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Selling Options on Futures?
Created: by ron99 Views / Replies:621,649 / 5,910
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Selling Options on Futures?

  #801 (permalink)
Market Wizard
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opts View Post
ron:

I put in a few orders to sell GC options today and had no takers. There's some room between the bid/ask because of the recent volatility and I was trying to sell for a little more but no dice. When you sell the GC options do you go for the current bid 'as is' or try to squeeze some more?

Bid/Ask in SI is even worse. Hard to read those sometimes.....

Thanks....

When placing sell orders for options I first look at the prior day's settlement. I then look at the current day's futures price. If you multiply the delta for that option, preferably out to 4 decimal places, times the amount that futures are up or down, you get the amount that the option should be up or down compared to the prior day's settlement.

For example, if the delta is 0.0200 and futures are down 0.50, then 0.02 times 0.50 equals 0.01. If the prior day's settlement was 0.06, then the fair price for the option would be 0.07 if there is still about >30 DTE. Less than that and the time erosion of the premium would probably wipe out that penny.

If you don't have the delta then just figure if the futures are down a lot then the put should be trading higher and calls would be trading lower. Opposite for days when prices are up.

Don't chase buy prices. If the bids aren't there then just put in your fair ask and wait.

GC is usually decent for getting options sold at a fair price. Stick to the options with more OI.

Since silver has sky high margin, I haven't been trading it because the ROI is so low.

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  #802 (permalink)
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to OX user

Hi all,
I have trading expierence from 2004 (equties, futures, options, currency) without any success. To risky, to unpredictable...
After reading J.Cordie book for apr. 1 year I selling only options and feel comfortable with constant growth. I use only fundamental data, in my opinion technical approach help a little...
I carefully follow this very interesting thread and now decide to transfer my assets from IB to OX broker. Mostly for margin requirement (they are incomparable). I have some question about OX:
1. Is there any additional security (in addition to username and password)?
2. What is PIN and for what?
3. Did you trade directly from web page or use xTend platform?

Thanks in advance

uuu1965

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  #803 (permalink)
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ron99 View Post
When placing sell orders for options I first look at the prior day's settlement. I then look at the current day's futures price. If you multiply the delta for that option, preferably out to 4 decimal places, times the amount that futures are up or down, you get the amount that the option should be up or down compared to the prior day's settlement.

For example, if the delta is 0.0200 and futures are down 0.50, then 0.02 times 0.50 equals 0.01. If the prior day's settlement was 0.06, then the fair price for the option would be 0.07 if there is still about >30 DTE. Less than that and the time erosion of the premium would probably wipe out that penny.

If you don't have the delta then just figure if the futures are down a lot then the put should be trading higher and calls would be trading lower. Opposite for days when prices are up.

Don't chase buy prices. If the bids aren't there then just put in your fair ask and wait.

GC is usually decent for getting options sold at a fair price. Stick to the options with more OI.

Since silver has sky high margin, I haven't been trading it because the ROI is so low.

Roger that...Thanks Ron

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  #804 (permalink)
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uuu1965 View Post
Hi all,
I have trading expierence from 2004 (equties, futures, options, currency) without any success. To risky, to unpredictable...
After reading J.Cordie book for apr. 1 year I selling only options and feel comfortable with constant growth. I use only fundamental data, in my opinion technical approach help a little...
I carefully follow this very interesting thread and now decide to transfer my assets from IB to OX broker. Mostly for margin requirement (they are incomparable). I have some question about OX:
1. Is there any additional security (in addition to username and password)?
2. What is PIN and for what?
3. Did you trade directly from web page or use xTend platform?

Thanks in advance

uuu1965

U: Now that you mention it, I can't recall what the PIN number is for. This might be used to add or delete funds from your account or something that is used to initially fund your account.

The only requirements to log in to trade are a username and password.

I trade from the web page and my smart phone. The xTend platform is used for more active traders and might be too busy (too much 'stuff') on the screen if you are only going to write futures options. I wish that OX would upgrade their charting capabilities, they are not that great. I've monitored the xTend platform a few times but there really is no need for it.

