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Selling Options on Futures?
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Selling Options on Futures?

  #7141 (permalink)
Market Wizard
Cleveland, OH
 
Trading Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 3,006 since Jul 2011
Thanks: 924 given, 5,514 received


swisstrader321 View Post
I appreciate the answer. I watched your short webinar. You mentioned some techniques of adjusting the position if it moves against you.

What does that exactly entail? buying the option back at a loss and then reselling at a further out date/further price? Hedging with a futures contract?

How do you normally handle positions that get uncomfortable?

I do not acquire a futures contract to protect short options. Too big a chance it could move against you and create further losses.

Best to either buy option to limit losses if you think moving against you was temporary or just take loss and reevaluate having option in that commodity at the current time.

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  #7142 (permalink)
Miami Florida United States
 
 
Posts: 4 since Mar 2018
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ron99 View Post
Here is a real life, prime example of why you shouldn't ride out short options to expiration.

The Oct CL 58.50 call expires on Tuesday Sep 17. On Friday Sep 13 it settled at $0.01. During the weekend there were bombings at Saudi Arabia oil processing plants. On Monday Sep 16 the 58.50 call option settled at $4.40!

Waiting for the last $10 of the option turned into thousands of dollars of loses.

Yes indeed, lived thru that one first hand, actually told myself on that Friday I'll just sit on them to avoid the "steep" exchange fees...as I watched the panic bidding push the price over $60 prior to Sunday open I'da galdly paid the exchange 100x their fees but it was too late, that old saying is as true as ever, it ain't bright to be picking up pennies in front of a steam roller...and the thing about the market steam roller u never see it coming.

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  #7143 (permalink)
Miami Florida United States
 
 
Posts: 4 since Mar 2018
Thanks: 0 given, 9 received



ron99 View Post
Here is a real life, prime example of why you shouldn't ride out short options to expiration.

The Oct CL 58.50 call expires on Tuesday Sep 17. On Friday Sep 13 it settled at $0.01. During the weekend there were bombings at Saudi Arabia oil processing plants. On Monday Sep 16 the 58.50 call option settled at $4.40!

Waiting for the last $10 of the option turned into thousands of dollars of loses.

Yes indeed, lived thru that one first hand, actually told myself on that Friday I'll just sit on them to avoid the "steep" exchange fees...as I watched the panic bidding push the price over $60 prior to Sunday open I'da galdly paid the exchange 100x their fees but it was too late. Luckily most ended up over the strike and I had some free margin so was able to sell a bunch of rich, waaay OTM calls...but could have easily been much worse, that old saying is as true as ever, it ain't bright to be picking up pennies in front of a steam roller...and the thing about the market steam roller u never see it coming. I'm once again a strict buy it back at 50-60% guy, hopefully I don't get complacent again...

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