Selling Options on Futures?

kevinkdog · March 2nd, 2014, 02:36 PM

MJ888

Thanks for verifying that Kevin

It would have been awesome to get a six figure profit on 1 call that hit 225 !!!!!

March 2nd, 2014, 02:39 PM

No kidding! Hahahahaha! When something looks too good to be true, it probably is!

March 2nd, 2014, 03:54 PM

uuu1965

Would you applay the same margin rules (3x excees) for option spread trading (sell nearest strike and buy futher one)?

P.S. I would like to say thanks for DeCarley broker service advice

Suppose you sell an option with a delta of 0.04. And you buy an option with a delta of 0.02 . (Same underlying)
A put vertical.

On the other hand suppose you just sell an option with a delta of 0.02 .

Is there a difference??

March 2nd, 2014, 08:32 PM

datahogg

Suppose you sell an option with a delta of 0.04. And you buy an option with a delta of 0.02 . (Same underlying)
A put vertical.

On the other hand suppose you just sell an option with a delta of 0.02 .

Is there a difference??

Let's use an example. June CL 79 put is .0194 delta and a price of 0.10. IM is 240. 76 DTE.

The June 8.35 put is .0396 delta, 0.20 price and IM of 425.

The IM for the spread is 185.

The IM for the spread is less than the 79 naked put. Delta is the same. Net possible profit slightly less because of double fees. But you have a higher short strike for the spread. So it has more of a chance of being ITM than just the naked put.

But I also suspect that the spread will be more friendly if the futures move slowly against you. But there is a point when the spread will not be more friendly if futures get very close to your short strike.

March 2nd, 2014, 08:35 PM

MJ888

Kevin,

I am not actually in this trade. I was using the trade calculator on OptionsXpress and the profit and loss chart gave me odd info. So I was just wondering if the info was wrong or was I missing something.

The way you explained it was what I thought it was, it was just that OptionsXpress was wrong and was confusing me.

The profit/loss chart on the trade calculator at OX has has mistakes in it for years. And they keep changing. They fix one thing and then something else goes wrong. Always verify the numbers on it.

March 4th, 2014, 08:48 AM

A word of warning on NG options. The margin for April is 46% higher than for May contracts. May is 44% higher than June. So April is 111% higher than June.

https://www.cmegroup.com/trading/energy/natural-gas/natural-gas_performance_bonds.html?exchange=XNYM&productCd=NGH4&underlyingContract=NG&floorContractCd=NGH4&expMonth=201403&prodid=

So if you put on June contracts, if the CME doesn't change anything, then the margin required for them will jump considerably when they become front month options.

I suspect that will change eventually but this is the way it is right now.

March 4th, 2014, 09:30 AM

Wasn't March more than double April?

March 4th, 2014, 10:09 AM

SMCJB

Wasn't March more than double April?

Yes

March 4th, 2014, 08:21 PM

I have notice that too about NG options, what exactly is the reasoning behind that? I do understand margin rising because of volatility but shouldn't that apply to all months? Does that mean that April is more volatile than May and May is more volatile than June?

So with NG, it's the reverse? With less days until expiration, the margin becomes higher?

March 4th, 2014, 09:37 PM

MJ888

I have notice that too about NG options, what exactly is the reasoning behind that? I do understand margin rising because of volatility but shouldn't that apply to all months? Does that mean that April is more volatile than May and May is more volatile than June?

So with NG, it's the reverse? With less days until expiration, the margin becomes higher?

Here is your answer. All 3 months are on the same scale.

March is obviously a lot more volatile than April and April more than May. So the CME makes the margin on each to reflect the different volatility.

Selling Options on Futures?

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Selling Options on Futures?