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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,515 / 5,734
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Selling Options on Futures?

Old February 9th, 2013, 10:05 AM   #711 (permalink)
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opts View Post
Ron: I live in Panama City Beach. Hit me up next time your around.

OX dropped their commission rate to $3.50 per side for options on futures as of 2/9. Very nice.

Have you ever gone to Dee's Hang Out? Great food and not the expensive tourist markup.

After digging around I see the OX announcement for new pricing for futures and options.

"The $3.50/contract pricing applies to U.S. customers only. The $3.50/contract rate is effective February 9, 2013"

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Old February 9th, 2013, 10:20 AM   #712 (permalink)
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ron99 View Post
Have you ever gone to Dee's Hang Out? Great food and not the expensive tourist markup.

After digging around I see the OX announcement for new pricing for futures and options.

"The $3.50/contract pricing applies to U.S. customers only. The $3.50/contract rate is effective February 9, 2013"

So, with exchange fees and their 75 cent "transaction fee" which I assume still applies, their overall rate per side will be $5.72 - $6.02 or thereabouts, depending on the instrument. Pretty reasonable, especially given their level of service.

Now if they would just allow IRA trading with futures options...

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Old February 9th, 2013, 01:15 PM   #713 (permalink)
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ron99 View Post
Have you ever gone to Dee's Hang Out? Great food and not the expensive tourist markup.

After digging around I see the OX announcement for new pricing for futures and options.

"The $3.50/contract pricing applies to U.S. customers only. The $3.50/contract rate is effective February 9, 2013"


I've been to Dee's many times. It is about a 5 minute drive from my house. It is one of those places that isn't overrun with a 'tourist menu' that actually has good food. They've been there for a few years now and I hope they stay. Spring break (March - April) is the absolute worst time to be in this area. Gotta take the good with the bad I suppose....

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Old February 9th, 2013, 01:17 PM   #714 (permalink)
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kevinkdog View Post
So, with exchange fees and their 75 cent "transaction fee" which I assume still applies, their overall rate per side will be $5.72 - $6.02 or thereabouts, depending on the instrument. Pretty reasonable, especially given their level of service.

Now if they would just allow IRA trading with futures options...


That would be nice....

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Old February 9th, 2013, 08:43 PM   #715 (permalink)
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Where I'm At

Futures Edge on FIO
Here is a summary of my analysis on selling deep OTM options. Remember, I am a newbie at selling options, so feel free to pick apart what I have written here. I have thick skin.

I should mention I did this analysis Friday during the day. Since that point OX options commissions have dropped, margin values may have changed, and settlement prices may be below my open orders. So, my ROIs might be off.



Right now, I am currently in Crude Oil CJ375P, Coffee KCK32000C and Cotton CTK36700P. All looking good at this point.

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Crude: I will add on to Crude, if I free enough margin up. My initial margin + excess was $981, and I dont want to go above that.

Coffee: I will add to Coffee, if I find a good value. Right now, most ROIs are below 2% not enough.

Cotton: For Cotton, I wont add to it, mainly because I missed the seasonal downtrend that usually comes in March-May (Ill consider myself lucky to escape that trade!).

Sugar: Sugar is in a downtrend, and seasonals suggest down, so I am trying to sell Sugar SBK323.5C at .03, which would be around 2.9% ROI.

Cocoa: Cocoa is in downtrend and seasonals suggest down, so I am trying to sell Cocoa CCK32700C at 3, which is around 2.2% ROI.

Beans: I also considered Bean puts (ROI too low, below 2%)

Wheat: Wheat calls (ROI around 1%),

Nat Gas: NG puts (ROI too low).

RBOB: RBOB puts look enticing, but with crude exposure already, Id rather avoid it. I know the correlation between CL and RBOB is not constant, but I don;t want to be short RBOB and CL puts at the same time, until I get more experience with it.

ES: ES puts just scare me, in the event of a market crash.

Everything Else: Corn, Gold, Silver, Heating Oil, Hogs, Live Cattle and Feeder Cattle do not even make the cut of me looking at options - I basically don't have enough confidence in future price direction to sell options.



Any thoughts you have would be appreciated.

