Writing futures options uncovered...

This is a discussion on Writing futures options uncovered... within the Futures & Options forums, part of the Markets category; This is a potentially really interesting topic! Options are sexy However, yet again, I am going to be 'negative'! There ...

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Old Aug 17, 2012, 12:49am   #8
Joined Aug 2012
Re: Writing futures options uncovered...

This is a potentially really interesting topic! Options are sexy However, yet again, I am going to be 'negative'!

There are people on this board that can tell you how to price the funkiest of options, that can help with modelling any sort of vol surface you like, and are INCREDIBLY knowledgeable about it. No, I am not one of them, and I am not massaging my own ego, but it is ridiculous that no-one ever seems to ask a real options question!!

There is never any mention at all as to how options are actually priced, as to how anyone is managing an option portfolio, even delta hedging - surely a reasonable assumption as the most frequently queried topic by serious traders - is NEVER mentioned.

I am here because I have too much time, and am very keen to learn. I am beginning to think that my very limited knowledge is already miles ahead of the average discussion. Again, feel free to ridicule me if you wish, that's my view though. There never seems to be any real discussion of anything of note apart from people claiming to be buying the low and selling the high!!!!!

Hopefully someone can convince me otherwise, but I am becoming disheartened. I'm sure for many the prospect of my departure is a welcomed development, but come on - there must be some serious option traders out there!!!

Grrrrrr - it annoys me!!!

Come on, someone make me look a tw@t, tell me I've got it all wrong. I'll eat my proverbial hat with glee.
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Old Aug 17, 2012, 2:57am   #9
Joined Aug 2012
Re: Writing futures options uncovered...

optsonly started this thread
Quote:
Originally Posted by justtellingitasitis View Post
This is a potentially really interesting topic! Options are sexy However, yet again, I am going to be 'negative'!

There are people on this board that can tell you how to price the funkiest of options, that can help with modelling any sort of vol surface you like, and are INCREDIBLY knowledgeable about it. No, I am not one of them, and I am not massaging my own ego, but it is ridiculous that no-one ever seems to ask a real options question!!

There is never any mention at all as to how options are actually priced, as to how anyone is managing an option portfolio, even delta hedging - surely a reasonable assumption as the most frequently queried topic by serious traders - is NEVER mentioned.

I am here because I have too much time, and am very keen to learn. I am beginning to think that my very limited knowledge is already miles ahead of the average discussion. Again, feel free to ridicule me if you wish, that's my view though. There never seems to be any real discussion of anything of note apart from people claiming to be buying the low and selling the high!!!!!

Hopefully someone can convince me otherwise, but I am becoming disheartened. I'm sure for many the prospect of my departure is a welcomed development, but come on - there must be some serious option traders out there!!!

Grrrrrr - it annoys me!!!

Come on, someone make me look a tw@t, tell me I've got it all wrong. I'll eat my proverbial hat with glee.
I agree 100% with everything you said.

I don't care how the powers that be determine the price of an option. Don't care what the greek variables are saying today, or what the interest rate to Maria Bartaromo's eye lash length is today either. My main concern is how much time is left to expiration and what the premium is. The option market and pricing is a different language for those people that want it to be, my two cents. I look at a potential commodity chart for previous S/R levels, the COT, and a few indys and the seasonal aspect of things...that's about it. No Gann Wheel or moon phase stuff.

I think a serious option trader might be a hedge fund manager or commercial dude, or a full time trading for a living trade. I know none of those people. I am like the majority of people here...Just a trader with a normal full-time job that wants to build their account over time.

I agree...serious options traders please respond!

Picking tops and bottoms...nobody can do that over and over...nobody. I entered the option writing arena because it gives me time to be away from the screen. The market loves to shake out those traders using a 5 cent stop loss on a wheat contract. Sold options can be 50% away from the current price, that's a good thing.

However, this can be a very boring way to make money. It took about a month to make $300 per sold option in the crude puts I sold...a month. That can be made in a few minutes trading the contract....been there done that with FOREX...in seconds. That takes too much of my free time that yo can never, never get back or buy more of. I'll take boring and consistent versus nail biting and quarter flipping any time.

Like you I am keen to learn...about everything. I'll pick up a book on quantum physics for the normal guy one day then how to correctly solder copper pipe the next. Oh, and try to make a buck or two somewhere in between.

Writing options is a 'rare' form of trading...Please, please anyone jump in here.

"Bueller....Bueller"
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Old Aug 17, 2012, 3:09am   #10
Joined Aug 2012
Re: Writing futures options uncovered...

Whether you are buying or selling options is irrelevant. Whether you are naked or not is similarly irrelevant. The point is you have a delta position. Ignoring every other greek (which in itself is a truly ridiculous thing to do. TRULY ridiculous), you still have an effective position in the underlying. The only reason to use options in such circumstances is for leverage.

It seems that no-one even mentions this most basic of facts. If you have no interest in the greeks, which clearly virtually no-one does because no-one ever mentions them at all, then you are only using options for leverage. If you are only using them directionally, then why on earth would you use them at all? If you have no appreciation of the pricing of options, how do you know if it is cheap or expensive?

There's some really clever guys here as I said that can help explain the vol surface as a starter example - literally no-one ever even asks what the vol is, let alone a vol surface.

I just cannot understand it. If you don't get the greeks, if you don't understand how something is priced, then how can you possibly understand it's worth??

Ergo, you don't understand the worth of something, yet are trading it's value.

MENTAL.
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Old Aug 17, 2012, 10:22am   #11
 
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Re: Writing futures options uncovered...

Erm, I am not really sure what this discussion is about...

No strategy is ever all good or all bad. The devil is, always and everywhere, in the details and the specifics.
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Old Aug 17, 2012, 4:05pm   #12
Joined Nov 2010
Re: Writing futures options uncovered...

If your strategy is to just short options without every worrying about the vol market or your short gamma position you will blow up.

You are constantly short tail risks. If you're not looking at skew, roll down and absolute vol level how can you be sure that the trade is good?

For example selling vol at these very low August levels is not a trade i would take regardless of what the chart technicals are telling you, it just not good value here.
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Old Aug 17, 2012, 9:34pm   #13
Joined Aug 2012
Re: Writing futures options uncovered...

optsonly started this thread
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Originally Posted by MacroStyle View Post
If your strategy is to just short options without every worrying about the vol market or your short gamma position you will blow up.

You are constantly short tail risks. If you're not looking at skew, roll down and absolute vol level how can you be sure that the trade is good?

For example selling vol at these very low August levels is not a trade i would take regardless of what the chart technicals are telling you, it just not good value here.
Not sure what August markets you are referring to...
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Old Aug 17, 2012, 9:41pm   #14
Joined Aug 2012
Re: Writing futures options uncovered...

optsonly started this thread Sounds like the experts have been here the entire time, and spoken. Depending on what you look for to enter a trade and if you want to filter for the best possible greek variable scenario then your 'choices' for potential sells will be very limited. The method here is simply writing far OTM options with x number of days left to expiration and look for time decay to eat away the premium. X number of days being two or three months of time.

If you want to sell a CZ 700 call option uncovered right now because that is what your greeks are telling you what you should do then knock yourself out. That in my mind is crazy, ridiculous, stupid, and you have no idea what you are talking about. If you have nothing to add to the thread besides criticism then please move on. I don't care if you have over 3,000 posts or 3 posts. Everyone's method is different for whatever reason. I have done this for years. I'm not here to start a pissing contest which sounds like everyone else has already but if that is what you want then fire away. The week is over.
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