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Selling Options on Futures?
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Selling Options on Futures?

  #691 (permalink)
Trading Apprentice
Edegem, Belgium
 
Futures Experience: Advanced
Platform: Trader Workstation
Favorite Futures: Options on Futures
 
Posts: 3 since Feb 2013
Thanks: 9 given, 1 received

OptionsXpress

Hi all,

I've been selling options on futures for a few years now using OptionsXpress as online broker, I was very happy with the platform/service they provided. Unfortunatly, optionsXpress is no longer servicing customer accounts in Europe as of end 2012, so I had to switch broker. Currently i'm using IB as broker, but due to their high margin policy (at least 2xSPAN margin) on options on futures is making me look for an alternative. Anyone has any suggestions for a good broker/platform that delivers service to people living in the EU?

I'm also looking into OEC, but their margin calculation seems to be poor.

Thanks!

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  #692 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,652 since Jul 2011
Thanks: 770 given, 4,582 received
Forum Reputation: Legendary

Hi MGBRoadster,

You're welcome. I enjoy helping others so they don't have to make the same very painful mistakes I did.

Thanks for the spreadsheet. That is an excellent start to calculate it.

When I do cash excess I start at 2X margin, go to 1X variably. That depends on how far OTM the option is and fundamentals. Roughly 14 days. But then if it still far OTM I go to zero excess at about 7 days.

So if I adjust the spreadsheet for those factors, I'm getting 1.42.

For example, if I take CL Apr 75 puts, 36 DTE, and start with and stay at 2X excess I get a ROI of 5.3%.

If I use the 1.42 factor for excess the ROI increases to 6.6%.

Now we need to figure margin and premium. But I suspect that we could apply the LOG to that also.

When I have time I will work on that.

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  #693 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,652 since Jul 2011
Thanks: 770 given, 4,582 received
Forum Reputation: Legendary



CJ77 View Post
Hi all,

I've been selling options on futures for a few years now using OptionsXpress as online broker, I was very happy with the platform/service they provided. Unfortunatly, optionsXpress is no longer servicing customer accounts in Europe as of end 2012, so I had to switch broker. Currently i'm using IB as broker, but due to their high margin policy (at least 2xSPAN margin) on options on futures is making me look for an alternative. Anyone has any suggestions for a good broker/platform that delivers service to people living in the EU?

I'm also looking into OEC, but their margin calculation seems to be poor.

Thanks!

Hi CJ77.

I use OEC. Their margin calculation on the emailed daily statements is correct and at exchange minimum. But on their platform it shows margin as if you had on futures. Nothing on their platform shows you margin on short options.

They don't automatically calculate if you have enough margin to put on a position. They set you up with a limit for the number of contracts. Which is usually too low for what we do. Thus a pain in the butt. But workable.

I haven't had to ask them for an increase in contracts since they were sold by OX to Gain Capital. So I don't know how they are about increasing the limit now.

You do need to negotiate with them to remove the overnight fee. Once you do that their commissions are pretty low.

But I do worry about the stability of OEC. Their back office is poor. They have been fined by CFTC for miscalculating futures (They had the decimal point in the wrong spot on Rubles and someone used that to their advantage). There maybe other fines. I also worry about Gain Capital, their new owner.

That is why I only have a small percentage of my money there. If it wasn't for that I would have a lot more.

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  #694 (permalink)
Trading for Fun
Reno, USA
 
Futures Experience: Intermediate
Platform: esignal
Favorite Futures: Oil
 
Posts: 70 since Jul 2011
Thanks: 14 given, 9 received

Question for the board

So im just testing things out on TOS (as this is my primary broker for now). I looked up how much it would be to sell a March 88.5 put which has a delta of -.02; I would be credited 20 dollars BUT the question is my buying power is reduced by $2151; is this the margin required to hold just one contract? If so the ROI is only a very bad 0.9%

thanks

V

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  #695 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,652 since Jul 2011
Thanks: 770 given, 4,582 received
Forum Reputation: Legendary


vmaiya73 View Post
So im just testing things out on TOS (as this is my primary broker for now). I looked up how much it would be to sell a March 88.5 put which has a delta of -.02; I would be credited 20 dollars BUT the question is my buying power is reduced by $2151; is this the margin required to hold just one contract? If so the ROI is only a very bad 0.9%

thanks

V

That is about the correct margin. I'm getting SPAN minimum of 2239.

Your strike is too close to ITM. That is why the margin is so high.

You need to go further out in time.

But 0.9% in 7 days is equal to 47% yearly rate.

IMO selling an option $7 OTM for only $20 is too much risk for too little reward. You could be right 9 out of ten times but what you could lose on the 10th one will be far greater than what you made on the previous 9. You need to be 100% perfect trading those and that is impossible.


Last edited by ron99; February 8th, 2013 at 12:48 PM.
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  #696 (permalink)
Trading for Fun
Houston, Texas
 
Futures Experience: Advanced
Platform: Interactive Brokers, OptionsXpress
Broker/Data: Options Express
Favorite Futures: Options on Futures
 
MJ888's Avatar
 
Posts: 165 since Sep 2012
Thanks: 37 given, 123 received


vmaiya73 View Post
So im just testing things out on TOS (as this is my primary broker for now). I looked up how much it would be to sell a March 88.5 put which has a delta of -.02; I would be credited 20 dollars BUT the question is my buying power is reduced by $2151; is this the margin required to hold just one contract? If so the ROI is only a very bad 0.9%

thanks

V

I just took a quick look at OX and Init Margin is $2,462.35 and Maint is $2,238 for the March CL 88.5 put

Margin gets higher as you get closer to the money

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  #697 (permalink)
Elite Member
NW Florida
 
Futures Experience: Intermediate
Platform: OX and TOS
Favorite Futures: Futures Options, Stocks
 
opts's Avatar
 
Posts: 234 since Aug 2012
Thanks: 29 given, 107 received

Crazy price action in the grains today with the report.

So glad I quit trading futures contracts many, many moons ago.....

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  #698 (permalink)
Trading for Fun
Houston, Texas
 
Futures Experience: Advanced
Platform: Interactive Brokers, OptionsXpress
Broker/Data: Options Express
Favorite Futures: Options on Futures
 
MJ888's Avatar
 
Posts: 165 since Sep 2012
Thanks: 37 given, 123 received


opts View Post
Crazy price action in the grains today with the report.

So glad I quit trading futures contracts many, many moons ago.....

Yes, I was following the grains a bit too and I have no idea how people can make any money trading the futures. They zig zag up and down like crazy. What day trading system would one use to trade those movements? Your stops would constantly be hit for no particular reason!

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  #699 (permalink)
Elite Member
NW Florida
 
Futures Experience: Intermediate
Platform: OX and TOS
Favorite Futures: Futures Options, Stocks
 
opts's Avatar
 
Posts: 234 since Aug 2012
Thanks: 29 given, 107 received

Deeeeeeeeeeeep pockets.

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  #700 (permalink)
Elite Member
NW Florida
 
Futures Experience: Intermediate
Platform: OX and TOS
Favorite Futures: Futures Options, Stocks
 
opts's Avatar
 
Posts: 234 since Aug 2012
Thanks: 29 given, 107 received


Ah the weekend. Will pour a single malt, light up a stogie, restring the light tackle for the trout and redfish that will soon be on the flats, and mark two days off the calender for premiums to erode.

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