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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,268 / 5,727
Last Reply:December 2nd, 2016 (12:40 PM) Attachments:642

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Selling Options on Futures?

Old February 26th, 2013, 11:56 AM   #921 (permalink)
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ron99 View Post
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.

Hello Ron, I've just started selling futures options using short strangle. Do you try to enter the short positions when the volatility high? If so, how do you read this off the charts. Apologies if this has been addressed before.

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Old February 26th, 2013, 12:26 PM   #922 (permalink)
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Big Mike View Post
The question wasn't directed at you. So when you answered it, it was pointed out that the question wasn't directed at you.

I've read your posts, and I agree that futures.io (formerly BMT) is likely not for you. Your posts come across with a lot of arrogance which does not work well in a community that works to help each other.

Mike


Fair enough, but I think you're mistaking a tendency to focus on facts and numbers, with arrogance. In real life, I am quite the opposite of brash or arrogant. The reason I have taken a direct approach as I have is to get people to think analytically instead of succumbing to the "dreamer's attitude" like a lot of traders have a tendency to do. I'm not saying there are not people who don't know what they're doing, but a lot of new traders that read these threads are bound to get swept away into believing things can happen without knowing why or what the chances are and without doing the homework they need to do.

My intent has never been to piss people off, rather to encourage debate so as to put reality more into focus. If I get ourselves to question our methods, it's a good thing.

You have to understand that I come from a scientific background. In the science community, things are debated. Facts and figures are put forth where they are argued. Certainly some people are not used to this. Indeed, my style might be unusual, but it doesn't mean there is no benefit.

I believe the reason I deliberately take a direct, blunt tone is as a kind of "cold water" wake-up call. The purpose is really just to spark the kind of self-reflection that leads to "am I really doing the right thing here, do I need to look at it from a different angle." This approach walks a fine line between achieving what it intends, or alienating people, and it seems to do doing more of the latter, unfortunately. For that I apologize.

At this point, I think I'll take a different tack. If anybody wants, you can respond to one of my threads or PM me, and I promise I won't bite your head off.

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Old February 26th, 2013, 12:47 PM   #923 (permalink)
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Big Mike View Post
Email Carley Garner. In the webinar today she mentioned $10 or possibly less depending on volume.

cgarner@decarleytrading.com

Mike


I deal with RJO via Etrade for CL options. $7/side ($14 round turn). Tradestation also uses RJO for the options. apparently this will change soon for Etrade as they will do all their own clearing.

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Old February 26th, 2013, 01:09 PM   #924 (permalink)
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gigi View Post
Hello Ron, I've just started selling futures options using short strangle. Do you try to enter the short positions when the volatility high? If so, how do you read this off the charts. Apologies if this has been addressed before.

I have never used volatility to decide when to put an option on. Since I am so far OTM my main concern is finding buyers. I can't be choosy about picking time based on volatility.

I do look if futures are down then that is time to sell puts if you don't think things are going further lower. Buyer are more likely then. When futures are up I look to sell calls.

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Old February 26th, 2013, 01:17 PM   #925 (permalink)
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Futures Edge on FIO

Are you a NinjaTrader user?

 
The cycle for gold prices, which climbed for 12 straight years, has probably turned as the recovery in the U.S. economy gathers momentum and investment holdings collapse, according to Goldman Sachs Group Inc., which reduced forecasts for the metal.

The bank cut its three-month target to $1,615 an ounce from $1,825 and lowered the six- and 12-month forecasts to $1,600 and $1,550 from $1,805 and $1,800. Goldman reversed an assumption exchange-traded products holdings will expand in 2013, analysts Damien Courvalin and Jeffrey Currie wrote in a Feb. 25 report.
Gold's cycle seen turned by Goldman Sachs as ETP holdings drop

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Old February 26th, 2013, 01:51 PM   #926 (permalink)
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mwtzzz,

Your are fine in my book. I agree that asking hard questions about the subject is important. I think this thread is perfect for new options sellers since there are several contributors that have extensive yet different styles of selling options. Just about everyone here is very conservative and there is a lot of emphasis placed balancing risk vs reward. I welcome your continued input and questions.

MJ888

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Old February 26th, 2013, 02:00 PM   #927 (permalink)
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MGBRoadster View Post
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.

I agree that without the long options, it would be impossible to hold a strangle unless you have or want to use up a large amount of funds for margin.

I guess the main question about the position is if a decent profit can be made by the time the longs expire and an exit of the shorts. At least that is how I am considering managing the simulated position that I posted on here yesterday. I will post an update on that after markets close.

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Old February 27th, 2013, 04:45 PM   #928 (permalink)
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MGBRoadster View Post
There was some information earlier in the thread that suggested OX might have stopped servicing European clients. This isn't correct, but they seem to be aiming towards US customers. They said to me:

"upon our review and at our discretion we accept unsolicited accounts from non-U.S. residents. Although our account opening process is geared toward opening accounts for persons with a U.S. domestic address, we will review and open foreign accounts depending on the country of residence and at our discretion"

The new commission pricing ($3.50/contract for options) only applies to US customers. Non-US clients go off the tier rates, starting at $12.99 for 1-40 contracts per month.

I was also told today that "SPAN margin only applies to futures trades" and not to options. The guy said this was for all acounts, not just non-US. On their "virtual trade" application I was quoted margin that was even worse than IB's. I nearly fell off my chair.

Let me know if you have better luck with them.

Chris

Just to let you know that OX indeed accepts European Clients, after my account was shut down last year due to OX Europe no longer doing business, I applied for a new account last week and my account is now operational. When looking at the fees using Trade Calculator for options on futures, commission pricing is $3.50/contract, margin also seams fair (May 75 Put on CL shows $6,376 on OX while $23,956 at IB). Happy to be able to trade again at OX with decent fees and margin, and thanks MGBRoadster for pointing out that OX still services European customers!

Edit: margin is for May CL 75 Put not 70 (and for 10 contracts), thanks ron99 for noticing.


Last edited by CJ77; February 27th, 2013 at 04:55 PM.
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Old February 27th, 2013, 04:50 PM   #929 (permalink)
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CJ77, I suspect you mean a different option than a May CL 70 put.

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Old February 27th, 2013, 06:34 PM   #930 (permalink)
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Crazy volatility in the metals the past few days. So glad that I gave up trading contracts years ago...

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