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Diversified Option Selling Portfolio
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Diversified Option Selling Portfolio

  #1011 (permalink)
Trading for Fun
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myrrdin View Post
I agree with your evaluation of the fundamentals.

This would be a short time trade, using the August contract. Dave Hightower suggested this trade. I prefer selling options with 90 to 150 DTE.

Regarding cattle, I hold the LCV P100/C136 strangle for some weeks. And I consider to sell LCZ puts at lower prices of the underlying during the next couple of weeks. In my opinion cash price in December should be above $ 120.

Best regards, Myrrdin

I see your talking about live cattle, what about feeders? I am wondering having grown up on a farm where we feeders.

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  #1012 (permalink)
Market Wizard
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TraderGriz View Post
I see your talking about live cattle, what about feeders? I am wondering having grown up on a farm where we feeders.

I rarely trade FC options, as there is a very low volume.

Best regards, Myrrdin

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  #1013 (permalink)
Market Wizard
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Currently I hold the following positions in the short options portfolio:


LHQ P70 / C88
LHV P58 / C74
LHZ C70
Longterm trades. I rolled down the October calls from 78 to 74. Intend to add the LHZ P50 at lower prices.

LCV P100+P106 / C136
In my opinion, the highs are in, and LC prices will move more or less sidewards. But there will be strong moves upwards and downwards.

CLZ C58-68
Intend to take profit at 50 %, if given the chance soon.

Currently I do not hold ES puts, as there are so many other promising trades around. Among others, I hold spread positions in the Financials, RB-HO, KW-W, LHG-LHV, LHG-LHZ and covered outright long positions in CC and KC.

Best regards, Myrrdin

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  #1014 (permalink)
Trading Apprentice
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Will FOMC meeting this week affect Crude Oil?

Does the FOMC meeting this week have the potential to affect Crude Oil prices? I'd like to sell some calls right now but not sure if it's wiser to wait til after the meeting. I'll be selling very deep OTM.


Last edited by Calamari88; July 23rd, 2017 at 07:16 PM.
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  #1015 (permalink)
Silver bullet
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Calamari88 View Post
I'd like to sell some calls right now but not sure if it's wiser to wait til after the meeting. I'll be selling very deep OTM.

Just curious, does it pay out selling calls deep OTM (in case of Oil-Future). What strike are you thinking of? When it comes to Oil I prefer USO, better adjustable and on top additional % due to the decay when selling calls. Comparing the margin and return on CL everytime I check I prefer to stay with USO. So I'm just curious how it pays out for you.

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  #1016 (permalink)
Market Wizard
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Calamari88 View Post
Does the FOMC meeting this week have the potential to affect Crude Oil prices? I'd like to sell some calls right now but not sure if it's wiser to wait til after the meeting. I'll be selling very deep OTM.

As the FOMC Meeting has the potential to move the Dollar it has potential to move Crude Oil prices. I do not have an opinion on the decision of the FOMC meeting.

And remember: Usually deep OTM options move faster on a quick move of the underlying than ATM options. Assuming you sell both for the same total price. Example: You sell one CLZ C46.5 (ATM) at $3000 (case 1), or ten (100) CLY C58 (CL C73) at $300 ($30) (case 2). After the FOMC Meeting the CLZ contract has moved to $48 or $50. You are in the money for case 1, but losses for case 2 might be much higher than for case 1.

Best regards, Myrrdin

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  #1017 (permalink)
Elite Member
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PK 1 View Post
Just curious, does it pay out selling calls deep OTM (in case of Oil-Future). What strike are you thinking of? When it comes to Oil I prefer USO, better adjustable and on top additional % due to the decay when selling calls. Comparing the margin and return on CL everytime I check I prefer to stay with USO. So I'm just curious how it pays out for you.

Don't you pay considerably more in fees, as you earn less premium per option sold?
E.g. a C60 on CL I sold last week with a delta of 5 brought $120.

