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Selling Options on Futures?


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Selling Options on Futures?

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  #7321 (permalink)
 josh 
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Thanks @SMCJB and @myrrdin ! There's so much more to trading commodities that I've rarely dipped my toes in the water ... limit up/down is a real thing and scares the heck out of me, unlike in equity index / treasury futures, where it's so rare that some traders have never actually seen it.

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  #7322 (permalink)
 SMCJB 
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I remember the first day energy futures went limit up or down, and trading was halted on the NYMEX, but trading on Enron Online continued unabatedly. Didn't take the NYMEX long to change that rule!

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  #7323 (permalink)
 ron99 
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I calculated selling two ES 2350 puts at ~3 delta and buying three ES 1950 puts at ~1 delta on Feb 23, 2020. Futures were 3225 that day. The worst day to put on the spread before the pandemic.

I order to ride it out and not get a margin call and end up profitable you would have had to have 30x IM. I was using 6x back when I was doing them.

The short options went in the money for 2 days. The worst day the account lost 43%.

At expiration you would have a 0.5% monthly ROI or about 6.2% per year compounded.

They ended profitable because futures were above 2350 at expiration.

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  #7324 (permalink)
 ron99 
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Karen the Supertrader is back trading (She sold/is selling ES options). Here is a 43 minute interview that was done June 5, 2021. She starts talking at the 7 minute mark.



Here is summary of what happened to her in 2017.

According to the SEC, the company hid losses by pushing them forward without recognizing them. But that is how her Disclosure Document was written. 20% Fees were only on "realized" profits/positions and not on "unrealized" profits/losses. (Half of that fee went to her charity.) No management fee. During this time, Karen failed to acknowledge these unrealized losses.

Hope Advisors settled with the SEC for $1.5 million to avoid the fraud charges. Regulators also blocked Bruton and her colleague Dawn Roberts from accessing $7 million in Hope Advisors’ account.

She is 72 years old now.
https://investormint.com/investing/how-karen-the-supertrader-blew-up

Here is SEC complaint.
https://www.sec.gov/litigation/complaints/2016/comp-pr2016-98.pdf

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  #7325 (permalink)
 SMCJB 
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Thanks @ron99. Really interesting or maybe entertaining!



The key part of the SEC complaint is...
3. Each month, Hope caused the Funds to make certain “Scheme
Trades” that had the purpose and effect of realizing a large gain in the current
month while effectively guaranteeing a large loss would be realized early the
following month. In essence, these trades continuously converted any realized
losses into realized gains in the current month, and losses which would be realized
in subsequent months, except that they would be continually deferred by the
Defendants engaging in additional Scheme Trades. The Defendants did not
simply delay realization of trading losses, however, they also intentionally sized
the Scheme Trades such that the Funds realized a profit every month. Hope
employees maintained a spread sheet that tracked, month to date, the realized
losses of the Funds. As the end of each month approached, Bruton picked the
amount of profit she wished the Funds to show (and de facto, the fees she wished
to generate), and her traders would size the Scheme Trades accordingly.
Also key to the complaint is that Fees were paid based upon realized but not unrealized profits and losses. So how could this all fit together?

Hypothetical example. Imagine that yesterday you bought the Sep ES 4300P/Oct EW3 4300P put spread. Using settle prices the spread was 37 with leg prices pf 54.50 and 91.50. Now lets fast forward to 17-Sep and assume the S&P is above 4300. The SEC alledges that Karen booked the 54.50 from selling the Sep ES 4300P regardless of what the situation is on the Oct EW3 4300P. They then allege that in October, if she had a loss on the Oct EW3 4300P she would do a similar trade again to make sure she made more on the new expiring trade than she lost on the Oct EW3 4300P.

which gets us to...
. Without the fraudulent Scheme Trades, Hope would have received
almost no incentive fees from at least October 2014 through the present.
and
Hope has
been using the Scheme Trades to avoid realization of more than $50 million in
losses
, while still earning large monthly incentive fees.


Her explanation of the SEC complaint? "I don't want to go down that road!"

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  #7326 (permalink)
 Henning993 
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thejourney View Post
Struggling to find platforms to sell naked options on futures besides Interactive Brokers.

Anyone able to sell naked puts / calls on futures on a different platform?

@thejourney: Yes, I am doing that with Tastyworks.

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  #7327 (permalink)
 MDRider 
Washington, DC
 
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Trading: CL Futures Options
 
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DeCarley Trading also supports selling naked futures option contracts, even for IRA accounts. Carley is great to work with!

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  #7328 (permalink)
Symple
Zuerich / Switzerland
 
 
Posts: 173 since Sep 2021
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Hello all. I think in option and hedge strategy trading, which is also associated with short options, it can be very important today to be aware of the current, following situation on the market, along with the rise in prices in the energy sector.

The Big Trade Hidden Under The Surface

https://www.zerohedge.com/markets/big-trade-hidden-under-surface

Symple

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  #7329 (permalink)
Symple
Zuerich / Switzerland
 
 
Posts: 173 since Sep 2021
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The following could be interesting for "Short Gamma" traders:

Lines In The Sand: Will Market 'Ping Pong' Continue Today?

https://www.zerohedge.com/markets/lines-sand-will-market-ping-pong-continue-today

Symple

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