OX customer service is very good so that makes up for the charting woes in my opinion.

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  #805 (permalink)
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Heya everybody,

I know this is a forum on selling options on futures but with the breakdown in GOLD is anybody considering buying some puts ?

Still in my /CL trade from previous; yep it is like watching paint dry and tests the patience quite a bit but knowing theta is on my side keeps me smiling.

thanks

V

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  #806 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
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uuu1965 View Post
Hi all,
I have trading expierence from 2004 (equties, futures, options, currency) without any success. To risky, to unpredictable...
After reading J.Cordie book for apr. 1 year I selling only options and feel comfortable with constant growth. I use only fundamental data, in my opinion technical approach help a little...
I carefully follow this very interesting thread and now decide to transfer my assets from IB to OX broker. Mostly for margin requirement (they are incomparable). I have some question about OX:
1. Is there any additional security (in addition to username and password)?
2. What is PIN and for what?
3. Did you trade directly from web page or use xTend platform?

Thanks in advance

uuu1965

1. Only to withdraw money.
2. PIN is the additional security code needed to withdraw money.
3. I trade from the web page because trading from multiple accounts on Xtend is slow to switch from one account to the next. If I had only one account I might be trading from Xtend. They do have streaming Xtend available from the webpage. You don't have to download the program to use it.

OX has excellent customer service. They can answer your questions quickly. Either use the chat or you can email them.

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  #807 (permalink)
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vmaiya73 View Post
Heya everybody,

I know this is a forum on selling options on futures but with the breakdown in GOLD is anybody considering buying some puts ?

Still in my /CL trade from previous; yep it is like watching paint dry and tests the patience quite a bit but knowing theta is on my side keeps me smiling.

thanks

V

V:

This is easier said than done but....

If I was considering buying puts I would have done this before the drop. There was a lot of talk about the dollar strengthening and metals 'losing their luster' along with gold already pulling back some before the drop. Trading = speculation so puts should have already been purchased. The premiums for puts now are very expensive, even far OTM ones but now you need even a larger move to make $ on those.

You already stated this is a selling option thread so, at least I would assume, that the majority of contributors to this thread have the 'sell only' mentality. With that being said, I'm watching the puts to sell at some point because of the inflated premiums. Gold has a good "chance" to make 1500 but those puts are kinda pricey right now. If we get to 1500 I'm thinking what are the chances of gold making 1400 or 1300? My answer is less likely as time goes by so I'll be watching those put premiums to sell.

Buying and selling options are totally different methods as far as risk, money management, and market direction are concerned. However, I am thinking ahead in the grain markets when the seasonal lows are usually put in around June/July and will consider buying calls due to the ongoing dry soil conditions. In other words: I will already be prepared for that to happen...before it happens.

Ron stated this a few posts previously and it should be ingrained into everyone's trading plan...don't chase a market.

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  #808 (permalink)
Market Wizard
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vmaiya73 View Post
Heya everybody,

I know this is a forum on selling options on futures but with the breakdown in GOLD is anybody considering buying some puts ?

Still in my /CL trade from previous; yep it is like watching paint dry and tests the patience quite a bit but knowing theta is on my side keeps me smiling.

thanks

V

I am looking to sell GC calls. With the US Congress I would be afraid to buy puts.

When you buy an option you not only have to be correct on direction, but you also need the futures to move faster than the time erosion of the premium.

Here's an example. May Corn on Jan 15th was 730. The May 600 put was 2.000. Now Corn has dropped 41 cents to 689 but the 600 put premium has dropped to 1.625. You are losing money if you bought that put. even though you were correct on direction and got a good sized move, but I am making money because I sold those puts.

You can be wrong on direction of futures but still make money selling options. You can't be wrong when you buy a put or when you do futures. There is no leeway in them. There is a lot of leeway in selling options.

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  #809 (permalink)
Trading for Fun
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Thanks for the insight guys

V

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  #810 (permalink)
Market Wizard
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Here is something I started using at OX. It is a browser page with 12 streaming real time charts of the commodities I follow. I put this up on one of my 3 monitors I use daily. Nice way to get a quick glance at what the markets are doing.

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