Let's Trade Options

maybe seasonal demand, slowdowns in the US fields, etc...catch up with the oil bear. Everything changes. A little bounce into summer will be worth fishing for, but I'd like to get in cheaper than the $0.20 debit below...

...a Jul/Oct $30/$31 eats more margin but debits $0.13...

USO $30 is about wti $80

Been wanting to get into futures and futures options, mostly to trade oil and natgas. Equity options choices for the latter are limited. Here's the only good thing Sosnoff says about options on futures:

"it's cheaper to sell naked options because it's the same price as the future, that part of it's better - it's not well-designed as a product"

anybody here trading futures options? Is it more cost effective on say, for instance, /ES, as opposed to SPY?

https://www.tastytrade.com/tt/learn/...s?locale=en-US

"Additionally, the smaller capital requirement involved is an advantage of trading options on futures as opposed to options on individual equities. If an investor does not have enough capital for a portfolio margin account, options on futures are actually a less expensive way of trading large indices such as the SPX, especially if the investor is interested in selling naked short positions."

https://www.tastytrade.com/tt/learn/...s?locale=en-US

...see at 14:00 above, nobody saw the hydrocarbon crash coming...

https://www.tastytrade.com/tt/learn/...s?locale=en-US

Beef talks about the /CL calendar spreads. The /CL calendar spreads are a separate product, not something you have to (or are able to) leg into or out of, as in calendar spreads I might build on USO or other equity options....interesting...(he mentions he used to do 1,000,000/year of them as a prop trader...)

2015 predictions

http://www.businessinsider.com/2015-...e-world-2015-1

A 20% shakeout in the S&P? Brent to $40? BRIC-family stocks get another 30% shave? Sterling to $1.30, fiber to $1.08?

Hot Damn!

With ECB and FOMC out in the latter half of January, there might be some potential for ranging in the first few weeks of the year. However, oil has been the big black trump card for these last 5-6 months, and that could continue to spook equity markets. If January opens with strong moves down for crude, I'd expect equity index slippage. If crude gets stable m/l or rises, we head into Q4 earnings season and the ER effects have been positive, USA keeps printing good econ numbers, etc, then the dovish Fed keeps cooing, well, higher highs for the indices might well keep coming in Q1.

Wild cards abound, though: strengthening USD must begin to weigh on US equities eventually, as may lowering crude price: EMU turmoil, namely any serious threat of a Greek ejection - that shit hits the fan & the Atlantic is not wide enough to keep the spatter off the USA; China slowdown; other BRIC's sliding; crazy Putin who knows what he might do?; etc, etc, etc...

Predictions are fun and I often get some right, but it doesn't matter if you're not right on time & trade accordingly.

idk, the only thing seems obvious to me on New Year's day is further USD strength. Happy New Year traders, I think it will be full of good trading opps for the nimble. Bright cold sunny day here, I need to make some Hoppin' John...http://en.wikipedia.org/wiki/Hoppin%27_John

Greek elections, when...? Jan 25

http://www.washingtonpost.com/world/...prss=rss_world

ECB: 1/22; Greek elections: 1/25; FOMC: 1/29 ----- big week closes out the month. Look Jan5/Feb 1 or Jan4/Jan5 or Jan/Feb plays.

4/19/2012 saw the lowest UNG price, post- the last split, @ $14.25 --- closed at $14.77 Friday. Various ways to fish for a bottom, put diag spreads @ $0.50 credit a little over b/e --- go $1.00 and get more...a dangerous game, but there has to be a bottom somewhere, someday....

Feb2/Feb $13.5/$13 credits $0.11, b/e @ $13.00 at expiry; $13/$12, same expiries, credits $0.17, b/e $12.75 at expiry...look at other 1-week spreads and look for exp b/e at $13 or below...

Feb/Apr $13/$12 put diag debits $0.09 and has a Max P of $0.39, b/e $12.20 at exp

There are some advantages using futures options. If a trader wants to trade SnP, usually ppl with smaller accounts go for SPY options, with larger accounts to /ES options, and whales go to SPX options (and those are cash settled and European style exercise, which also can help)...

There is not just margin requirements that is better than for equity options, but also possible more juice on far OTM options. I listened some of the videos from ppl that wrote "The Complete Guide for Option Selling", a book for future options sellers. In those videos, they are selling commodities future options that are 50% from the current future price, even 100% away. They are doing it for example with 90 DTE. Imagine now 50% away on lets say AAPL. That would be $165. April 165 call is $0.13. So you would wait more than 90 DTE for $13? I wouldn't. But they are getting $400 - $700 for far OTM futures options.

I agree. On beginning of every year we had some shit piling, but for the last couple of years, nothing could stop the raging bull train. But USD was not strong, Oil was not down, and rates was and are low. IMO, FED interventions disrupted normal market cycles, it is expected that the bull market will finally be over. It simply last to long, and vast majority of stock are expensive, to put it simply. Like gold was expensive @ $1900+ ...Correction - How would that look like? When will it happen? What will cause it to finally correct more than 10%?

It seems this year will start with VIX above $20. Pity I didn't entered that VXX Jan 26.5/27.5 bull put spread, 2 days ago. It has lost more than 1/2 of the value.

