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Selling Options on Futures?


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Selling Options on Futures?

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  #7141 (permalink)
Cleveland, OH
 
Experience: Advanced
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Trading: Options on Futures
 
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swisstrader321 View Post
I appreciate the answer. I watched your short webinar. You mentioned some techniques of adjusting the position if it moves against you.

What does that exactly entail? buying the option back at a loss and then reselling at a further out date/further price? Hedging with a futures contract?

How do you normally handle positions that get uncomfortable?

I do not acquire a futures contract to protect short options. Too big a chance it could move against you and create further losses.

Best to either buy option to limit losses if you think moving against you was temporary or just take loss and reevaluate having option in that commodity at the current time.

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  #7142 (permalink)
Miami Florida United States
 
 
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ron99 View Post
Here is a real life, prime example of why you shouldn't ride out short options to expiration.

The Oct CL 58.50 call expires on Tuesday Sep 17. On Friday Sep 13 it settled at $0.01. During the weekend there were bombings at Saudi Arabia oil processing plants. On Monday Sep 16 the 58.50 call option settled at $4.40!

Waiting for the last $10 of the option turned into thousands of dollars of loses.

Yes indeed, lived thru that one first hand, actually told myself on that Friday I'll just sit on them to avoid the "steep" exchange fees...as I watched the panic bidding push the price over $60 prior to Sunday open I'da galdly paid the exchange 100x their fees but it was too late, that old saying is as true as ever, it ain't bright to be picking up pennies in front of a steam roller...and the thing about the market steam roller u never see it coming.

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  #7143 (permalink)
Miami Florida United States
 
 
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ron99 View Post
Here is a real life, prime example of why you shouldn't ride out short options to expiration.

The Oct CL 58.50 call expires on Tuesday Sep 17. On Friday Sep 13 it settled at $0.01. During the weekend there were bombings at Saudi Arabia oil processing plants. On Monday Sep 16 the 58.50 call option settled at $4.40!

Waiting for the last $10 of the option turned into thousands of dollars of loses.

Yes indeed, lived thru that one first hand, actually told myself on that Friday I'll just sit on them to avoid the "steep" exchange fees...as I watched the panic bidding push the price over $60 prior to Sunday open I'da galdly paid the exchange 100x their fees but it was too late. Luckily most ended up over the strike and I had some free margin so was able to sell a bunch of rich, waaay OTM calls...but could have easily been much worse, that old saying is as true as ever, it ain't bright to be picking up pennies in front of a steam roller...and the thing about the market steam roller u never see it coming. I'm once again a strict buy it back at 50-60% guy, hopefully I don't get complacent again...

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  #7144 (permalink)
Wanzleben-Börde,Germany
 
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ron99 View Post
I do not acquire a futures contract to protect short options. Too big a chance it could move against you and create further losses.

Best to either buy option to limit losses if you think moving against you was temporary or just take loss and reevaluate having option in that commodity at the current time.

Hello, I've been reading here recently. Interesting page, is it advisable to work your way through from page 1?

Where can I find your short webinar, what was written about on September 24th?

English is not my native language, I hope that my text is understandable!
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  #7145 (permalink)
Cleveland, OH
 
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Maxie View Post
Hello, I've been reading here recently. Interesting page, is it advisable to work your way through from page 1?

Where can I find your short webinar, what was written about on September 24th?

Welcome.

Here is link to my webinar. It is very basic.
https://www.youtube.com/watch?v=yhzlwlmSdbY

I would suggest reading the whole thread. But of course there will be posts that you should skip if they are off topic. Look at this thread as a free book with many authors.

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  #7146 (permalink)
Zurich
 
 
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ron99 View Post
Welcome.

Here is link to my webinar. It is very basic.
https://www.youtube.com/watch?v=yhzlwlmSdbY

I would suggest reading the whole thread. But of course there will be posts that you should skip if they are off topic. Look at this thread as a free book with many authors.

Hi Ron99,
nice to see you again. Following the method mechanically - would it have survived the last 2 years? Would you think results of 2%-2.5% per trade are still achievable?

Thanks

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  #7147 (permalink)
Cleveland, OH
 
Experience: Advanced
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Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
 
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Forex37 View Post
Hi Ron99,
nice to see you again. Following the method mechanically - would it have survived the last 2 years? Would you think results of 2%-2.5% per trade are still achievable?

Thanks

To be honest I haven't back tested the last 2 years. I should.

I wish @TFOpts was still here. He had a great way to backtest.

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  #7148 (permalink)
San Francisco CA USA
 
 
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Selling options should make up the majority of your option activity or sure. Someone who buys options, will likely have many losses with a few big wins, but overall a losing portfolio.

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  #7149 (permalink)
Hanoi, Vietnam
 
 
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To all who is starting, or have been trading for a while but is still new and want to improve, I just found a very short but good material.

Was reading a book "Higher probability commodity trading" by Carley Garner and there is a short but very nice section about Selling Options. Very clear, easy to understand, no bias, shows clear advantages AND disadvantages. Lists a few examples of terrible trades, and bad things that can happen. A very nice read.

Im thanksful to James Cordier for introducing me to this strategy, but his books is totally a sales pitch, not realistic. He probably has a remarkable record, but recently I've been digging into his articles where he makes analysis and gives trade recommendations, and I gotta say that in a way he was a disaster waiting to happen (and it happened). Very risky strategies. The books gives nothing but an illusion, so should be taken with a grain of salt. Carley Graner's book can be a great addition to anyone who has read James Cordier's book.

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  #7150 (permalink)
London - England
 
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yurahoang View Post
To all who is starting, or have been trading for a while but is still new and want to improve, I just found a very short but good material.

Was reading a book "Higher probability commodity trading" by Carley Garner and there is a short but very nice section about Selling Options. Very clear, easy to understand, no bias, shows clear advantages AND disadvantages. Lists a few examples of terrible trades, and bad things that can happen. A very nice read.

Im thanksful to James Cordier for introducing me to this strategy, but his books is totally a sales pitch, not realistic. He probably has a remarkable record, but recently I've been digging into his articles where he makes analysis and gives trade recommendations, and I gotta say that in a way he was a disaster waiting to happen (and it happened). Very risky strategies. The books gives nothing but an illusion, so should be taken with a grain of salt. Carley Graner's book can be a great addition to anyone who has read James Cordier's book.

Agreed - this is a good book and I was pleasantly surprised.

She has some interesting concepts around options strategies for swing trading..
If bullish, buy an ATM call for instance and fund it with the sell of a OTM put (lower down) ... and an OTM call futher up.
Putting you a position with a very small outlay (maybe even a credit) and big upside if direction is correct.
To avoid the risk with the naked put, one could purchase a cheap wing even further out.
Essentially a bullish trade which has a bull put spread.. and bull call spread..

Of course, this likely requires some market timing skills...
Any thoughts / critisims of this strategy at all ?

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