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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,237 / 5,727
Last Reply:December 2nd, 2016 (12:40 PM) Attachments:642

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Selling Options on Futures?

Old February 21st, 2013, 09:55 AM   #821 (permalink)
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OX today increased GC margin by 20%.

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Old February 21st, 2013, 11:13 AM   #822 (permalink)
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Well my first selling option on commodities didnt go so well.

I had sold the April /CL 82 for 0.1; hit my 200% rule as per Cordier's book so closed it out today.

Who knew crude would lose close to 8 in 2 days !!

V

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Old February 21st, 2013, 11:33 AM   #823 (permalink)
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In my opinion, Cordier's 200% rule does not work when selling options that are very far out of the money simply because the premium can double too easily. In your case 0.1 doubled to 0.2. You will find yourself exiting almost all of your far out of the money positions by following this rule. And then a few days/weeks later, many of these same positions will expire worthless. Can be very frustrating.

I would suggest scrolling back in this thread and read what Ron99 wrote about keeping 66% of his account in cash to be able to ride out the volatility.

I sold some May CL 75 puts that has been taking some heat the past several sessions but since I have a decent cash reserve, I will stay with them. Plus I can take a little bit of comfort that with this sell off, I am still $18 out of the money. I will monitor closely though.

And CL losing $8 in two sessions is not all that big of a deal if you have been trading for awhile, it happens!


Last edited by MJ888; February 21st, 2013 at 11:39 AM.
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Old February 21st, 2013, 12:44 PM   #824 (permalink)
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vmaiya73 View Post
Well my first selling option on commodities didnt go so well.

I had sold the April /CL 82 for 0.1; hit my 200% rule as per Cordier's book so closed it out today.

Who knew crude would lose close to 8 in 2 days !!

V

Some of the participants in this thread like to sell their options some 60 days to expiration. I preffer to sell them beyond 90 days, this way any fluctuation in the price has less effect than in the closer dates. Usually, I donīt wait until expiration, I buy them back at 50% of profit plus commissions. IN average, it only takes 20 days to reach that point


Alfredo E.

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Old February 21st, 2013, 12:53 PM   #825 (permalink)
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britkid99
I closed out an April GC 1450P today. That crazy drop in gold doubled my premium and while it might bounce tomorrow it could also drop further and cost more to close out. Better to be safe than sorry.

The ironical thing was I sold it by accident some weeks ago when I was checking the margin in IB and pressed the "Transmit" button instead of "Cancel". I only realized what had happened when the trade button started flashing

Brit

As a rule, if I ever enter into a trade "by accident", I get out as quickly as I can without panicking. After reading Nick Leeson's "Rogue Trader" book, I never try to ride out an error.

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Old February 21st, 2013, 12:58 PM   #826 (permalink)
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alfredoe View Post
Some of the participants in this thread like to sell their options some 60 days to expiration. I preffer to sell them beyond 90 days, this way any fluctuation in the price has less effect than in the closer dates.

Alfredo E.

That is not correct if you are comparing options with the same strike.

For example, for the CL 75 strike, Apr is trading +0.03 today. May +0.12. June +0.25. July +0.30.

Are you comparing some other way?

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Old February 21st, 2013, 01:00 PM   #827 (permalink)
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alfredoe View Post
Some of the participants in this thread like to sell their options some 60 days to expiration. I preffer to sell them beyond 90 days, this way any fluctuation in the price has less effect than in the closer dates. Usually, I donīt wait until expiration, I buy them back at 50% of profit plus commissions. IN average, it only takes 20 days to reach that point


Alfredo E.

I have considered selling options this way too. I am guessing the margin requirements are lower with farther out strikes containing mostly time value.

My question is do you enter a GTC limit order to take profits at 50% + commissions once you sell?

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Old February 21st, 2013, 01:51 PM   #828 (permalink)
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One thing I am noticing is that seasonal moves happen earlier and earlier. GC usually peaks late Feb. This year the peak was early Feb.

I've noticed that as well. What do you attribute it to? Still learning.

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Old February 21st, 2013, 02:08 PM   #829 (permalink)
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empty View Post
I've noticed that as well. What do you attribute it to? Still learning.

Very large traders, hedge funds, recognizing the market is about to turn and they need to start getting out sooner to be out before the change in direction.

But that is just an educated guess.

For CL futures only, hedge funds peaked net long in the spring on 4/6/10, 3/8/11, and 2/28/12. Earlier each year.

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Old February 21st, 2013, 03:10 PM   #830 (permalink)
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So then the question is at what level do you get out? If not 200% then where or is that dependent on risk appetitie?

thanks

V

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