Yes, I am still looking into all that, takes time, the freedom from the pdt rule is also attractive.

even w/ shitty comms, gotta like the r/r on uup bull spreads. The stars are lining up for more USD strength, may not happen, but worth a shot...

I sat in my "trading chair" to late today, totally unprepared. (Lazy fat-ass...) Nice jump in VIX, and some opps for long weekly puts.

Some ideas
1. Looking at TWTR again. Inverted skew there, I am looking at Feb monthly options with 49 DTE, and equidistant calls are more expensive.
Almost $2.00 credit on Feb 30/43 short strangle... hm... with IVR at 33, and VIX around $19.50. I will think more about that, maybe on Monday enter some trade there.

Add-on: TWTR has ER's on Feb 4... I just saw that.


2. I will check now for exact dates and companies with ER's for next week, I wrote some names 2 days ago, like FDO, MU, MON, BBBY...

no fills at $0.05, none at $0.06....

I don't see any bid on UUP Feb 26 calls, just ask. No volume. Some volume on 24 calls. Feb 24/25 call spread is doable.
There has to be something that is more liquid than this. Maybe USDX future options. I didn't checked futures and futures options in my trading permissions for this account, so I can't see that.

ya I know, SDog, best I have been able to do is Mar $25/$26 bull call spread for $0.10 debit

just over 6x on the option


SPY Jan 2015 207.000 put (SPY150102P00207000)
-OPR
2.01 https://s.yimg.com/lq/i/us/fi/03rd/up_g.gif 0.12(19.35%) 21:14

http://finance.yahoo.com/video/sante...164300654.html

Draghi will deliver...

http://www.cboe.com/micro/spx/introduction.aspx

re: SPX options, I never traded any European style options...

http://safertrader.com/monthly-incom...ptions-to-use/
"SPX, DJX, NDX, and RUT options are Index Options. They are European Style options, which means, among other things, that their monthly “last trading day” is different than those of ETFs. Index options expire on the third Friday of the month, so their last trading day is the third Thursday of the month.

SPY, DIA, QQQ, and IWM are ETFs (Exchange Traded Funds) and are American Style options, and both the last trading day and the investor’s expiration day for these options are the same: the third Friday of the month just like options on individual stocks.

This is a critical difference, and not understanding it can cost an investor dearly. With the SPX option, and other Index Options, there could be a major development after the options market closes on the third Thursday of the month (last trading day)… which ends all trading in those options.

There could then be an overnight development that causes the underlying index to open way up or down the following Friday (expiration day), but the index option investor is “locked in.” His last trading day has come and gone, but the settlement price of the index is determined on the basis of Friday’s market action.
Another significant difference between the Index options and the ETF options is that the Index options are “cash settled” and the settlement takes place only on expiration day. ETF options on the other hand can be “assigned” at any time, but rarely would be unless they were in-the-money… and SaferTraders do not remain in positions that reach in-the-money status.

Another trade-related significant difference is liquidity and the related matter of wide or narrow bid-ask spreads. Liquidity of the SPY ETF is much greater than that of its Index counterpart the SPX. Therefore you can typically expect better (more favorable) fills on SPY orders whether you are entering or exiting the position.
Finally, there are differences in size of the contracts. For example, the SPY is 1/10 the size of the SPX; the IWM is 1/10 the size of the RUT; the QQQ is 1/40 the size of the NDX.

This means that you would need to acquire more contracts of the SPY, IWM, or QQQ ETF contracts to equal the value of their index counterparts… and that means you would be paying more in commission for the same “buying power effect.”

However the higher commission disadvantage of the ETFs like SPY may well be more than compensated for by the ETF’s narrower bid-ask spreads, often resulting in better fill prices, and the fact that you can still exit from a position on expiration Friday.
An additional important advantage of the ETF vs. Index approach is that the investor has the opportunity to take advantage of market movement to acquire greater premiums as he accumulates the ETFs at different prices on the way to equaling the buying power effect of a single larger Index.

Tax Treatment Differences
Here there is a substantial plus to Index options. The IRS treats these indexes differently from stocks (or ETFs).
The Index options get special Section 1256 treatment which enables the investor to have 60% of a gain as long term (at a 15% tax rate), and the other 40% treated as short term (at the regular 35% short term capital gains rate) even if the position is held for less than a year.
By contrast, the ETFs are treated as ordinary stocks, and thus if held less than a year, all gains are taxed at the less favorable 35% short-term capital gains rate.
Thus the Index options can be better from a tax standpoint. You should of course consult with your tax advisor to see how these tax implications may or may not be significant in your situation.

Here’s a summary:
INDEX OPTIONS
SPX, DJX, NDX, RUT
European Style
Can exercise only on expiration day
Can enter or exit from position at any time prior to expiration.
Usually have wider bid-ask spread
Last trading day – third Thursday of month (day before expiration day)
Expiration day – third Friday of month
Tax treatment – 60% long-term
ETF OPTIONS
SPY, DIA, QQQ, IWM
American Style
Can exercise any day
Can enter or exit from position at any time prior to expiration.
Usually have narrower bid-ask
Last trading day – third Friday of month
Expiration day – third Friday of month (same as last trading day)
Tax treatment – entirely short term

"

http://sixfigureinvesting.com/2012/0...spxpm-options/