also..how would ES futures daytrade margins factor in when trading ES options?..also...seems a better deal to EXPLOIT the puffed up option pricing and sell that option as it shrinks down..seems better deal to sell options than buy them as price is puffed up..thoughts?
Anyone daytrade or swingtrade ES options?
- Thread starter increasenow
- Start date
You are really better off asking your broker those margin questions. I know that once I have a spread on then my margin is less. If I sell the straddle or strangle my margin is the same as if I only sold the put or call.
When I plan a trade I have a PLAN so even if I am short a ratio spread say +1 ESU8 1200 P/ - 2 1225 P I can always turn it into a butterfly spread if/when market goes up and perhaps even lock in a credit. If the market doesn't cooperate I can roll it down or add another long put to at least define my risk to a tolerable level.
Talk with your broker and have a clear understanding (do as I say and not as I do
) of the margin. Again the best advise is to paper trade then start very small.
When I plan a trade I have a PLAN so even if I am short a ratio spread say +1 ESU8 1200 P/ - 2 1225 P I can always turn it into a butterfly spread if/when market goes up and perhaps even lock in a credit. If the market doesn't cooperate I can roll it down or add another long put to at least define my risk to a tolerable level.
Talk with your broker and have a clear understanding (do as I say and not as I do
) of the margin. Again the best advise is to paper trade then start very small.The problem is you don't KNOW if that puffed up option will get more or less puffed up (vols) any more than you KNOW which direction the market will go. Futures options trading while not identical (I think there is some advantages but believe me I'm a newby) is the same as regular options. You take either a directional (delta) risk or volatility (vega) risk when you make a trade so you have to have a plan in advance for when you are right and when you are wrong.
I guess the advantage with futures options is if you believe vols are high you can sell the straddle then wait for vols to come down and theta to decay and fly it off. This is the span advantage. You (retail) could never do that with SPX. But you need to HAVE the discipline to fly it off and/or accept the risk of running around naked.
Hi Richard and Increase,
One of the most important pieces of the puzzle is having an effective means of monitoring your margin requirements. This is akin to a military commander knowing with certainty the size and exact positions of the enemy. He still has no control over what they will do, but armed with this intel he can take appropriate action long before any damage has been sustained.
With Span Margining your bought and sold Options are compared to arrive at a net delta [+ or -] , the exchange then applies the current risk to arrive at your Margin requirement. Tools to calculate margin requirements are available for the markets that I trade and are probably available for ES. It is a simple matter to manage Delta, Vega and Margin risk with the right information, whilst allowing for efficient use of available funds and the realization of a plethora of opportunities.
Regards
Johno
One of the most important pieces of the puzzle is having an effective means of monitoring your margin requirements. This is akin to a military commander knowing with certainty the size and exact positions of the enemy. He still has no control over what they will do, but armed with this intel he can take appropriate action long before any damage has been sustained.
With Span Margining your bought and sold Options are compared to arrive at a net delta [+ or -] , the exchange then applies the current risk to arrive at your Margin requirement. Tools to calculate margin requirements are available for the markets that I trade and are probably available for ES. It is a simple matter to manage Delta, Vega and Margin risk with the right information, whilst allowing for efficient use of available funds and the realization of a plethora of opportunities.
Regards
Johno
not exactly accurate as the major diff is that future options are electronic (traded) vs spx pit traded and span...basic premise is the same....
I think you're thinking of the E-mini Richard - that is exclusively traded electronically, as are the E-mini futures. But overall, options on futures are actually an anachronism in that most of the volume in most contracts is still pit traded. In the crude options for example pit volume dwarfs electronic volume, same in the grain options.
Here are a few important ways that stock options differ from options on futures.
1. Most important, in futures options you can short the underlying as easily as go long, as much as you want, with no borrowing issues etc. That changes the whole game.
2. Risk margining in futures options.
3. No cost of carry of the underlying in futures options, as you can hold your margin in T-bills.
4. No dividends to worry about in futures options.
5. Futures options have a single formal settlement price at the end of the day.
6. Insider trading and knowledge is a big consideration in stock and not in futures.
7. No mergers, corporate takeovers, bankruptcies or other such events in futures.
Having traded futures options for well over two decades and having just in the last year or so started trading stock options, I may be biased. But it seems to me that the world of stock options (and stocks) is shadowy and opaque compared to the futures world, which is incredibly straightforward and transparent by comparison. In stocks you have orders routed to different exchanges with firms paying for order flow - no chance of abuse there! There's the whole "naked short" business where 1% of trades fail to clear and when you ask the SEC why all they can say is "I dunno."
There's talk about merging the SEC and CFTC but the cultures are so different - I'm skeptical.
PS I'm coming in late in this thread so if this is all irrelevant to the discussion then - never mind!
yea, I need to somehow get an easy method to calculate the margin required when selling in or out of the money ES options...or any other Futures options...I'll ask my broker...unless someone here can easily in simple language spell it out...thanks again...
1. here is how i use options on futures. when there is blood on wall street, i check every day until brokers raise margin requirements.
2. on that day, i start going long leverage etfs.
3. on the day they re-establish normal margin, i sell my long position, and move to the next strategy.
4. the next strategy is ... what i know it is.
2. on that day, i start going long leverage etfs.
3. on the day they re-establish normal margin, i sell my long position, and move to the next strategy.
4. the next strategy is ... what i know it is.
thanks for your post...
yea, I need to somehow get an easy method to calculate the margin required when selling in or out of the money ES options...or any other Futures options...I'll ask my broker...unless someone here can easily in simple language spell it out...thanks again