Selling Options on Futures?

August 22nd, 2014, 09:57 AM

meyer99

Can someone check if this chart is more or less ok?
thinkorswim Sharing

If it works this could be a free source for seasonal charts.

Here is the code that was given to me. I know nothing about TOS codes, just copied and pasted to add more years.

plot LastYear = close[252];
plot TwoYearsAgo = close [2 * 252];
plot ThreeYearsAgo = close [3 * 252];
plot FourYearsAgo = close [4 *252];
plot FiveYearsAgo = close [5 * 252];
plot CombinedAvg = (LastYear + TwoYearsAgo +ThreeYearsAgo + fourYearsAgo + fiveYearsAgo) / 5;
CombinedAvg.SetDefaultColor(color.LIME);

def today = GetLastDay() == GetDay();

AddChartBubble(today, LastYear, "LY", Color.white);
AddChartBubble(today, TwoYearsAgo, "2Ya", Color.white);
AddChartBubble(today, ThreeYearsAgo, "3Ya", Color.white);
AddChartBubble(today, FourYearsAgo, "4Ya", Color.white);
AddChartBubble(today, FiveYearsAgo, "5Ya", Color.white);

I compared this chart to Ron's and it looks pretty close.

To make it easier to read I run same idea with a 5 day SMA instead of EOD prices. I hope it helps.

thinkorswim Sharing

input AvgLength = 5;
plot ThisYear = Average(close, AvgLength);
ThisYear.SetDefaultColor(Color.WHITE);
plot LastYear = Average(close[252], AvgLength);
LastYear.SetDefaultColor(Color.CYAN);
plot TwoYearsAgo = Average(close[2 * 252], AvgLength);
TwoYearsAgo.SetDefaultColor(Color.PINK);
plot ThreeYearsAgo = Average(close[3 * 252], AvgLength);
ThreeYearsAgo.SetDefaultColor(Color.LIGHT_GRAY);
plot FourYearsAgo = Average(close[4 * 252], AvgLength);
FourYearsAgo.SetDefaultColor(Color.YELLOW);
plot FiveYearsAgo = Average(close[5 * 252], AvgLength);
TwoYearsAgo.SetDefaultColor(Color.RED);

plot CombinedAvg = ( LastYear + TwoYearsAgo +ThreeYearsAgo + fourYearsAgo + fiveYearsAgo) / 5;
CombinedAvg.SetDefaultColor(color.LIME);

def today = GetLastDay() == GetDay();

AddChartBubble(today, CombinedAvg, "Avg", Color.LIME);
AddChartBubble(today, LastYear, "LY", Color.white);
AddChartBubble(today, TwoYearsAgo, "2Ya", Color.white);
AddChartBubble(today, ThreeYearsAgo, "3Ya", Color.white);
AddChartBubble(today, FourYearsAgo, "4Ya", Color.white);
AddChartBubble(today, FiveYearsAgo, "5Ya", Color.white);

August 22nd, 2014, 10:26 AM

Thanks Ron and Mu2pilot for the quick reply. I need time to do more research to find the right broker, your recommendation is a very good start point:-).
I have been trading ES with IB for a few years (day-trade future) and the result is not that successful, after commission, I am just barely break-even. I started to sell option on ES from the end of last year and I am not that lucky as well. The margin is high with IB obviously, and I am not good at money management (leaving too little excess cash). At the beginning of this year, one time I sold weekly put with alpha around 0.25, and a move of 30 points against me forced me to get a margin call from IB and IB did liquidate my position with MARKET ORDER. I lost 25% of my whole account and I stopped selling option on ES since then.
I decided to do more research before I do another selling, so I googled 'how to control risk when selling future options' and I ended up with one article on seeking alpha by Cordier, then I found his website, bought his book( not finished yet), after surfed around a few more days, I eventually found here, what a blessing!!!
I have read about 40 pages of this thread and I have learned a ton from everybody here. Big thanks to RON and others who are willing to share your thoughts and methods here!!

August 22nd, 2014, 11:11 AM

Ron, the DeCarly charged $7 for round trip for selling options, is that right? what about their margin?
for example, if I want to sell Sep 12,2014 1850 put (bid 1.7, ask 1.9, alpha=0.04), IM is 6685, MM is 5348 at IB.
since I am familiar with ES, I may focus on ES option selling for now. Commodity trading is very new to me.

Do you know anybody here focusing on selling ES options? thanks!

August 22nd, 2014, 11:27 AM

daydayup8

Ron, the DeCarly charged $7 for round trip for selling options, is that right? what about their margin?
for example, if I want to sell Sep 12,2014 1850 put (bid 1.7, ask 1.9, alpha=0.04), IM is 6685, MM is 5348 at IB.
since I am familiar with ES, I may focus on ES option selling for now. Commodity trading is very new to me.

Do you know anybody here focusing on selling ES options? thanks!

I think you're using ALPHA in place of DELTA. The correct term is DELTA.

I'm not a customer of DeCarly brokerage, but I've considered the firm. Be aware that the commissions stated on the website are round turn, they charge for both sides at the opening trade, and they don't refund half of them if you let the options expire worthless. You also have to add exchange fees and a couple cents for NFA fees.

