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As you trade with IB you should be aware that margin for naked short options on futures is extremely high. In case I sell options on my IB account I always sell option spreads. Here you get a reasonable margin. (I mainly use the IB account for trading stocks.)
Best regards, Myrrdin
Can you help answer these questions from other members on NexusFi?
learn a lot from this thread!
I almost got killed by selling naked calls on grains ealier this month.my account lost 8% in 3 days because or the rally of gains.
As Ron's study shows - as expected - the risk of ending up in the money is larger for ATM options. But drawdowns often are more severe for OTM options, and can enforce being stopped out. This fact is reflected by a higher relation of margin per premium for OTM options.
I haven't examined the different strikes yet because I wasn't sure if it's worth looking at them yet with the FOMC meeting coming up. I'll check them out on Thursday. There haven't been as many attractive CL option selling opportunities for me in the past couple years since the market dropped and lost volatility. I used to sell them monthly from 2010-2015 and did quite well. For the sake of my sleep I like to sell them with strikes beyond the underlying futures daily limit of $10.
I've never looked into USO options. Are those stock options? I tried looking them up on my OEC platform but couldn't find any listed.
For me these two accounts are very different stories.
In my stocks account I have parked the money that probably my children will get some time. I hold stocks of companies that - according to my opinion - will be successful in the long run. I intend to hold most of these stocks for many years and sell them only in case of major changes in the success story of the company. Once in a while I use free margin of the stock account for other trades, eg. short option trades.
My trading account at deCarleys is significantly smaller. Here I trade short options as described in this thread, outright futures, and futures spreads.
But of course you can trade stocks in a very different way than I do.
In case it is your opinion that the daily limit of the underlying future helps you to get out of a short option trade in case of a "black swan", I have to disappoint you. Options do not have a limit. Whereas the price for most futures cannot move more than a defined price range per day, the price for options can. And you can be sure that it does, as future traders who are caught in a limit up move begin buying calls to neutralize their short position.
