Ron

I think you mentioned that you were going to do some traveling.
Have your trips been interesting and noteworthy?

HH

Interesting your timing of asking. I am leaving Monday to go to Key West Florida in my RV for a week (1,400 miles!). Then spending another 2-3 weeks in central Florida.

In Oct I spent 2 weeks in PA. Saw the Oil Museum. Saw location of first oil well in the US. Saw the longest continually operating oil well. 126 years! Saw the lumber museum. Saw some great scenery and ate some good food.

So yes it was interesting and noteworthy.

All while trading with my laptop using a mobile hotspot.

Toughest part of traveling is finding someone to care for my horses, cattle and cats back at home.

On Jan 3 I sold EW3j8p2140(2)p1900(3) for 3.30. Jan 12 I exited at 1.80. Only 9 days held. 8.0% MROI.

I also sold new positions. EW3j8p2250(2)p2000(3) for 2.75.

How many such positions will you do for every 100K portfolio? Curious on the sizing and allocation

Another few newbie questions sorry guys:

1. I understand selling an option puts a margin into escrow which slowly becomes available as you move towards expiry date (aslong as you stay out of the money). However, what if the price of the future sharply moves towards your strike price, but stays below to your strike price the whole time (but really close to the strike price). And the option expires worthless. Do you still receive your premium + all of the margin back in account? From my understanding as position moves against you during the option period your ‘margin’ increases. However, what if you have enough cushion in your account for extra margin. Do you still profit in the end if the contract expires worthless?

2. What exactly happens to margin if you buy back your option for a profit/or loss depending on the situation. Does it go back into your account or do you forfeit it? Also how is the buy back calculated. Including margin. E.g. on Ron99’s latest post sold after 9 days? (Profit of trade broken down - cost of trade broken down). When you buy back a sold option, are you ‘exercising’ the underlying future?

3. I’m reading Cordier. And in the ‘Entering and Exiting Your Spread Topic’. It states, ‘a spread order can be placed all at once as a spread. Thus you could place your order as Sell one september corn 5.00 call and buy one september corn 5.50 call at a 10 cent to the sell side. This means you don’t care what the absolute prices of the options are, you just want to make sure you sell the 5.00 call for at least 10 cents more than you buy the 5.50 call. (In corn this would mean difference of 500 dollars).

Okay, so i’m confused reading this chapter. Why must you make sure you sell the call for at least 10 cents more? What’s the advantage or logic behind this.

4. Also ron99 when he mention’s MROI is that 9% monthly ROI of his total account.

Thanks in advance.

1. Think of margin like a security deposit when someone rents. If nothing is wrong when you leave, then you get your security deposit back in full.

So yes, if your short option is OTM at expiration, you get to keep all of the premium you sold the option for minus fees. And your margin is no longer in "escrow".

2. Margin (security deposit) always returns to your account when you exit the position.

When you buy back a short option you are not exercising the option. Your gross profit/loss is the difference between the premium you sold the option for minus what you bought it back for.

3. The 10 cents is your possible profit amount. Or $500 in the case of corn. It doesn't have to be 10 cents but it can't be negative. The wider the spread the higher possible profit. But that also means more risk.

4. That ROI number is just for that position taking into account margin and excess held and net profit and days held.

That trade I sold the spread for a net premium of 3.30. I bought it back for a net premium of 1.80. So gross profit was 1.50 or $75. It cost me 30.70 in commissions and fees for the 5 contracts in the spread. Net profit was $44.30.

Margin for the spread was 466. I kept 4xIM or 4 times 466 = 1,864. Or 25% for margin and 75% for cash excess. $44.30 divided by 1,864 is 2.4% actual ROI. When factoring in the 9 days held that gives you 8.0% monthly ROI.