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Buying an option has nothing to do with exercising. Buyers can only buy from someone selling.
I suggest you get a beginners book on options on futures to learn more about trading them. It is too soon for you to be contacting a broker and trading them. You need a far better understanding of them or else you will lose a lot of money. Exercising should not be your only concern with selling options.
Actually 14% from Dec futures price. That is not very much.
ZCz18 was at 380 in Jan. Peaked over 420. While that wouldn't put your trade ITM the margin increase on short calls would have been huge.
14% on 380 is 440 call in mid Jan. Premium Jan 12 was $450 with $275 IM. On May 23 premium was $601 and IM was $1,293.75.
So premium loss was $151 and IM increased $1,018.75. Combined $1,169.75. You would have needed at least 5 times your IM in cash excess or you would be on margin call.
optionsellers.com loses money on their trades many times. I had an account with them.
That is very enlightening. Thankyou. What seems far away and safe on sight could be very risky. The deltas need to be checked before entering a trade. Thanks again.
Hi Ron,
Thanks for the reply and I really appreciate your concern for me.
I have been trading futures for 20 years, have a great system for pinpointing market turning points, but I have never been able to accurately determine the speed or size of that new market direction, hence difficulty in making consistent money trading the futures contract directly.
I found Cordiers book and another great one called "options on Futures, Summa, Lubow" a couple of years ago.
I have been paper trading about 2 positions per month for he last year with no losses or necessity to roll forward.
I believe my option selection process is sound.
The only time exercise is talked about is when options expire, but I will probably never let that happen.
So, if you could just please answer this one question.
What happens when my sold option is purchased back off me, before it expires?
I believe that I will be left with an open futures position?
This is what I need to confirm and if this is correct, can I instruct my broker to close that position immediately if this situation occurs, (in advance)
I answered your question when I said, "Buyers can only buy from someone selling". Nobody can buy your short option from you. Once you sell an option the only ways it leaves your account is expiration, being selected in an exercise or you buying the same commodity, month and strike option to offset (close) your short option.
Someone can exercise their American long option and then you may be selected to be the offset. But that extremely rarely happens as long as you are OTM.
If you sold a 470 corn call, nobody is going to exercise it if futures are below 460 and maybe higher. Why would they want to be long futures from 470 when currently futures are 450?
