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Selling Options on /ES
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Selling Options on /ES

  #31 (permalink)
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uuu1965 View Post
And how much you left for margin and option price increseanig?

The amount of contracts I sell at a given strike price is not based on the value of the initial margin or how much margin I have available. I don't use IM*3 as mention in the other thread. I have substantially more margin available in case of gap down, where I would be able to roll down if I felt that it was temporary not a trend. I would say that if the option was close to doubling in price I would be looking to roll down or take a loss

As far where I would exit all positions and remain on the sidelines that would really all depend on my long term view. During the recent greece and china events in July, I was down but instead of rolling down, I added more contracts at lower strike prices and had my best returns of the year.

Volatility is good for the market and trading.

Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
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  #32 (permalink)
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General question

Hello
Been trading some paper money. Selling ES puts.
My question is as the IM drops while holding say 10 contracts how long do I wait before I add more to my postion to bring my account up to full capacity(3x or 4x IM). I guess what I am asking is it could get expensive commision wise adding contracts one or two at a time to keep the account IM full capacity.
THANKS anyone

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  #33 (permalink)
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rajab View Post
Hello
Been trading some paper money. Selling ES puts.
My question is as the IM drops while holding say 10 contracts how long do I wait before I add more to my postion to bring my account up to full capacity(3x or 4x IM). I guess what I am asking is it could get expensive commision wise adding contracts one or two at a time to keep the account IM full capacity.
THANKS anyone

You are charged commission per contract, not per order.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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  #34 (permalink)
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I am not talking about orders.
If I sell 10ES puts and maintain 3xIM in my account. As the decay occurs and IM drops I would have to sell more puts to maintain the 3xIM( good business sense). Do I do it 1, 2,... contract at a time or there are no rules.

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  #35 (permalink)
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rajab View Post
Hello
Been trading some paper money. Selling ES puts.
My question is as the IM drops while holding say 10 contracts how long do I wait before I add more to my postion to bring my account up to full capacity(3x or 4x IM). I guess what I am asking is it could get expensive commision wise adding contracts one or two at a time to keep the account IM full capacity.
THANKS anyone

As Kevin mentioned, it is charge per contract for futures unlike equities which will charge order fee + contract. That can be negotiated though for equities.

I don't trade based off IM or at full capacity. The best time to use substantial margin and add contracts is when there is a sell-off and spike in IV. I usually don't add contracts or sell when IM is decreasing or the option is decaying in price because the premium is dropping and it is hard to get decent fill price. Easier to get a better fill and more premium when the option price is increasing.

Volatility is good for the market and trading.

Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
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  #36 (permalink)
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rajab View Post
I am not talking about orders.
If I sell 10ES puts and maintain 3xIM in my account. As the decay occurs and IM drops I would have to sell more puts to maintain the 3xIM( good business sense). Do I do it 1, 2,... contract at a time or there are no rules.


You said it could get expensive commission wise selling 1 or 2 puts at a time.

My reply was that it doesn't matter. If you sell 10 puts, 1 at a time, you will pay the exact same commission if sell 10 puts all at the same time.

I can tell you from experience that trying to keep margin at the 3X level is not good business sense at all. You will end up short a ton of almost worthless options, but when a price shock hits, you will feel a ton of pain. Been there, done that.

My approach is to base my margin usage on the margin when I sell them. That keeps the number of options lower. I only free up margin when ones expire or I buy them back. You might think this is silly - I am leaving a lot of margin "on the table" so to speak, but you'll be grateful you did this when a big price drop turns worthless options into a huge loss for you, because you have so many of them.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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  #37 (permalink)
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kevinkdog View Post
You said it could get expensive commission wise selling 1 or 2 puts at a time.

My reply was that it doesn't matter. If you sell 10 puts, 1 at a time, you will pay the exact same commission if sell 10 puts all at the same time.

I can tell you from experience that trying to keep margin at the 3X level is not good business sense at all. You will end up short a ton of almost worthless options, but when a price shock hits, you will feel a ton of pain. Been there, done that.

My approach is to base my margin usage on the margin when I sell them. That keeps the number of options lower. I only free up margin when ones expire or I buy them back. You might think this is silly - I am leaving a lot of margin "on the table" so to speak, but you'll be grateful you did this when a big price drop turns worthless options into a huge loss for you, because you have so many of them.

That has been my experience also

Volatility is good for the market and trading.

Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
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  #38 (permalink)
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rajab View Post
I am not talking about orders.
If I sell 10ES puts and maintain 3xIM in my account. As the decay occurs and IM drops I would have to sell more puts to maintain the 3xIM( good business sense). Do I do it 1, 2,... contract at a time or there are no rules.

Your rules should be based on your risk tolerance.

My rules are risk first and what am I comfortable losing on a position if the market drops. If I sell a $20 option and it doubles overnight or over a few days it will be close to ATM. I would reassess where I think the market is going longer term. I would either take a -$10,000 loss or roll down further out of the money

Volatility is good for the market and trading.

Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
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The following user says Thank You to blb014 for this post:
 
  #39 (permalink)
Trading for Fun
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Thanks Guys.
blb014
Second sentence on the first page where you describe your trading plan. Can you explain what you mean about the Vega risk?
Thanks

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  #40 (permalink)
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Moderator Note


In order to avoid confusion and a split topic, I have moved this thread to the Journals section.

I understand there was some sort of disagreement between this thread starter and the existing thread starter, but it is in the best interest of the community that we avoid a split topic.

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