I don't know what the minimum tick size is for ES options, but if you're trading CL or NG it's $10 and for SB it's $11.20. Single or both-side commissions plus relatively high minimum tick sizes (comparing CL/NG/SB to grains at $6.25 or coffee at $3.75) are important variables in determining whether to buy in your options or let them expire worthless, especially if you are trading a lot of them.

August 22nd, 2014, 11:40 AM

CafeGrande

I think you're using ALPHA in place of DELTA. The correct term is DELTA.

I'm not a customer of DeCarly brokerage, but I've considered the firm. Be aware that the commissions stated on the website are round turn, they charge for both sides at the opening trade, and they don't refund half of them if you let the options expire worthless. You also have to add exchange fees and a couple cents for NFA fees.

I don't know what the minimum tick size is for ES options, but if you're trading CL or NG it's $10 and for SB is $11.20. Single or both-side commissions plus relatively high minimum tick sizes (comparing CL/NG/SB to grains at $6.25 or coffee at $3.75) are important variables in determining whether to buy in your options or let them expire worthless, especially if you are trading a lot of them.

Thank you for the explanation and share your experience. I can't believe I used Alpha instead of Delta.
The minimum tick size for ES option is 0.25, it equals to (0.25*100/2=)$12.5.

August 22nd, 2014, 11:48 AM

CafeGrande

I think you're using ALPHA in place of DELTA. The correct term is DELTA.

I'm not a customer of DeCarly brokerage, but I've considered the firm. Be aware that the commissions stated on the website are round turn, they charge for both sides at the opening trade, and they don't refund half of them if you let the options expire worthless. You also have to add exchange fees and a couple cents for NFA fees.

I don't know what the minimum tick size is for ES options, but if you're trading CL or NG it's $10 and for SB it's $11.20. Single or both-side commissions plus relatively high minimum tick sizes (comparing CL/NG/SB to grains at $6.25 or coffee at $3.75) are important variables in determining whether to buy in your options or let them expire worthless, especially if you are trading a lot of them.

"they don't refund half of them if you let the options expire worthless"
It is not reasonable, oh, well. I guess every broker has their own small tricks:-)

August 22nd, 2014, 12:22 PM

daydayup8

Ron, the DeCarly charged $7 for round trip for selling options, is that right? what about their margin?
for example, if I want to sell Sep 12,2014 1850 put (bid 1.7, ask 1.9, alpha=0.04), IM is 6685, MM is 5348 at IB.
since I am familiar with ES, I may focus on ES option selling for now. Commodity trading is very new to me.

Do you know anybody here focusing on selling ES options? thanks!

I have been using TOS long before there was a thought of them being purchased by TD Ameritrade.
Their commissions for ES are approximately $5.64 round trip for futures options. They don't charge for options
expiring as far as I know. I almost always sell futures put options with a DELTA of 0.02 . This way
I can get a good feeling of what is a good price for a 0.02 delta put. Also TOS options analysis is excellent.
Hope this helps.

August 22nd, 2014, 12:40 PM

datahogg

I have been using TOS long before there was a thought of them being purchased by TD Ameritrade.
Their commissions for ES are approximately $5.64 round trip for futures options. They don't charge for options
expiring as far as I know. I almost always sell futures put options with a DELTA of 0.02 . This way
I can get a good feeling of what is a good price for a 0.02 delta put. Also TOS options analysis is excellent.
Hope this helps.

That does help, thank you. Do they allow to selling ES option in an IRA acct? what about their margin? can you check the margin for selling ES 1850 PUT with expiration SEP 12?

August 22nd, 2014, 12:47 PM

daydayup8

Ron, the DeCarly charged $7 for round trip for selling options, is that right? what about their margin?
for example, if I want to sell Sep 12,2014 1850 put (bid 1.7, ask 1.9, alpha=0.04), IM is 6685, MM is 5348 at IB.
since I am familiar with ES, I may focus on ES option selling for now. Commodity trading is very new to me.

Do you know anybody here focusing on selling ES options? thanks!

SPAN minimum for a Sep 12 expiring weekly option is 2470. Delta .04.

SPAN minimum for a Sep 19 expiring 1850 option is 2464. Delta .07.

There is a heck of lot more volume for the regular options vs the weekly options. OI of 2K vs 22K in the options above.

I would recommend going further out DTE than these options. Then you won't have to be so close to ITM. Less chance of being forced out and having big loss. Also less IM.

$7 is what OX charges RT.

August 22nd, 2014, 12:56 PM

ron99

SPAN minimum for a Sep 12 expiring weekly option is 2470. Delta .04.

SPAN minimum for a Sep 19 expiring 1850 option is 2464. Delta .07.

There is a heck of lot more volume for the regular options vs the weekly options. OI of 2K vs 22K in the options above.

I would recommend going further out DTE than these options. Then you won't have to be so close to ITM. Less chance of being forced out and having big loss. Also less IM.

$7 is what OX charges RT.

I have the answer now, thanks RON!!

Selling Options on Futures?

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Selling Options on Futures?