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Futures, Options on Futures, and the meaning of life
I am interested in trading futures and options on futures (risk-defined trades like iron condors, etc). TDAmeritrade lets me do all that in one account, along with my options on equities stuff, but the futures commissions aren't what I'd call inexpensive, but the platform costs are zero. So still, I'm making money there so I'm not complaining.
But I think there is more out there, so I got set up with a broker and CQG QTrader. As a bonus, there might be potential down the road to have other people use my trading success as an advisor. So I thought that might be cool as a career potential kind of thing, and so I did tons of paperwork. That was all fun and games until my first CQG order failed, whereupon I asked and the broker told me I'd have to call the order desk to place a trade containing any short option. What? This wasn't specified in the agreement paperwork, and I've never called a broker to place a trade, so not doing that. To top it off, when I called the clearing firm and asked what other brokers I could use, they wouldn't give me a list and said someone from compliance would have to call me back and they haven't.
So I found an article online and started calling. Tradeovate has no ability to do iron condors. Infinity Futures has a full voicemail box. At this point I made a drink. It's like I've landed in a hot tub time machine and gone back to 1890 or something. Why is this so difficult to find a competitive commission provider and choose a platform? All I want to do is buy/sell futures contracts and execute defined-risk futures options trades. I'm not asking for a polished rock from Mars here.
Any opinions welcome. I don't want to change platforms every year, but I'm not opposed to it either. I was going to take a look at NinjaTrader next. I don't think there is any potential to be an advisor down the road with them, but maybe that's just too much to ask.
Thanks,
CJ
Can you help answer these questions from other members on NexusFi?
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
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Re: Brokers and Short Options
As you are probably aware buying an option has limited downside and unlimited upside and selling an option has limited upside and unlimited downside. Because of this some brokers will not allow any short options at all while others may be very restrictive. While this may be broker dependent it is also probably very account size/net worth/financial guarantee dependent.
For what its worth I have sold futures options with Advantage, ED&F Man and Interactive Brokers, and sold stock options with Tradestation, so I know they all allow it. Have no idea how my financial situation compares to yours though. There are several brokers here that can probably give additional insight into this, and what they personally offer. @CannonTrading @FuturesTrader71 @mattz
Re: Platforms and Option Strategies
Most (all?) exchanges who list options also list option strategies. Some but not all software give you access to those strategies. Imagine the 100 call is quoted 10/11 and the 110 call is quoted 5/6. Simple calculations will tell you that the 100/110 call spread is 4/6 but if you were to quote the 100/110 call spread as a strategy you will probably find it is 4.5/5.5 maybe even 4.75/5.25. Also if you execute as a strategy there is no leg risk. Some platforms give you the ability to execute these 'exchange' strategies and some don't. Other platforms may allow you to create your own spreads (ie the 4/6 market) while others won't even allow you to do that and will force you to enter two discretely different orders. Platform functionality can vary greatly. I would assume that you get what you pay for this in category, but have little experience so could be completely wrong.
I am not an expert on options but for sure the followin platforms allow you to trade both options and futures:
1) ThinkOrSwim (this is the standard platform for options traders, it is very advanced and you can trade anything)
2) Tradestation
3) ProRealtime (this is not well known in US but in Europe we use it a lot, you can trade futures and options. It's a French company and has a special deal with Interactive Brokers with reduced fees)
It is not the possible to trade options on futures with a standard TradeStation account. To do so, it is necessary to use their Futures + platform, which requires setting up a separate account: https://www.tradestation.com:443/platforms-and-tools/futures-plus/ Futures + is a rebranding of the TT web platform, from Trading Technologies.
ThinkorSwim is indeed popular with equity options traders but the OP wasn't referring to equity options. ThinkorSwim charges $2.25 one-way for a futures option trade. This is 50% more expensive than doing the same trade on TradeStation Futures + and 164% more expensive than placing the trade via Interactive Brokers. (All prices referenced are net of exchange and regulatory fees).