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Old February 9th, 2013, 09:09 PM   #716 (permalink)
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kevinkdog View Post
Here is a summary of my analysis on selling deep OTM options. Remember, I am a newbie at selling options, so feel free to pick apart what I have written here. I have thick skin.

I should mention I did this analysis Friday during the day. Since that point OX options commissions have dropped, margin values may have changed, and settlement prices may be below my open orders. So, my ROIs might be off.



Right now, I am currently in Crude Oil CJ375P, Coffee KCK32000C and Cotton CTK36700P. All looking good at this point.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).




Crude: I will add on to Crude, if I free enough margin up. My initial margin + excess was $981, and I don’t want to go above that.

Coffee: I will add to Coffee, if I find a good value. Right now, most ROIs are below 2% – not enough.

Cotton: For Cotton, I won’t add to it, mainly because I missed the seasonal downtrend that usually comes in March-May (I’ll consider myself lucky to escape that trade!).

Sugar: Sugar is in a downtrend, and seasonals suggest down, so I am trying to sell Sugar SBK323.5C at .03, which would be around 2.9% ROI.

Cocoa: Cocoa is in downtrend and seasonals suggest down, so I am trying to sell Cocoa CCK32700C at 3, which is around 2.2% ROI.

Beans: I also considered Bean puts (ROI too low, below 2%)

Wheat: Wheat calls (ROI around 1%),

Nat Gas: NG puts (ROI too low).

RBOB: RBOB puts look enticing, but with crude exposure already, I’d rather avoid it. I know the correlation between CL and RBOB is not constant, but I don;t want to be short RBOB and CL puts at the same time, until I get more experience with it.

ES: ES puts just scare me, in the event of a market crash.

Everything Else: Corn, Gold, Silver, Heating Oil, Hogs, Live Cattle and Feeder Cattle do not even make the cut of me looking at options - I basically don't have enough confidence in future price direction to sell options.



Any thoughts you have would be appreciated.

If the 3 most important factors in real estate investing is location, location, location; then the 3 most important factors in trading options is volatility, volatility, volatility.

Personally, I think your whole approach to trading options needs to be reconsidered. You're overly concerned with predicting the direction of the market. Successful options traders know that market prediction falls into two categories: 1) the prediction of the short-term movement of prices, and 2) the prediction of volatility of the underlying. Almost all experienced options traders trade vol and not the underlying's direction.

Simply stated, its a much easier task to predict volatility than to predict prices, and therein lies the real advantage of trading options. The attraction of predicting volatility is that it almost always trades in a range – and a glance at the past history of volatility for any individual instrument shows just what that range has been.

If one is able to isolate volatility, the trader doesn’t care where the price goes – he is just concerned with buying volatility near the bottom of its range and selling it when it gets back to the middle or high of the range, or vice versa.

Practically speaking however, it is nearly impossible for an inexperienced options trader to be able to isolate volatility so specifically – he will have to pay some attention to the underlying's price, but he will still is able to establish positions in which the direction of the stock price is irrelevant to the outcome of the position.

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Old February 9th, 2013, 10:10 PM   #717 (permalink)
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kevinkdog,

SBK323.5C margin is now 81, using 6.02 fees I get 3.1% ROI. The 23.00 get you a 4.1% ROI. That’s where I am going.

I find I have to go to a higher delta on some commodities. SB is one.

The 15 yr seasonal on CT isn’t lower than it is now when the option expires. You’ll probably be fine.

For an IRA account I would stay lower than 75 for CL. CL is volatile and can move fast. A little too fast for an IRA. You need to keep an eye on the 75. If you add more add something lower than 75 unless you aren’t trading this like a IRA right now.

The CCK32700C settled at 2. You probably need to move to a lower strike. Selling calls in CC is OK.

On KCK3 calls 190-200 would be OK. The 190 get you to 3.0% ROI. 6.32 fees.

S puts would be good but you are correct that ROI too low. I tried several and couldn’t find anything above 2.5%. W calls 1.6% for a May 1000.

For NG I am selling calls. When you get this late in winter and inventory is this far above the 5 yr average, +15%, the trend is down. Only use the 5 yr seasonal for NG. Things have changed (fracking) and the 15 yr seasonal no longer works.

