Annual returns are on whole account. Which do include trades other than selling options.
If when you put on a trade and the margin is 500 you should have 1000 cash excess. If the loss on the premium plus the increase in margin wipes out your $1000 cash excess it is time to give up on that trade.
A lot of traders want to have hard rules for exiting trades. I don't do that, but I don't recommend that. I have been trading for 15 years. You get a better feeling for exiting after many years of experience. But of course I still get it wrong, just not as often.
I even had one time years ago, before cell phones, that I was using dial up internet. Since I was on the internet nobody could call me. My broker was trying to call me. He drove to my house (15 miles) to come and get me and take me back to his office to liquidate my positions. I'll never forget that day. And I never want to do that ever again.
Yep the school of hard knocks still gets me too. Sometimes I try to hit a home run rather than singles. When you try to hit home runs you strike out a lot.
I haven't stopped trying to hit home runs every once in a while but I try it far less.
Even worse than you doing something wrong is when things out of your control happen. Like when the exchange jacks up margin by a huge percent (silver is one example).
Or when your broker/FCM decides your position is too risky for them and they force you to close profitable positions. I have left many places because of that. They just can't get it out of their heads the oft repeated line that "naked options are risky". Which they aren't if traded properly. But they have no problem with you doing futures where you can be wiped out in hours.
Sorry to be the bearer of bad news but OX, after getting purchased by Charles Schwab, no longer allows futures or options on futures trading in IRA accounts. It did grandfather in accounts already open and doing that to stay open, so far. So yes I have IRA accounts there. But they refused to do another one for a relative.
I keep track of exchange minimum margin on futures for front month futures for each commodity I trade. Then in a 2nd spreadsheet column I keep track of OX's margin (I have a watchlist setup for that). I can then know how much the Trade Calc is higher than minimum.
For example, OX is 10% higher on KC.
Last edited by ron99; February 4th, 2013 at 02:38 PM.
Sorry for your loss, Ron. I hope your wife will be OK given some time.
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Broker/Data: Deep Discount Trading/Rithmic,DeCarley/Gain
Favorite Futures: Future Options
Posts: 35 since Sep 2012
Thanks: 46 given,
Im not sure how you got that info. but this is a excerpt of the reply I received from the principle at DDT when posing the initial questions of being option seller friendly and their application of margin for option sales.
"Thank You for contacting us.
1.) We are Option-Writer friendly just as long as you maintain a decent account balance & comply with any margin calls immediately. Historically speaking, Option Writing has been the # 1 Destroyer of Major Banks & Brokerages so it cannot be taken lightly.
2.) Exchange minimums are required for holding positions overnight. We do not inflate these figures."
I currently hold some short KC options, and I'm not sure of the exact margin for that specific position but absolutely know it is not the figures you suggested, but as a guide im short 33 options with DDT at the moment with a margin requirement of $48K, some of those sales currently have relatively high deltas approaching .25 which is bumping the margin up a bit higher than usual.
Exchange minimum margins are a must, wouldn't use that broker otherwise.
This is exactly what I was talking about when I said some FCMs have an irrational fear of short future options.
I wouldn't trade there because they will eventually force you out of positions because of their fear of the risk. I have had that done to me several times. One time the account had 80% cash and they called me and said the position was too risky and told me I had to close it.