NexusFi: Find Your Edge


Home Menu

 





Selling Options on Futures?


Discussion in Options

Updated
      Top Posters
    1. looks_one ron99 with 2,221 posts (4,489 thanks)
    2. looks_two SMCJB with 346 posts (733 thanks)
    3. looks_3 kevinkdog with 341 posts (400 thanks)
    4. looks_4 myrrdin with 288 posts (408 thanks)
      Best Posters
    1. looks_one SMCJB with 2.1 thanks per post
    2. looks_two ron99 with 2 thanks per post
    3. looks_3 myrrdin with 1.4 thanks per post
    4. looks_4 kevinkdog with 1.2 thanks per post
    1. trending_up 1,949,926 views
    2. thumb_up 9,259 thanks given
    3. group 458 followers
    1. forum 7,370 posts
    2. attach_file 794 attachments




 
Search this Thread

Selling Options on Futures?

  #3661 (permalink)
 mu2pilot 
Dallas, TX
 
Experience: Advanced
Platform: T4, Zaner360, TOS
Broker: DeCarley Trading
Trading: Options
Posts: 104 since Sep 2013
Thanks Given: 134
Thanks Received: 52

Hummingbird, the most you can lose when you buy an option is the cost of the option.


Sent from my iPad using Tapatalk HD

Reply With Quote

Can you help answer these questions
from other members on NexusFi?
Better Renko Gaps
The Elite Circle
Exit Strategy
NinjaTrader
My NT8 Volume Profile Split by Asian/Euro/Open
NinjaTrader
Are there any eval firms that allow you to sink to your …
Traders Hideout
Deepmoney LLM
Elite Quantitative GenAI/LLM
 
Best Threads (Most Thanked)
in the last 7 days on NexusFi
Get funded firms 2023/2024 - Any recommendations or word …
61 thanks
Funded Trader platforms
39 thanks
NexusFi site changelog and issues/problem reporting
26 thanks
The Program
18 thanks
GFIs1 1 DAX trade per day journal
18 thanks
  #3662 (permalink)
hummingbird
Yreka, CA United States
 
Posts: 11 since Sep 2014
Thanks Given: 0
Thanks Received: 2

Thanks for the response, but that doesn't answer my question. I know that part about not loosing more than the call is worth, but what about the part when I sell to close my call a week before expiry when the price of the underlying instrument went against my position by more than the price of the call? Will I just loose part of its' time value or all of it?

Reply With Quote
  #3663 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785



hummingbird View Post
I am a newbie to options and hope someone can help me with a question. I have read a few books and am still unsure how much money I can loose if the trade goes against me. Let's say I buy a call for 75 cents and the trade goes against me by a $1.50, but there is still one week to expiry when I scratch the trade. Will I loose the entire 75 cents or just the time value. Hope this makes sense.

This thread is options on futures. A question about options on stocks needs to be placed in a different thread.

Started this thread Reply With Quote
  #3664 (permalink)
hummingbird
Yreka, CA United States
 
Posts: 11 since Sep 2014
Thanks Given: 0
Thanks Received: 2

Then I guess you don't know the answer

Reply With Quote
  #3665 (permalink)
CafeGrande
St Paul, MN, USA
 
Posts: 200 since Jan 2014
Thanks Given: 131
Thanks Received: 207


hummingbird View Post
Thanks for the response, but that doesn't answer my question. I know that part about not loosing more than the call is worth, but what about the part when I sell to close my call a week before expiry when the price of the underlying instrument went against my position by more than the price of the call? Will I just loose part of its' time value or all of it?

An exchange-traded option, in or out of the money, stock or futures, is going to have *some* time value right up to the moment of expiration, and if you want to be really precise, you could say it will also expire with one tick (smallest price increment) of time value. An OTM option is worthless at that point, but if you look at an option matrix with closing prices on expiration day (might depend on product or data vendor) you'll see all the OTM options closing with 1 tick of value.

The second thing you asked about was "how much of its time value have I lost?" If the volatility has been steady or declining, you've held the option for several weeks or more, and you're selling it a week before expiration, then you've lost most of the time value that existed when you purchased the option. Even with an out of the money option, it's possible for a fair amount of time value to remain with one week to expiration, but that's only going to happen if the volatility increased since you bought it. That's a generalization - it can get a lot more complicated depending on how close to the money your about to expire option is and the skew (shape of the implied volatility curve).

Reply With Quote
  #3666 (permalink)
hummingbird
Yreka, CA United States
 
Posts: 11 since Sep 2014
Thanks Given: 0
Thanks Received: 2

Thanks for the reply. So let me see if I can get this straight. I purchased a monthly call for 75 cents, price goes against my position by $5, I have a week to expiry and I sell to close my call. Will this call have any value at all or have I just lost the full purchase price of that call?

Reply With Quote
  #3667 (permalink)
CafeGrande
St Paul, MN, USA
 
Posts: 200 since Jan 2014
Thanks Given: 131
Thanks Received: 207


hummingbird View Post
Thanks for the reply. So let me see if I can get this straight. I purchased a monthly call for 75 cents, price goes against my position by $5, I have a week to expiry and I sell to close my call. Will this call have any value at all or have I just lost the full purchase price of that call?

Yes, it will have some value. It's time value or extrinsic value. If you're talking about a US stock option that trades in nickle increments, it might only be worth a few nickles (or less). Sometimes, again it's the same with futures or stock options, you sell it while it still has some value, as long as commissions don't make it a wash (or a loss)

Reply With Quote
Thanked by:
  #3668 (permalink)
hummingbird
Yreka, CA United States
 
Posts: 11 since Sep 2014
Thanks Given: 0
Thanks Received: 2

Thanks for your answer. It probably seemed like a stupid question, but it wasn't clear in the books I read. By the way, I didn't know you could trade futures using options, that's interesting. I always thought, for example, that if you wanted to buy options in say the emini s&p 500, you would buy them in the spy.

Reply With Quote
  #3669 (permalink)
 datahogg 
Knoxville Tennessee USA
 
Experience: Intermediate
Platform: TOS
Trading: ES, NQ, CL, /6E futures options.
Posts: 346 since Oct 2012
Thanks Given: 135
Thanks Received: 154


hummingbird View Post
Thanks for your answer. It probably seemed like a stupid question, but it wasn't clear in the books I read. By the way, I didn't know you could trade futures using options, that's interesting. I always thought, for example, that if you wanted to buy options in say the emini s&p 500, you would buy them in the spy.

You need to learn much more before you buy or sell anything. (Constructive advice.)

Reply With Quote
Thanked by:
  #3670 (permalink)
hummingbird
Yreka, CA United States
 
Posts: 11 since Sep 2014
Thanks Given: 0
Thanks Received: 2


That's good advice, thank you. I mostly scalp the Emini S&P 500 but would like swing trade other instruments on hourly and daily time frames using options to limit my risk. I have never traded with options and don't know much about them, so I thought I would stop by this forum and ask a few questions.

Reply With Quote




Last Updated on July 28, 2023


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts