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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:567,857 / 5,727
Last Reply:11 Hours Ago (12:40 PM) Attachments:642

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Selling Options on Futures?

Old February 25th, 2013, 07:29 PM   #911 (permalink)
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ron99 View Post
That's great results.

How has what you trade changed over the years?

While I am profitable at the end of each one of those nine years, I am not as consistent as you are Ron. I have not fully found a trading plan that I am 100% comfortable with so I am constantly refining my plan.

Over the years, I have gotten more and more risk adverse but I also realize there is no way to eliminate risk. Just respect it more. I am choosing strikes with lower and lower delta's.

Being disciplined and patient has been an issue for me in my option selling career. Even though I am profitable 9 out of 10 years, I know that I should be doing even better. When I look back at my annual results, sometimes I get very frustrated because there is always that one or two trades where I had a lapse in discipline that damaged my overall results. Some say I am being too hard on myself and I am a perfectionist but I am always looking to improve.

Maybe I am off topic here......

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Old February 25th, 2013, 07:39 PM   #912 (permalink)
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Here is a chart comparing premiums on different strategies last year. What happens when markets go against you.

Aqua line is a short Aug 12 CL 80 put. Naked option.
Red line is a short Aug 12 CL 80 put and a long 75 Aug put. Covered short put. Same months.
Yellow line is short Aug 80 put and a long 77 July put. Diagonal spread. Different months.

On May 1st the premiums were,
Aqua 0.17
Red 0.09
Yellow .014

On June 1st the premiums were
Aqua 3.16
Red 1.30
Yellow 2.26

Starting June 13th the Aqua and Yellow premiums were within a few pennies of each other. Red is 1.13 less.

The covered spreads same months gave you more protection when the market went against you. But they also offer lower returns. Depends on how risk adverse you are.

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Old February 25th, 2013, 07:44 PM   #913 (permalink)
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Thanks for the chart Ron. But I highly doubt anyone holding any one of those three possible trades would have been able to stay in for that long.

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Old February 25th, 2013, 07:46 PM   #914 (permalink)
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MJ888 View Post
While I am profitable at the end of each one of those nine years, I am not as consistent as you are Ron. I have not fully found a trading plan that I am 100% comfortable with so I am constantly refining my plan.

Over the years, I have gotten more and more risk adverse but I also realize there is no way to eliminate risk. Just respect it more. I am choosing strikes with lower and lower delta's.

Being disciplined and patient has been an issue for me in my option selling career. Even though I am profitable 9 out of 10 years, I know that I should be doing even better. When I look back at my annual results, sometimes I get very frustrated because there is always that one or two trades where I had a lapse in discipline that damaged my overall results. Some say I am being too hard on myself and I am a perfectionist but I am always looking to improve.

Maybe I am off topic here......

Thanks.

Option selling I am somewhat consistent. Other trading plans. No consistency. Usually 2 months a year are negative. And if things work out, two months are pretty good.

But I am the same as you. A lot more risk adverse as the years go by.

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Old February 25th, 2013, 07:54 PM   #915 (permalink)
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Futures Edge on FIO

Are you a NinjaTrader user?

 
I talked to RJO Futures today. They do allow options on futures. But they want $14 per trade. $14 when you put options on. Nothing when the expire.

Oh well.

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Old February 25th, 2013, 08:52 PM   #916 (permalink)
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ron99 View Post
I talked to RJO Futures today. They do allow options on futures. But they want $14 per trade. $14 when you put options on. Nothing when the expire.

Oh well.

Email Carley Garner. In the webinar today she mentioned $10 or possibly less depending on volume.

cgarner@decarleytrading.com

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Old February 25th, 2013, 09:40 PM   #917 (permalink)
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ron99 View Post
I talked to RJO Futures today. They do allow options on futures. But they want $14 per trade. $14 when you put options on. Nothing when the expire.

Oh well.

I just got through talking with RJO Futures over the past couple of weeks. They start with $14 RT, go down to $10 and maybe $6 if you don't want their research and just want to be self-directed. I was able to negotiate them down to $4 RT. I told them that I was looking to switch my account to a new IB and that I had an offer from another IB that clears through RJO at $4 (which I did) and that if they matched it I would work with them. They asked me quite a few questions about my account size, trading style, risk management and the like, but in the end they agreed. They said anything below $6 has to be approved through the powers to be. At least that is what they told me.

Hope this helps.

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Old February 26th, 2013, 08:28 AM   #918 (permalink)
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ron99 View Post
You lose the protection of the long options at about 40 DTE of the short options. Don't know if that is a big worry.

Without the long positions, then it's a strangle and the premium is 3000 and the margin is 4130 and ROI 8.4%.

Thanks for that Ron.

I don't think you'd be able to hold this position at IB after the expiration of the Long options.

In my IB SIPP (UK Pension) account the initial margin for CJ77's calendar spread is approx $2,765.

As a strangle the IM increases to $25,380. (that's not a typo ). Even though the strangle margin will decrease by then there will still be a HUGE jump in IM after the May expiry, and a good chance of a margin call.

I think CJ77 is using this as a means of making the best of IB's byzantine margin structure. Closing the position isn't too much of a problem because of IB's low comms. Thank you CJ77.

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Old February 26th, 2013, 11:42 AM   #919 (permalink)
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Exited the Apr CL 77 and 75 puts for .03 today.

Thinking that if Wash DC lets the sequester happen might be a drop for the oil market. Added a few % points to my account balance so a winner either way.

Will monitor CL for another entry

Watching Gold and Soybeans also....

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Old February 26th, 2013, 11:45 AM   #920 (permalink)
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MJ888 View Post
Thanks for the chart Ron. But I highly doubt anyone holding any one of those three possible trades would have been able to stay in for that long.

The main point of the chart is the time frame from May 1st to Jun 1st. The covered spread, same month, loses less money because the long options are the same month as the short options. The diagonal spread loses more money because the time erosion of the long option which is 30 days closer to expiration.

The diagonal spread will make more money when things are going OK. In the one example it was 9.8% vs 7.2% monthly. The diagonal spread will lose more money when things go wrong.

You have to decide what fits your risk tolerance.

Same for naked options. If you do an option with a 0.1000 delta you will make more money than a 0.0300 delta. But you could lose far more money when things go wrong.

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