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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:567,733 / 5,727
Last Reply:3 Hours Ago (12:40 PM) Attachments:642

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Selling Options on Futures?

Old February 21st, 2013, 03:52 PM   #831 (permalink)
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vmaiya73 View Post
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

If you are selling options at <$100 premium then I wouldn't use doubling of premium. Above that probably. But just going off of premium leaves you missing part of the picture. Margin can and does move independently of premium. Exchanges can raise margin. FCMs can raise margin above the exchanges.

When I use up the cash excess I set up for that trade when I put it on, that's when I dump it. If every position in your account did this you would be on margin call.

If margin is $500 then I have $1000 excess. If the loss on the premium plus the increase in margin is up to $1000 then it is time to get out.

And of course the reason the market went against you plays a large part in determining whether to dump it or not.

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Old February 21st, 2013, 04:55 PM   #832 (permalink)
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I wish I had an answer to this.

KCk3 calls from 170 to 300 settled higher today when futures were only up 0.10??? The 180s to 222s settled up 0.10 or more. The calls below 170 settled lower. And this happened when none of those options traded anywhere close to that. And the July calls at the same strikes settled lower.

I have seen this in the past. The options will keep these inflated premiums for a few days then come back to earth. Unfortunately the bidders for options won't be bidding at these prices. So the inflated premiums decrease money to sell more options for a few days.

I called ICE. We'll see if I get a response.

EDIT They did call back and said they will be lowering the settlements. For example she said there was a bid at closing on the May 180s at 0.37 which was 0.02 higher than yesterday's settlement of 0.35. But their original settlement was 0.47. Too high. It had traded at 0.43 today.


Last edited by ron99; February 21st, 2013 at 05:34 PM. Reason: Response from ICE
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Old February 21st, 2013, 08:09 PM   #833 (permalink)
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2 cents of technical analysis...

Wheat: This has the best rhythm of the three commented on here. Pullbacks followed by the continued downtrend. My 900 calls expire at $0 tomorrow so I'll reassess this market next week. 660 looks very doable sometime in the future.

Crude: How far will it go? The 50% retracement (using the low from mid June to the high from mid Sept) is around the 91.00 area. The next chart support I see is around 86.50. There is a lot of congestion in that area. MJ..I'm with you buddy.

Gold: Little bump today around the 1550 area of support. If that level breaks...Katy bar the door! Not sure how to spell Katy....

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Old February 21st, 2013, 08:23 PM   #834 (permalink)
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Selling options on futures is the red-headed stepchild!! It's the great secret, known and loved by a select few! It was the favorite trading strategy of the senior trader at my former broker's firm. He used standard deviations to make his picks. I did pretty well with the guy's trade signals! I remember he didn't think much of Cordier and his book. He considered his research strategy to be different.

I think option selling has a bad reputation because 1. It's the strategy that will get used when somebody wants to try to cover up less-than-ethical trading and outright fraud and 2. It presents unlimited risk if you don't know what you're doing.

I love option selling. It's so cool to take your profit up front and then see if you'll get to keep it!

I have an ebook about it around here somewhere. I'll see if I can find it.

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Old February 21st, 2013, 08:40 PM   #835 (permalink)
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JMarsh View Post
Selling options on futures is the red-headed stepchild!! It's the great secret, known and loved by a select few! It was the favorite trading strategy of the senior trader at my former broker's firm. He used standard deviations to make his picks. I did pretty well with the guy's trade signals! I remember he didn't think much of Cordier and his book. He considered his research strategy to be different.

I think option selling has a bad reputation because 1. It's the strategy that will get used when somebody wants to try to cover up less-than-ethical trading and outright fraud and 2. It presents unlimited risk if you don't know what you're doing.

I love option selling. It's so cool to take your profit up front and then see if you'll get to keep it!

I have an ebook about it around here somewhere. I'll see if I can find it.


Post it or attach it if you can. There is so little 'real' information on selling.....

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Old February 22nd, 2013, 01:08 AM   #836 (permalink)
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JMarsh View Post
Selling options on futures is the red-headed stepchild!! It's the great secret, known and loved by a select few! It was the favorite trading strategy of the senior trader at my former broker's firm. He used standard deviations to make his picks. I did pretty well with the guy's trade signals! I remember he didn't think much of Cordier and his book. He considered his research strategy to be different.

I think option selling has a bad reputation because 1. It's the strategy that will get used when somebody wants to try to cover up less-than-ethical trading and outright fraud and 2. It presents unlimited risk if you don't know what you're doing.

I love option selling. It's so cool to take your profit up front and then see if you'll get to keep it!

I have an ebook about it around here somewhere. I'll see if I can find it.

Yes, please post or attach the ebook if you happen find it. Why is "unlimited risk" always associated with options selling? If I were to short 100 shares of any stock or short any futures contract, wouldn't my potential risk also be "unlimited" if I did not use stops to manage the position?

It's one thing for newbies to be misinformed but it still amazes me how many so called professionals have no idea how option selling actually works.

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Old February 22nd, 2013, 03:47 AM   #837 (permalink)
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MJ888 View Post
Yes, please post or attach the ebook if you happen find it. Why is "unlimited risk" always associated with options selling? If I were to short 100 shares of any stock or short any futures contract, wouldn't my potential risk also be "unlimited" if I did not use stops to manage the position?

It's one thing for newbies to be misinformed but it still amazes me how many so called professionals have no idea how option selling actually works.

Another funny point is the "so called" pofesionals who think it is to dangerous to sell puts will go around saying how great covered calls are. But when you look at a risk profile they are exactly the same.

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Old February 22nd, 2013, 09:11 AM   #838 (permalink)
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When you hear 'unlimited risk' it's because prices can keep going up so selling calls, shorting a stock or future, the risk can be unlimited. However, selling puts, or going long a stock or future the risk is limited because zero is the lowest anything can go.

Lot's of scare tactics out there. If The Force is with you, you should be fine....

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Old February 22nd, 2013, 11:25 AM   #839 (permalink)
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opts View Post
When you hear 'unlimited risk' it's because prices can keep going up so selling calls, shorting a stock or future, the risk can be unlimited. However, selling puts, or going long a stock or future the risk is limited because zero is the lowest anything can go.

Lot's of scare tactics out there. If The Force is with you, you should be fine....

And what they are saying is not wrong, it is just limited information. Fear is a very powerful especially when used on people that have limited knowledge of the topic.

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Old February 22nd, 2013, 12:15 PM   #840 (permalink)
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ron99 View Post
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?

It is correct. I am not comparing opctions with the same strike price.

This way I sell options farther out with less risk and collect higher premium. The main thing is that when you sell closer to expiración ANY FLUCTUATION (in days like today) may do more harm to your pocket.

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