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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,198 / 5,728
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Selling Options on Futures?

Old February 7th, 2013, 03:05 PM   #681 (permalink)
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Some crop info:

By CME Group - Thu 07 Feb 2013 11:46:34 CT
Related Keywords: Agriculture
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U.S. corn and wheat supplies later this year will be larger than previously forecast, while soybean stockpiles are likely to be smaller, according to a Reuters survey of analysts ahead of an Agriculture Department crop update.

Based the surveys, nationwide corn inventories at the close of the 2012-13 marketing year August 31 are expected to total 618 million bushels, up 2.7% from 602 million bushels the USDA estimated in a January report. So-called ending stocks of corn would still be the lowest in 17 years.

Estimated wheat ending stocks for 2012-13 are expected to be increased about 1.5% to 727 million bushels from 716 million bushels previously, while estimated soybean ending stocks are expected to be reduced 4.4% to 129 million bushels from 135 million bushels.

The USDA is scheduled to release updated Supply and Demand estimates at 11 a.m. Central time February 8.

Two Chicago-based grain industry analysts Kyle Schrad of INTL FCStone and Jerrod Kitt of Linn Group - will discuss their outlooks for the USDA reports during a live webcast hosted by CME Group later today.

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Old February 7th, 2013, 08:11 PM   #682 (permalink)
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Hmmmmm...is it me or is the http://www.ccstrade.com/futures/seasonal/ website a little funky? It has been like this for the last few days?

Anyone else having trouble viewing the charts?

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Old February 7th, 2013, 09:01 PM   #683 (permalink)
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opts View Post
Hmmmmm...is it me or is the Seasonal Charts website a little funky? It has been like this for the last few days?

Anyone else having trouble viewing the charts?

I just went there and clicked on the CL charts and they looked OK to me.

What do you mean by funky?

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Old February 7th, 2013, 09:08 PM   #684 (permalink)
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Effective Feb 13th, GC, SI, HG, RB, HO margins are dropping.

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Old February 7th, 2013, 10:45 PM   #685 (permalink)
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Futures Edge on FIO

ron99 View Post
I just went there and clicked on the CL charts and they looked OK to me.

What do you mean by funky?


Do you see the list for grains, softs, and meats?

I just see currencies, energies, and financials.

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Old February 7th, 2013, 10:51 PM   #686 (permalink)
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opts View Post
Do you see the list for grains, softs, and meats?

I just see currencies, energies, and financials.

Drop down menu is working....

All good.

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Old February 7th, 2013, 11:16 PM   #687 (permalink)
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ron99 View Post
Effective Feb 13th, GC, SI, HG, RB, HO margins are dropping.

That is awesome! I have positions in all of those. Where do you get notices of these changes?

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Old February 8th, 2013, 12:41 AM   #688 (permalink)
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That is awesome! I have positions in all of those. Where do you get notices of these changes?

See post #565 on page 57.

https://futures.io/commodities-futures-trading/12309-selling-options-futures-57.html#post295942

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Old February 8th, 2013, 07:58 AM   #689 (permalink)
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Thanks

Hi Ron,

Ive been following this thread for a few months and finding so much valuable stuff.

Id like to add my thanks for sharing your knowledge. Your generosity is greatly appreciated.


Chris

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Old February 8th, 2013, 08:14 AM   #690 (permalink)
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Margin cover



ron99 View Post
Correct.

The 5.6% ROI assumes that you keep the same margin and excess until the contract expires. Which normally you don't. But I don't know of a way to accurately calculate the ROI with decreasing margin and excess plus increasing profit until expiration.

Anybody got an idea on that?

Well I’ve had a stab at this, but bearing in mind I only studied mathematics up to age 16 (and that was more years ago than I care to remember) it still needs some work. These are my thoughts on how you could deal with decreasing excess.

If we used 3x margin cover at (say) 60 DTE and reduced this to 1x cover at 1 DTE in a straight line then cover at 30 DTE would be 2x and the average margin cover would be (3+1)/2 = 2. There’s too much risk here – cover at 30 DTE needs to be considerably more than 50% of cover at 60 DTE, reducing gradually at first, and more quickly as we get closer to expiry in a logarithmic curve.

This screenshot has the DTE in column A (you’re smart people, you managed to work that out), and column B has this formula: =LOG($A3,$I$1)+1
There is a variable in cell i1. We can put any number in here and it will reduce the cover from x DTE down to 1x cover at 1 DTE. A variable of 8 gives approx. 3x cover at 60 DTE. A variable of 6 will give 3x cover at 40 DTE.

The average margin required at 60 DTE (if we use base 8 as the variable) is 2.51x (cell B64).

This is where I’ve hit a mental wall. I can’t find a formula to calculate the average cover for a given DTE number. I’ve taken the cowards way out and produced a table for some sample numbers simply by deleting some cells. You could use these figures to calculate the ROI, but you’d have to punch them in manually.

In order to accurately assess the effect of decreasing margin on the ROI I think you’d have to plug PC-SPAN into the formula. You could probably find a log curve that approximates to it, but that’s for another day.


Hope this helps,

Chris

Sorry, I'm not allowed to upload a screenshot because I'm new here. This is the spreadsheet if you want to download it.

Margin Cover.xlsx

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