Last year May NG was at 2.75. In Apr it was down to 2.00.

I have on Apr 4.50 NG calls. But too late to put those on now. May 4.50 have a 2.8% ROI.

For one aggressive account, towards the end of the cold snap and the long range forecast was above normal, I sold Apr 4.00 calls and bought 4.25 calls for 0.015. Right now those are 4.2% ROI and settled at 0.007.

It’s weird because the May 4.00-4.25 call spread is a 3.0% ROI when the Apr is 4.2.

I have been selling a lot of RB puts. Seasonal trend is strong up in Feb and Mar. Just hard to find buyers.

I do find that a lot of the buyers <50 DTE are people taking profit. When I check OI the next day after selling options, mostly I find the OI is the same. I added new positions the buyer got out of his. Just like when Britkid and I traded KC.

The fees on ES options are lower than others. With a 3.50 commission, total cost for ES options is 4.82.

The problem with ES puts right now is low ROI. A Mar 1300 is 1.9%.

The problem with ES calls is there is no money when you are at a decent strike OTM. Mar 1650 calls, 138 OTM, settled at 0.10. A put 138 OTM, 1375 settled at 2.25.

EOM ES. Symbol EW. Sell them 30-45 DTE. Not a lot of volume there though.

GC puts are so-so ROI. Apr 1400 is 2.5%. SI margin is too high. HG very low option volume. But I do have a few 3.000 Mar puts on.

Normally I don’t do hogs or LC options.

I do have some milk options on, but I don't recommend them to someone without dairy experience.

Ron


Last edited by ron99; February 9th, 2013 at 10:17 PM.
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Old February 9th, 2013, 10:16 PM   #718 (permalink)
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tigertrader, your style of trading options is totally different than what we are discussing here. We don't buy options.

We also are not discussing stock options.

By selling far OTM options we are not trying to predict where the futures are going. We are just trying to predict where the market isn't going. Even if the market goes the wrong way as long as it doesn't make a drastic move we still make full profit.

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Old February 9th, 2013, 10:33 PM   #719 (permalink)
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tigertrader View Post
If the 3 most important factors in real estate investing is location, location, location; then the 3 most important factors in trading options is volatility, volatility, volatility.

Personally, I think your whole approach to trading options needs to be reconsidered. You're overly concerned with predicting the direction of the market. Successful options traders know that market prediction falls into two categories: 1) the prediction of the short-term movement of prices, and 2) the prediction of volatility of the underlying. Almost all experienced options traders trade vol and not the underlying's direction.

Simply stated, its a much easier task to predict volatility than to predict prices, and therein lies the real advantage of trading options. The attraction of predicting volatility is that it almost always trades in a range and a glance at the past history of volatility for any individual instrument shows just what that range has been.

If one is able to isolate volatility, the trader doesnt care where the price goes he is just concerned with buying volatility near the bottom of its range and selling it when it gets back to the middle or high of the range, or vice versa.

Practically speaking however, it is nearly impossible for an inexperienced options trader to be able to isolate volatility so specifically he will have to pay some attention to the underlying's price, but he will still is able to establish positions in which the direction of the stock price is irrelevant to the outcome of the position.



Thanks for your comments. I feel I am trying to pick where prices will not go, rather than predict where they will go. But I do understand your concern which prediction of prices.

For volatility, I will admit that with these deep out of the money options I have not really concerned myself with it. It seems, at first glance, that time decay is more important than vol for these types of options, but I know I have to look into it further.

Thanks again for your input.

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Old February 10th, 2013, 02:25 AM   #720 (permalink)
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Howdy!
I'm new to the forum. This was the first thread that caught my attention. I was out of the market for a few years, but with the interest rate environment being what it is, I'm back in for income trades, selling options has been a main focus.
After a few way OTM naked puts, I decided on a trade plan that emphasized a no blow out strategy; so no more naked puts, no matter how safe they might seem. Credit spreads have been working out well, using candlestick analysis and a few other technicals. I'm looking at expanding to options on futures, using optionsxpress. Call credit spreads on crude oil might be shaping up as high probability trade. I'd appreciate any pointers on the characteristics of futures, options on futures, using optionsxpress for these kinds of trades, or anything else that might help.
Thanks!

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