Selling Options on Futures?

October 28th, 2013, 07:37 PM

Is bean oil a candidate. Bearish and possibly retesting low and having a high volatility?

kevinkdog · October 28th, 2013, 07:44 PM

BlueRoo

Is bean oil a candidate. Bearish and possibly retesting low and having a high volatility?

I think you'll have trouble finding a decent ROI. Bean Meal has a much higher ROI.

October 28th, 2013, 10:40 PM

kevinkdog

I think you'll have trouble finding a decent ROI. Bean Meal has a much higher ROI.

Yes I have worked up a few strangles and it is not good. Oh well, one has to explore these things. Thanks Kevin, I am slowly starting to diversify my activities. There is a bit to learn when looking further a field or rather exploring the numbers and assessing alternative trades. I have found the ROI a good method for this comparison matched with probability. BEAN OIL IS OUT!

October 28th, 2013, 10:46 PM

Raven

Good diversity! I am in all of those too except for US. I do trade some TY instead. Pretty much the same except that it seems like TY has more volume.
r

TY is Ten Year Bonds right? Isn't the code ZN? Help!

October 28th, 2013, 11:15 PM

BlueRoo

TY is Ten Year Bonds right? Isn't the code ZN? Help!

Yes, that is the 10 year. It is TY for optionsXpress. I think ZN for others. I don't know why they differ.

October 29th, 2013, 02:28 PM

+ CLG4 72P @ 0.08 Delta= 0.0134
- CLG4 75P @ 0.12 Delta= 0.0225

Vertical @ 0.04 , DTE = 79 IM=303.00

I sold some of these. Good position or bad?

kevinkdog · October 29th, 2013, 02:44 PM

datahogg

+ CLG4 72P @ 0.08 Delta= 0.0134
- CLG4 75P @ 0.12 Delta= 0.0225

Vertical @ 0.04 , DTE = 79 IM=303.00

I sold some of these. Good position or bad?

I calculate a 1.3% monthly ROI on that, assuming you still keep the 3X margin excess. If you decide to keep less excess because of the 72P purchase, you will have a better return.

I hope it works out for you!

October 30th, 2013, 08:43 AM

I have finally finished reading the full thread. Thank you to everyone who selflessly shared their systems and ideas and especially to Ron for initiating the thread and offering his constant advice. My name is Frank. I used to be a professional trader on OTC energy and environmental markets (Carbon, Electricity, Gas) for utilities.
I have been trading options on the side for 14 years and I can say that the only strategy that has given me consistent results over the years was selling premium. There is very little literature on the topic that goes beyond theory, so when I found this thread I was surprised and amazed that I am not alone as an individual options seller vs professional trading houses. I have learned a lot from you and I intend to keep learning. Like many of you I started off trading stocks and stock options then I moved to index options. I also traded futures for a while but I only started doing futures options recently. Which kind of closes the full circle.

I have a question regarding OX spreads margins. I know from this thread that the Trade Calc does not properly work, so I addressed the issue through customer service at OX. After a long discussion with several reps they brought in one of the futures brokers. She indicated that Trade Calc computes margin properly for spread options on futures using SPAN. I showed them how margin differs dramatically for 1 contract vs 2 contracts. Also if you keep adding contracts margin requirements decrease dramatically when you reach 100 contracts and tend to stay there. For example, an iron condor with 78 DTE on CL requires $912 IM for 1 contract ($70 premium) and $966 for 2 ($140 premium) which makes no sense. But it only requires 31% premium to margin ratio when you enter 5 contracts. The IM starts decreasing as you enter more contracts, so when you reach 100 contracts the requirement is only around 45% and it does not change much if you enter 1000 or 2000 contracts. I asked them if substracting IMs for 1 and 2 contracts could fix it (as suggested in several parts of this thread) and they had no idea what I was talking about.
They pointed out that SPAN requires less margin as the volume of contracts increases, and that the computations were accurate. I am not familiar with SPAN and I wanted to post the question in this forum in case any of you have heard of anything like this. It does not sound right to me but they kept insisting there are no issues with Trade Calc.
Thanks

October 30th, 2013, 09:19 AM

Welcome ffasin.

