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Just wondering if you sell options on currency futures ? Looks like he Euro has been in a nose dive and with the fed raising rates here, i think any bounce may be an opportunity to sell calls.
thoughts ?
thanks
V
Can you help answer these questions from other members on NexusFi?
If you would have studied this thread you would have noticed that I had sold currency options for a while. But I was not successful, whereas I was successful selling other commodities options. Thus I stopped selling currency Options some years ago.
Currently I do not have an opinion on the Euro and the other currencies. The only currency position I currently hold is a hedge position, as I trade in the US, and live in an Euro Country.
Firstly, @myrrdin, I bow to you and Ron for creating this and the ‘Selling options on futures’ threads – these are quite simply the two most potentially life-changing (as far as trading is concerned) threads I have come across. I have just finished reading every single page of this thread (and am about 400 pages into Rons’ one).
My background: 20 years of options trading, mainly selling naked options against indexes (FTSE, SPX). Very little commodities knowledge – have been wanting to learn this for years but couldn’t find anything beyond the basics and then I accidentally stumbled upon these threads…..
My aim : to diversify. I’ve been kicked in the ‘cohones’ a couple of times by sharp index moves (the word ‘Brexit’ still haunts me, and it’s not just cos I live in London), and as a result, I want to get true diversification with commodities. I don’t have a ‘day-job’, so I can trade full-time. I am addicted to it. I live it, breathe it, and consume it. I have had an IB account for years, but have also just opened one with DeCarley, and funded it quite nicely, in readiness to take on commodities option selling. So far, I have played with 1-lot short sales (and some other strategies) to get familiar with the mechanics (multipliers, contract specs, technicals, seasonality, etc).
Newbie (dumb) questions: Can I pls ask about ‘old crop and new crop’ as it relates to corn, soybean etc? I’ve read the article mentioned on page 82 of this thread - I cannot post a link to the article, as my post-count is less than 5 - but frankly, I think it could have been written more clearly.
1) So, as I understand it, new crop relates to the Dec future, whereas the Sep future is the old crop. So, as we are in May now, does this mean that the price of the Sep ’18 future (for corn) is the price for the corn that was harvested in Autumn of ’17? And the Dec ’18 future is based on the expected price of the corn that is still in the ground and will be harvested in Autumn ‘18?
2) If this is the case, then if we get adverse weather in Jun/Jul, then this would affect the Dec future, as that crop is yet unharvested, but will it also affect the Sep future, seeing that this crop is sitting in some farmers storage?
If the Sep future is largely un-affected, then would selling calls on the Sep corn seem reasonable? I realise from your numerous posts that you are not keen on selling short calls on corn/soybean as we are in the weather season, and you normally wait till Jul onwards when the picture is a lot clearer. (I realise also, that another poster has asked a similar question 2 days ago, but I wanted to get clarity on the Sep/Dec contract.)
3) If the uncertainty over corn/soybean prices from now till Aug is due largely to the weather, and the risk is mainly on the upside, then would selling short puts be a good idea?
Many thanks, and I totally appreciate the time, effort and knowledge that you have shared here.
First of all, thanks a lot for reading the whole thread before asking questions. I recognize that this is a lot of work, but it helps a lot to reduce the workload for answering.
ad 1) Regarding corn, the December contract is the first one that is considered as "New Crop". Some years ago this was a clear definition as most of the corn was grown in the northern hemisphere. Nowadays, a lot of corn is grown in Brazil, Argentine, and other countries in the southern hemisphere. For these countries, the May or the July (Safrina crop) contracts should be considered as "New Crop".
The price of the September 2018 future (for corn) is the price for the corn that was harvested in autumn of 2017 in the northern hemisphere and in spring of 2018 in the southern hemisphere. The December 2018 future is based on the expected price for the crop harvested in the autumn of 2018 plus the rest of the crop remaining from 2017 which has not been sold until then.
ad 2) The price of the September future is affected seriously by adverse weather in July. If a farmer foresees that the price of corn will rise in autumn he will not sell earlier. I definitely would not sell corn calls for the September contract before a reliable weather forecast for July is published.
ad 3) The problem is: The (perfect) trade will take care of a corn price according to the average guess for the crop. But in weather markets there can be large deviations from the average guess. As well to the upside as to the downside. Thus, you have to be careful regarding selling OTM puts. I sold ATM puts for corn some time ago, but intend to buy them back at the current price level.
In case I want to be in the market during this time of the year I trade outright futures or future spreads. Some traders also buy "lottery tickets" - they buy options with about 4 to 6 months to go at a time before the weather market has begun and these options are still cheap.
I hope I could answer your questions. Please ask again in case something remained open.
Hi everyone, I am new here. first of all thanks to Myrridin for the great post which I am reading as I have some time.
Have been trading options on futures and Would like to share my trades in order to get feedback and improve.
I am thinking about two trades:
1) CL short calls, expiration 20/07, strike between 75 and 77. seasonality points dowm for next month or so, COT report shows commercials at extremely short levels, Open Interest show a huge amount of calls at 75 strike which has increased over the last few days, and supply as per EIA data has increased (quite logic as at higher prices US shale producer increase their output). I am starting to scale in this trade using strike 77
2) NG: the situation here is not as clear in my opinion. we have seasonality pointing down, COT shows the commercials at one of the highest levels in last years, and on the chart I can see we broe from a consolidation to the upside but we are at the important resistance level of 3.00$. The analysis of OI (expiration 26/07) shows quite a balance with 3.25 and 2.75 as highest strikes. so I'd like to sell a strangle 2.70/3.30 which should earn me about 340$ credit x contract (i'll place the order at the open)
Lorenzo
ad 1) I am also short CL for the reasons you mention. I expect a large move downwards, and, thus, decided to buy the CLZ P70 which were ATM at this time. I rarely buy options, but in this case it seems to be appropriate to me. The political Situation in the oil producing countries is dangerous, and for this reason the prize of CL might pop.
Regarding the options you chose, I do not like the expiry in a couple of weeks. I usually sell 3 months (or more) out.
ad 2) Regarding NG, I am short an Iron Condor in the September contract (2.25 / 2.4 / 3.2 / 3.4) for a while.
Please feel free to ask in case you have additional Questions.
I would suggest moving your strikes a little further away from ATM. NG could easily move to your strikes. I also agree with myrrdin about moving further out in time. Those options will have higher premium.
Exit at 50% drop in premium because the first 50% drop usually will happen a lot faster than the 2nd 50% drop to expiration. Thus you will get a higher ROI.
thanks for your reply!
as per the expiration, I choose august expiration which is 46 days. i entered on friday call 77 @21points (210$ credit x contract). i also decided to split the risk on this trade half in call options and half in the spread Z18-M19 short entered at 2.14 (half position with unlimited profit potential )
I also entered the NG Strangle aiming to close it @ around 50% as @ron99 kindly suggested.
my options portfolio, just for information, now includes:
CLQ 77 calls;
NGQ 3.3/2.7 strangle ( however, very careful on this should it break to the upside I'll be quick in dropping the calls)
GCN strangle opened some weeks ago1230/1370, doing fine till now. I gonna exit in the next days for about 50/60% profit
HEN short puts 680 that I 'll let expire worthless
good trading to everybody
Be careful with the HEN options. They are traded very thinly. I prefer the HEM and HEQ options.
I usually buy back meat options before expiry, when their value has decreased to 10 or 20 %. There is significant risk that these options make large moves, eg. in case of a desease.
