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Diversified Option Selling Portfolio


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Diversified Option Selling Portfolio

  #1001 (permalink)
 manuel999 
Germany
 
Experience: Intermediate
Platform: TWS
Trading: Options on futures
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myrrdin View Post
I tried to sell the NGX C400 as well, but was not filled.

Best regards, Myrrdin

How to you determine which minimum price you are willing to accept, or rather go unfilled?

Thanks.

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  #1002 (permalink)
 manuel999 
Germany
 
Experience: Intermediate
Platform: TWS
Trading: Options on futures
Posts: 155 since Jul 2014
Thanks Given: 341
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myrrdin View Post
As I am retired it is difficult to define vacations. But I travel a lot ...

If I do not have access to my account or do not want to take care of the account I liquidate some of my positions, place intraday stops where appropriate, and ask my broker (Carley) to take care of the stops of the remaining short options and future positions (end of day).

If I have access to my account I take care of these issues myself once a day around the close. Usually I do not place many new trades during vacations.

Best regards, Myrrdin

BTW, I opened a small account with Carley Garner recently and she provides great service.
Great customer focus. Much better than my German broker.

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  #1003 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
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manuel999 View Post
What does short CLZ C58-C68 mean?
You sold the C58 and bought the C68?

Thanks.

Yes, I sold the CLZ C58 and bought the CLZ C68 as protection. I consider the risk of a unforeseen huge move upwards in CL in case of a catastrophe as significantly larger than for other commodities.

Best regards, Myrrdin

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  #1004 (permalink)
 manuel999 
Germany
 
Experience: Intermediate
Platform: TWS
Trading: Options on futures
Posts: 155 since Jul 2014
Thanks Given: 341
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myrrdin View Post
Yes, I sold the CLZ C58 and bought the CLZ C68 as protection. I consider the risk of a unforeseen huge move upwards in CL in case of a catastrophe as significantly larger than for other commodities.

Best regards, Myrrdin

Thanks, that is a good tip.

Is there a way to calculate the risk with that type of spread?
Currently those two options are about 0,1 apart.
Is it reasonable to say that the max risk (while both options are still OTM) would be $ 100 per spread?

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  #1005 (permalink)
 myrrdin 
Linz Austria
 
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manuel999 View Post
How to you determine which minimum price you are willing to accept, or rather go unfilled?

Thanks.

In this case there was resistance just above the high, and I intended to sell there. But unfortunately the price did not get there.

Other criteria are:

I do not sell options which are too cheap because of spread and fees.

There is a clear resistance / support where I would like to place my stop loss. In this case I choose the entry price in a way to meet my risk criteria.

At times when I use a significant part of my account as margin I only enter trades that fulfil all my criteria strictly. This is currently the case.

In case it is a trade I consider as safe I tend to be more generous and make sure I can enter the trade. In case of a more risky trade - eg. the NGX C4 - I am more conservative.

Best regards, Myrrdin

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  #1006 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
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manuel999 View Post
Thanks, that is a good tip.

Is there a way to calculate the risk with that type of spread?
Currently those two options are about 0,1 apart.
Is it reasonable to say that the max risk (while both options are still OTM) would be $ 100 per spread?

Maximum risk at expiry is $10,000 per spread. But if the price explosion would be today risk would be much smaller than $10,000. There is software available to calculate the value of options under all circumstances. Using the protection I want to make sure that my account is not blown up because of this trade.

The current value of these options is $300 and $40, respectively.

Best regards, Myrrdin

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  #1007 (permalink)
TraderGriz
Minnesota
 
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myrrdin View Post
Entered the short CLZ C58-C68.

Seasonals point downwards, and COT data still looks bearish.

Currently I do not intend to sell puts.

Best regards, Myrrdin

Excuse me for being dumb but I don't really understand spreads. Are you selling a C58 an C68, or buying one an selling another? I have thought about this for sometime an can see many different ways.

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  #1008 (permalink)
TraderGriz
Minnesota
 
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myrrdin View Post
Yes, I sold the CLZ C58 and bought the CLZ C68 as protection. I consider the risk of a unforeseen huge move upwards in CL in case of a catastrophe as significantly larger than for other commodities.

Best regards, Myrrdin

Forget my previous? I just want to know more how spreads work. Some times different months and sometimes different commodities.

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  #1009 (permalink)
 manuel999 
Germany
 
Experience: Intermediate
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TraderGriz View Post
Forget my previous? I just want to know more how spreads work. Some times different months and sometimes different commodities.

In Myrrdin's spread above one sells the lower strike option to make money, and buys the higher strike option for risk protection. The risk is now limited (as opposed to unlimited with naked options).

Other spreads have different purposes. E.g. calendar spreads are more about volatility changes.
The spreads in different commidities are often done with the futures (not the options).

Carley GArnes book Higher Commodity trading has a good overview.

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  #1010 (permalink)
 
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 SMCJB 
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ron99 View Post

Like the way you line those up year by year. Still amazed how most high end software can't get seasonal charts right.

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