I'm probably going to strangle June Gold. Which month are you looking at?

I assume you are customer of IAB, as you use TWS as your platform. Here it is almost mandatory to limit risk, as margin for naked options is huge. I would expect that also ratio spreads (1 long option and several further out of the money short options) use a lot of margin.

Best regards, Myrrdin

Yes, it uses quite the same amount auf Margin as a naked position with the same value, the difference is not that big. But thats not the reason why i am doing it. I like the additional Protection, specially on Markets like Gold and Crude Oil with huge upside Risk. Volatility is hitting not that hard in coparison to a naked Position. Additionaly, i like the big staying power of a Ratio Spread.

In my opinion, probably everything what i can earn with naked position, i can do it with ratio spreads, just better. I love it.

As far as I understand ratio spreads, they also include naked positions. An example:

Your CL trade: 60 Long, 3x63 Short and 1x65 Short

You have one long position, 1 covered short position and 3 naked short positions.

IAB takes a lot of margin for these naked positions, much more than other brokers. Thus, when trading my IAB account, I traded the following spread:

Short CLH C61, Long CLH C71. No naked Option, thus, acceptable margin at IAB.

Best regards, Myrrdin

Yes, Ratio Spread include naked positions. Ratio Spread is not for Margin reduction particulary but for additional protection and Stayingpower. First, staying power: you have quite doble staying power in the first weeks, later even more. Second, Deep OTM Options: With properly seted Ratio you can reach deeper Strikes for Selling. So in my opinion, you have no downside, besides not liquid Markets, but these type of Markets are quite tricky for Naked Selling to.

To be understood correctly: I think ratio spreads are an interesting concept. But IAB calculates margin in a way that it is preferable to avoid naked options.

Best regards, Myrrdin

Yes, IB has quite high Margin for selling naked. You have a bit higher Margin for Ratio as for ONE Short Option with the same Value. Currently looking at Gold 1600 April.18 about 300 Dollar with 2,7k Initial-Margin and Ratio Spread with April.18( GC 1xLong 1600 and GC 3xShort 1660) for abut 300 Dollar and 3,3k Initial-Margin. As you see, Short Strike is deeper OTM, Margin is a bit higher but not dramaticaly.

I wanted to post some pictures, but apperently i need at least 5 Posts for that, i have only three. So, i going to mail it to you, you can post it here if you want.

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A.M.

Both of these options are short. I will try to explain the concept of this trade:

In the meat markets, the indvidual futures for different months trade more or less independently from each other. In comparison, futures for different months in the metal markets trade more or less synchronized. The reason is that it is more difficult to store meat than to store metals.

It takes some months from the start of "production" of hogs until they can be sold. This period of time is fixed, as the meat cannot be stored in large volumes.

In Q4 there will be too much meat, cash price moves downwards since middle of July, price for delivery in December more or less follows cash price. This is a normal seasonal behaviour, which is intensified this year, as two new plants that started this fall will still not be up to capacity. In Q1/2018 there will be less meat available, thus, price for the February contract should move upwards. I expect the December contract to expire somewhere below $55, and the February contract somewhere above $65.

As cash price affects all contracts to a certain degree such spreads help to use one option as a hedge for the other.

Best regards, Myrrdin

Is it the same behaviour for Cattle?

Thanks.