SPAN margin does not decrease per option/spread with more quantity.

Here are the emails I got from OX.

Quoting

7/16/09
Regarding the SPAN issues I have been digging quite a bit to figure out where these figures are coming from and here is what I was able to determine after much research and confirmation with coworkers. My initial thoughts were that the SPAN files we were receiving from the various exchanges were corrupted during the process at some point but this was found not to be the case.

The actual cause was much older and goes all the way back to when we merged the old XpressTrade platform into the OptionsXpress platform. Prior to the merge OX did did not use SPAN for futures requirements and held the full amounts regardless of the makeup of the portfolio. XT did use SPAN but the coding was old and had not been updated in some time. We took that old code and configured it to work with the OX platform. It is this old code that is causing the issue.

The actual time and development resources needed to correct the code are quite large and something that has been discussed at length. However we are making a change to our SPAN system that involves framework set forth by the CME. We expect that new system to hopefully be live before the end of the year which is along the same projected time frame that the current system would be corrected in. Unfortunately there isn’t a short term fix, however there is a light at the end of the tunnel in that we are aware of the issue and are working on a completely new SPAN system that should correct the issue and bring the requirements inline with what even their modified values would display. I realize that this doesn’t help any trades in the short term and I apologize for that but I am confident that the wait for the newer system will be well worth it.

Seth James
AVP/ROP

Quoting

4/30/10
I pinged my developers about your issue and they got back to me today. The SPAN program issues are currently at a crossroads and they have revised their time frame to a no ETA as to when the issue will be resolved. I did express my frustration over this approach and stressed that it needed to be done. I know that isn’t the answer you are wanting to hear and I’m sorry I could not give you better news. Since you have to call in and have the accounts looked at each time I spoke to my trading desk to see what could be done about the turnaround time. If you do have to call in a trade or to ask about the requirements please ask for John Grigus or Chris Benson as they will be familiar with your account and it should drastically reduce the time to get your orders placed. Both a senior futures traders and are very familiar with the products and SPAN margin. I will do what I can to stay on top of the issue but based on what they have told me I do not know when they plan on implementing this fix at this point.

Sincerely,
Seth James AVP/ROP

Quoting

6/28/11
Apparently, this was supposed to be corrected in our buying power overhaul, which included an update of SPAN. Buying power is something that is critical to the site, and not something that they have been able to rush (two years and counting). To give you an idea of the scope, we have 11 years of code that we have been modifying as changes came along, which we’re now trying to both update and consolidate it into a unified system..

Unfortunately this has been a far bigger project than anyone thought, and while some of it has been released, it still isn’t finished, and recently, the SPAN update was put on hold. Thanks to your bringing it to my attention I was able to get Q&A to regard this as a bug fix, and they are working to get it corrected.

Due to the merger process, our release schedule is in a bit of disarray as there are some things that need to be done before that can be completed. I should have a better time-table for you in a day or two, but I have managed to get priority attached to the fix.

Philip Bennett
Executive Vice President/Signature Services

Feel free to copy these emails and send them to OX.

The quality of customer service has dropped since Schwab bought them. I had one rep insist that nobody can trade futures in an IRA account. But we all know that is not correct. It is just a OX rule.

I just emailed Seth James about this. Let's see what his response is to me.

Phillip Bennett no longer works for OX. That's too bad because he was excellent in getting problems fixed.

October 30th, 2013, 08:26 PM

So if the margin in the trade calculator is incorrect in OX then the margin in your account balances must also be incorrect. I don't see a difference between them.

THAT HAS TO BE ALARMING! Right? Particularly when that is what you are going on in order to maximize your capital and trade exposure.

What is the solution?

Selling Options on Futures?

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Selling Options on Futures?