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Selling Options on Futures?


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Selling Options on Futures?

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  #41 (permalink)
 ron99 
Market Wizard
Cleveland, OH
 
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Cloudy, this is why forums are so hard to convey your intent. Especially for me who did not do well in English classes growing up but excelled in math classes. I took no offense in what you said. I am glad to answer your questions.

I have an account at Liberty. He is up 152% in 2.5 years in my account.

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  #42 (permalink)
 tigertrader 
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ron99 View Post
I don't sell any ITM options. I don't know why you would.

I wish there were more books about options on futures. 99% of the books are about stock options. Which IMO are very different than options on futures. Or if they do mention options on futures it is a very small part of the book.

I look at my trading this way, if it ain't broke don't fix it.


The principles for trading Equity Options and Options on Futures are the same. There may be advantages to trading Futures Options vs. Equity options due to the greater volatility in futures options, i.e., they are more expensive, and therefore might be a "better" sale, but the general principles are the same.

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John F. Summa (Author), Jonathan W. Lubow (Author)



IMO, never be satisfied with your trading and never get complacent about your trading. You can always learn more, you can always trade better, and you can always make more money.

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  #43 (permalink)
 ron99 
Market Wizard
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Thanks tigertrader for the links.

"IMO, never be satisfied with your trading and never get complacent about your trading. You can always learn more, you can always trade better, and you can always make more money."

I'm a fundamental seller of options. I have never used TA. I don't see a reason to complicate my trading and make my day harder to earn money I really don't need.

I have made well into 7 figures trading in 13 years. Sold my company 11 years ago. Told my wife a few years ago to quit her job. We built a nice house in the woods in the country. I watch deer and wild turkeys from my desk while trading.

I am more satisfied and less stressed out than anytime in my life.

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  #44 (permalink)
 ron99 
Market Wizard
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Here is the latest from Liberty.

Link

"As far as commodities markets in general, options held through expiration will expire worthless better than 80% of the time. Congressional showdowns don't change that. And default or not, the Brazilian Coffee harvest will continue unabated. In addition, people aren't going to stop drinking coffee (or for that matter, eating cornflakes or filling their cars with gasoline) simply because some politicians in Washington can't agree.

This crisis will end, sooner or later. In the meantime, there are excellent premiums available in these out-of-the-headline markets where price discovery comes primarily from underlying fundamentals. While the commonplace investor worries, you can be taking advantage of them."

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  #45 (permalink)
 Cloudy 
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Thanks Ron, no problem. I appreciate the great help and intro to this. I've been reading the book and just starting part ii now. I also have trial access to the liberty newsletter. I'm going to pick out 5-7 futures options shorts and demo it for 2 months. I'm getting the pricing through OX, and then simulating the p/l and expiration graphs on TOS as TOS updates current prices fine, if not historical.

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  #46 (permalink)
 tigertrader 
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ron99 View Post
Thanks tigertrader for the links.

"IMO, never be satisfied with your trading and never get complacent about your trading. You can always learn more, you can always trade better, and you can always make more money."

I'm a fundamental seller of options. I have never used TA. I don't see a reason to complicate my trading and make my day harder to earn money I really don't need.

I have made well into 7 figures trading in 13 years. Sold my company 11 years ago. Told my wife a few years ago to quit her job. We built a nice house in the woods in the country. I watch deer and wild turkeys from my desk while trading.

I am more satisfied and less stressed out than anytime in my life.

Now that sounds idyllic! I live in Philly. I watch the crack dealers and hookers, from my desk while trading.

Got room for another desk?

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  #47 (permalink)
Shirak
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Lornz View Post
I don't mean to critique your trading, my statement was more general. There might be a lot of beginning (options) traders reading this, and they might be enticed to sell options. After some success they think they have it down and before they know it, the bank forecloses on them....

Your example of a naked short put on CL is quite hazardous. The markets are quite shaky now, and CL might take a massive dive. The limited upside, and unlimited downside, is not appealing to me. I've actually made some money purchasing such options, so it's not something you do without a solid approach. You can easily have a win rate > 90%, only to blow up...

Again, I don't mean to be critical of your trading, you seem to be doing quite well. But selling options, aside from being a part of a sound strategy, is something to be treated with respect...

That being said, I welcome more posts about options on this board. They should be a part of every serious trader's arsenal!

I am VERY new in options, and please correct me if I am wrong, but can't you limit your downside potential via stop losses just like in futures?

That way, isn't the risk of "blowing up" theoretically identical to holding futures position?

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  #48 (permalink)
 Big Mike 
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ron99 View Post
You reminded me why I didn't trade at TOS. Their option program is very poor.

Very interesting. I've always heard that TOS was one of the best platforms for trading options, as that is what the platform was originally designed to do.

Mike

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  #49 (permalink)
 Lornz 
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Shirak View Post
I am VERY new in options, and please correct me if I am wrong, but can't you limit your downside potential via stop losses just like in futures?

That way, isn't the risk of "blowing up" theoretically identical to holding futures position?

I don't really have time to go through Options 101 now, but just to clarify:

When you buy an option, you have the right (but not the obligation) to buy (calls) or sell (puts) an instrument at a specific price at a specific time (European) or within a certain period of time (American). You can never lose more than what you paid for the option.

When you sell options, you are on the opposite side. This means that you will have to buy an option (opposite to the one you sold) to offset your position. When you sell an option, you collect premium. Depending on the movement of the underlying, your loss can be limitless (in theory)...

Of course, you can combine buying and selling to limit risk exposure etc... But that is another discussion...

The exchanges has some beginner courses in options, they might be a good place to start:

CBOE - Options Learning Center

Options

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  #50 (permalink)
 Cloudy 
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Big Mike View Post
Very interesting. I've always heard that TOS was one of the best platforms for trading options, as that is what the platform was originally designed to do.

Mike

I agree Mike. They are the best at options on equities imo. OX's "Xtend" java gui is still a light year or so behind TOS's platform and features. I was surprised to find out there were hardly any options on futures (besides ES and NQ) supported even though they show them. You just can't trade them. All "red lettered" out. (Even though one can trade any of the regular futures contracts of most any type. Lots of mini futures offered. Just not great for 1min scalping due to filtering and sluggishness, and higher commissions on average.) With TOS now part of TD Ameritrade , I'm not sure if that will help in that area either. If TOS had OX's offerings on options on futures that would be perfect..


(update: I tried to go through each futures listed option chain. Here are the only ones that did not give
a pop-up message box "This instrument is not traded." A little bit different from what's currently on the TOS website..Example, options on NG (natural gas) futures not tradeable):

TOS tradeable options on futures:

/ES E-mini
/NQ mini-Nasdq

/ZB (30yr TBond)
/ZF (5 yr TNote)
/ZN (10 yr TNote)
/ZT (2 yr TNote)

/CL Crude
/ZC Corn
/ZS Soybeans
/ZW Wheat

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