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  #1018 (permalink)
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manuel999 View Post
Don't you pay considerably more in fees, as you earn less premium per option sold?
E.g. a C60 on CL I sold last week with a delta of 5 brought $120.

Definitely fees and slippage are criteria that limit the price of short options to the downside.

Fees depend mainly on your broker, on the service you expect from your broker, and on the size of your account / the number of trades per month.

Best regards, Myrrdin

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  #1019 (permalink)
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myrrdin View Post
Definitely fees and slippage are criteria that limit the price of short options to the downside.

Fees depend mainly on your broker, on the service you expect from your broker, and on the size of your account / the number of trades per month.

Best regards, Myrrdin

For my main account fees are €3,50 one way; for me that is a factor worthy of consideration.

You are right on slippage, the ETFs seems to be less liquid than the futures. (Although I never looked at USO.)

I believe trading the ETF instead of the future would make sense in a smaller account with less margin.

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  #1020 (permalink)
Silver bullet
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manuel999
Don't you pay considerably more in fees, as you earn less premium per option sold?
E.g. a C60 on CL I sold last week with a delta of 5 brought $120.

No, I don't. The ratio between fees and return is almost the same (more below).

Some examples:
Short LOU7 C6000 (Sept'17) delta 0,003 (likely delta 0,005 last week) has a bid/ask now 0,01/0,02, maintenance margin 1142
Short LOZ7 C6000 (Nov'17) delta 0,032 has bid/ask 0,07/0,09 and maintenance 1267 and about 120 DTE.

So I'm not sure which expiration your named referred trade was.

Either way that's a terrible premium when I compare to selling calls on USO with same amount of margin. Risking one future per options contracts for such a decent return and in case of buying back at 50% it's even less. With USO I risk way less even when selling additional options for the same return.
Of course the margin above is not SPAN, neither for the FOPs nor calls on USO. But the point is the ratio between both would be on SPAN similar, not the same but the difference not that big. I'm talking about the ratio of the margin, which is the point when comparing.

Slippage: Easy to say slippage on CL-Options is less. Having traded Puts and Calls on CL and tons of options on USO I can say I never had any serious issues with slippage on USO. But actually it's good to use limited orders.

Fees: I'm on IB, so the fees are not that high, important is the ratio between fee and realized profit. It's between 2-5% on average for USO and CL-FOPs as well. If the amount of fee compared to the realized profit is to high, say about 10-20% or more then something is wrong and needs to be adjusted. Below 5% I feel comfortable and most of the time it's about 2 or 3%. So a low fee is important and myrrdin has written important points regrding fees. But with fees compared to the profit being almost equal one can eliminate it out of the equation when comparing. One thing to mention here is that comparing the fees it's almost equal but the needed margin for the same profit is way bigger on CL-FOPs.


manuel999 View Post
the ETFs seems to be less liquid than the futures. (Although I never looked at USO.)

but I did since a few years now and USO is very liquid. The spread is most of the time very tight. Can't remember that I refused a trade due to the spread, it was always acceptable, usually 1 or a few cents. Far OTM it's more but than the premium doesn't pay out, just eats margin.


manuel999 View Post
I believe trading the ETF instead of the future would make sense in a smaller account with less margin.

On small accounts dealing with futures and future options is not advised, everyone knows and should follow that rule to avoid a margin call. But that's not the point. The point is if it really pays out leaving the advantages of selling calls with USO on the table.

Also the ROI should be the focus not whether it's a FOP or a option on an ETF. I did both and stopped selling calls on CL (not puts, just calls) On ES I wouldn't mind SPY or similar, so I do the options on the future, the best one can do. But I stopped selling calls on CL because for the same return and percent of fees the needed margin is less with USO.

So thatswhy I was asking for numbers of your CL-Trades.

Having mentioned USO it's important to say that the longside when dealing USO is nothing I would suggest anyone. Here CL is the best thing one can do. But for the downside that disadvantage turns into a huge advantage due to the contango. A few percent every month due to the decay, not possible with CL-FOPs.


Last edited by PK 1; July 24th, 2017 at 10:17 AM.
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