, same margin arrangements for option sales, just as happy with them too but Optimus, bit more expensive on commission, frontload the RT commissions at time of sale, which is a disadvantage if you hold till expiry. DDT on the other hand charge 1/2 at entry and 1/2 RT at exit, no commission or charge if options expire worthless.

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  #636 (permalink)
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DeepDiscountTrading

Hi Harvard,
I checked out DDT a while ago when i was looking for who to setup with and I was told the margins there for selling naked options were 200% of the futures initial margin at the time of order placement (so something like 6,710 for 1 KC option).
Is that what/how they apply margin, or did you have to negotiate with them for SPAN minimum only and not the 200%?
Cheers
Scott

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  #637 (permalink)
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kevinkdog View Post
For Ron (and other far OTM option sellers) -

If you look back at past trades, do you find yourself biased towards selling puts, or selling calls?

I would imagine that for most instruments that selling puts would be more common, since it is less risky (selling calls in crude could be dangerous if a terrorist attack occurs, grains can skyrocket in droughts). For ES options, I would think selling calls might be preferable (think of a stock market crash).

I'm curious about the thoughts of the experienced experts here...

Selling puts the same amount of money OTM as a call will usually have a higher ROI because of the lower risk. So I sell a lot more puts. It does vary by commodity.

That is especially true for ES.

An Apr ES put 300 OTM (1200) premium is 1.50. For a call 300 OTM (1800) the premium is zero. A 1615 call is about the same premium as the 1200 put but the margin is 3X higher so the ROI is 3X lower.

A 1615 call 75 days out is too risky for me.

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  #638 (permalink)
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opts View Post
Kevin:

Oil is always going to be one of those markets that has the terrorist volatility variable waiting to be added to the current price. I would agree with you that the energies will always have a bias to the upside because of this. I am waiting for oil to drop a few dollars in price and will look to sell puts again because of the ever present terrorist threat. Time is on our side when selling options so I can wait for months if needed. I'm short March 900 wheat calls and my reasoning was that price was in the 50% retracement range even after the last bullish crop progress report in January. I sold 680 puts also. I think the tendency is to want to sell puts. The vast majority of the general public that owns stocks only want stocks to go up. This makes for a price bias on calls that makes them more expensive then puts. The futures markets are a minority but shorting a futures contract is more routine in futures than it is in stocks so why should we be 'scared' of writing call options on futures? Because we're scared that something like a terrorist threat can spike prices. In the grains it can be drought, OJ freezing weather, cotton the boll weevil..etc. But, these 'variables' usually happen with the seasonal aspects of the markets. I wait for those seasonal highs, or what I think might be the seasonal high along with what the charts are saying to let me know when it might be safe to sell calls. But, you are right. I fell more comfortable selling puts but sell calls nonetheless. It's all a waiting game for me and how I interpret charts.

Excellent post.

I don't usually sell too many oil calls because it's not worth the risk to make <$70. Higher than that maybe. But I also look back and say how many times in the last 20 years has oil spiked drastically because of an event? I can't come up with any. But that also doesn't mean it won't happen. Sometimes I think I am too risk adverse.

That is why I will do covered calls sometimes in oil. Selling the lower strike call and buying a higher strike call. The long call puts a limit on possible loss. The ROI% can be higher too if you have the correct spread between strikes.

Hedge funds usually are buyers of futures but I have sensed that they haven't been as long lately. They were really long early 2008.

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  #639 (permalink)
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Budis535 View Post
Hi Ron,

I'm a newbie in selling Fop and would like to ask you:
What have you been using to analyse a commodity fundamentally?

USDA reports, EIA reports for energies, I read Hightower and Dow Jones articles, and any other articles I can find.

I probably spend 2-4 hours per day reading-researching.

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  #640 (permalink)
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Glad to see you back Ron99

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