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With the big drop in crude this week, I thought it would be interesting to calculate my possible exit point, using Ron's method shown above. This is what I get (I hope it is clear).
I am a little confused because I used freed up margin from the first sale of a crude option to sell a second option back on 2/12...
So, I will treat both the original and "add on" option together as a pair (maybe I should not).
Originally, I sold CLJ375P for net premium of $64.73. Margin was $327, so I had $654 excess.
2 weeks later, I sold CLJ365P for net premium of $4.73. Margin was $103.
So, overall I collected $69.46 in premium, and right now it is showing a $40 gain.
On margin right now, my initial position has margin of $511, and the second position has margin of $122.
Since I started with $654 excess, I figure I know have $654 + 40 (premium) –184 (increase in position1 margin) –122 (position 2 margin) = $388 in excess remaining.
So, should margin on the 2 positions, plus any premium loss, go up by combined $388, I’ll probably bail (according to your rule).
Is that how you would do it, or do you treat each position as separate, even though the 2nd one was a “add to winner” type trade?
THANKS!
Can you help answer these questions from other members on NexusFi?
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.
What he said doesn't sound right. Earlier this week I had a OX customer service rep swear it was illegal to trade futures in IRA accounts. That was wrong and she wouldn't accept the fact that she was wrong.
Can you go to the Trade Calculator and give us an example of an option so we can compare to what I get?
You should have had $206 excess for the 65 put. Or you should have had $309 unused excess before you put on that position.
You don't want 1 big loser position to wipe out the profits on all of your other trades because you held onto it too long so I treat each position separately.
If things are volatile I sometimes go to triple or quadruple excess on the real far out of the money CL puts because the very low margin and excess don't cover a moderate move.
What I do is calculate the margin on a put that is $10 higher strike when I put on the position figuring I should be able to ride at least that much of a move. If the margin + excess that I have for the $65 put doesn't cover that much of a move then I raise the excess higher. You don't want to be bailing out of 65 puts on a CL move of <10 in futures.
But in other commodities that isn't necessary. You need to look at each one.
For example today I sold Jul KC calls. The OX margin on a 300 call is 31. I add 62 excess. This total of 92 is less than the margin required (69) for a 260 call. So theoretically I could survive a 40 rise in KC. I know this isn't exact but it comes close.
Also if there is <30 DTE, I ignore the bailing out of the position rule and use excess from other positions to ride it out if it is sufficiently far enough OTM and fundamentals aren't that bad. Like now I wouldn't bail on Apr 65 puts unless there was a major fundamental change.
I know some traders like to have hard rules for exiting but I have never done that. Each situation is different.
No it didn't sound right to me either, but I asked a couple of times - it was only on the chat function, so I thought I'd check again later.
I went into Virtual Trade but wasn't able to place a futures option trade (I think this may be because I was using Firefox) so I sold one AAPL MAR13 380 PUT which gave me an "Option Requirement" of USD4520
The IB IM for that option was GBP2513 (about USD3835)
I'll have a play around with it on Monday, see if I can get the future options working.
Opts is right, beat me to it, thanks! Yes, the trader I used to work with would often grumble that options selling had an undeserved bad rep! Brokers and traders are just doing their job when they inform you of the risks but if it was up to the National Futures Association, they'd never talk about anything but risk!! I've heard that there are even brokerages that won't let you sell options!
This will be my fifth post so I'm going to post this and then reply with a link to where the trader I used to work with is now.
OK!! I should be able to post links now!!! The trader I used to work with shut down his brokerage and opened a new one a couple years ago. He's mostly in managed products now but I know that guy, option selling will always be his favorite, I'm sure!! His name is Matt Johnson, his brokerage now is Vista Financial in Chicago. Drop him a line if you're interested but do be aware he'd want you to open an account with his brokerage. He's a Vision GIB.
Very dumb question guys so i apologize in advance.
On Friday I initiated a position in /Nasdaq futures by selling puts deep OTM with delta .02; prior to the futures market closing i was up a little. Check my account a while ago and it says im down 385 ? anybody know why that is ?
