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Selling Options on Futures?


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Selling Options on Futures?

  #6411 (permalink)
 dmau 
Melbourne + Victoria/Australia
 
Experience: Intermediate
Platform: nt
Trading: NQ
Posts: 19 since May 2012
Thanks Given: 0
Thanks Received: 3

Hi Ron,

I was wondering if have you considering the following solution ; leave a pending order in the underlying in the opposite direction at the strike price.

Example : You short a put with strike X (far below the market). So you then leave a short stop in the underlying at X.

If the market tanks the the underlying short should cover losses, though I suppose the margin on the short could be a big problem. But at least you have protection and the protection costs nothing to implement. The main risk is it touchs your strike and the moves back up, in which case you have complexity of managing 2 positions...

let me know your thoughts or whether you have considered / tried this.

This is my idea of a cheap form of insurance, cheaper than a spread, so you dont loose bank on a major fluctation....

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  #6412 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785


dmau View Post
Hi Ron,

I was wondering if have you considering the following solution ; leave a pending order in the underlying in the opposite direction at the strike price.

Example : You short a put with strike X (far below the market). So you then leave a short stop in the underlying at X.

If the market tanks the the underlying short should cover losses, though I suppose the margin on the short could be a big problem. But at least you have protection and the protection costs nothing to implement. The main risk is it touchs your strike and the moves back up, in which case you have complexity of managing 2 positions...

let me know your thoughts or whether you have considered / tried this.

This is my idea of a cheap form of insurance, cheaper than a spread, so you dont loose bank on a major fluctation....

We have tried and discussed this. It doesn't work for the reason you stated. The future is opened and then immediately becomes a loser.

I have gone to using spreads for protection of the big crash.

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  #6413 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,686
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ron99 View Post
We have tried and discussed this. It doesn't work for the reason you stated. The future is opened and then immediately becomes a loser.

I have gone to using spreads for protection of the big crash.

I fully agree with Ron.

Just one sentence regarding margin, when using your concept: Margin should be approximately the same if you add a short future to your ATM short put. With and without this future your delta is approx. 0.5 or - 0.5, respectively.

Best regards, Myrrdin

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  #6414 (permalink)
 rsm005 
vancouver BC/Canada
 
Experience: Beginner
Platform: Zaner360, OX
Broker: DeCaley
Trading: options
Posts: 264 since Jan 2015
Thanks Given: 13
Thanks Received: 205

@ron99

Does your spreadsheet, version 05a, allow for a spread with 3 options...

I'm trying to add a small tail hedge to the spread and see how that reacts. So far adding a 3rd contract simply results in the spreadsheet throwing up and me getting blank results.


esh6p1700 -1
esh6p1450 2
ewf6p1000 1

I'm playing around with that last one...I've tried

esh6p1000 also but that got me the same blank results. Any help would be most appreciated.

/rsm005/

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  #6415 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785


rsm005 View Post
@ron99

Does your spreadsheet, version 05a, allow for a spread with 3 options...

I'm trying to add a small tail hedge to the spread and see how that reacts. So far adding a 3rd contract simply results in the spreadsheet throwing up and me getting blank results.


esh6p1700 -1
esh6p1450 2
ewf6p1000 1

I'm playing around with that last one...I've tried

esh6p1000 also but that got me the same blank results. Any help would be most appreciated.

/rsm005/

It's Dudetooth's spreadsheet, not mine.

It works for me (version 05d). What date(s) are you trying to do? Are you using the correct Futures Month symbol?


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  #6416 (permalink)
Zero85
NYC +NY/ United States
 
Posts: 33 since Mar 2014
Thanks Given: 13
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What broker service to you guys use these days for selling options on commodities? In the past, I've used OX. Are they still good?

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  #6417 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,686
Thanks Received: 2,651


Zero85 View Post
What broker service to you guys use these days for selling options on commodities? In the past, I've used OX. Are they still good?

I use DeCarley Trading, and I am very happy with their service. And, to a smaller degree, IAB. (I have my stocks account at IAB and use some of the free margin for option selling. But I would not recommend them for a trader selling options.)


Best regards, Myrrdin

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  #6418 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785


Zero85 View Post
What broker service to you guys use these days for selling options on commodities? In the past, I've used OX. Are they still good?

OX no longer exists. They were bought by Charles Schwab. OX is now SmartStreet Central.

I used to be at OX. I am now at DeCarley Trading. Best customer service ever. Plus exchange minimum margin.

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  #6419 (permalink)
Forex37
Zurich
 
Posts: 49 since Feb 2011
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myrrdin View Post
I use DeCarley Trading, and I am very happy with their service. And, to a smaller degree, IAB. (I have my stocks account at IAB and use some of the free margin for option selling. But I would not recommend them for a trader selling options.)


Best regards, Myrrdin

But how -technically- do you get the spreads opened? I see no way for comfortable handling of spread orders at decarley.

For the naked version they are fine.

Best wishes

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  #6420 (permalink)
Calamari88
Henderson, NV, USA
 
Posts: 63 since Feb 2015
Thanks Given: 91
Thanks Received: 33



Zero85 View Post
What broker service to you guys use these days for selling options on commodities? In the past, I've used OX. Are they still good?

I'm at Futuresonline.com They are the discount division of Daniels trading. I've had an account for 2.5 years and so far they've been the best out of about 7 brokerages I've used since 1998. I've had a couple easily solved glitches but overall would highly recommend them. The only downside for me is there are no T-bills available which may become a problem now that the interest rate on them are going up.

The worst was Tradestation. I left in 2015 and during the last 2 months there I had literally upwards of 100 phone calls and e-mails with them dealing with all manner of mistakes they made. The customer service reps were extremely difficult and moronic. I had to switch broker reps multiple times and the last one confided in me that Tradestation is not all that suitable for option sellers. While their futures platform is award winning, their futures options platform was horrible. Overall a nightmare experience that I could write a giant post on.

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