ES Emini futures Options

Originally posted by StockApprentice
Has Anyone had an enlightening experiences selling these options?

Should I stay away from them? What is the risk of exercise?

Any thoughts?
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risk of exercise is prob nil, look like less cash needed for trading option.
info from www.mytrack.com;
Security---------- Initial Requirement -----Maintenance Requirement
E-mini S&P 500---------- $2,000 ---------------$1,000
E-Mini Nasdaq 100 ------$2,000 ---------------$1,000
Fortune E-50------------- $600 ---------------- $300
E-Mini Russell------------- $2,000-------------- $1,000
S&P Midcap 400---------- $2,000--------------- $1,000
Dow Jones Ind. Avg.----- $2,000 --------------$1,000
 
Originally posted by Yannis
StockApprentice,

There are significant advantages in using futures (leverage, but one should be very careful because that thing cuts both ways.)

There are also advantages in using futures options (leverage, while you are able to control the max amount you stand to lose.)

I would caution you that, if fututes are sophisticated instruments (and therefore not for the beginner) options are even more sophisticated because now you have to deal with the several variables inherent in that instrument (the greeks, etc)

No doubt, powerful trading methodologies can be based on futures options. What gives me a little pause is the nickname you have chosen. If you really consider yourself an apprentice, stay away from them.

I think that the order of learning should be something like: stocks, futures, stock options, futures options, etc. the important thing here is that between each step you should feel that you have "graduated" ie, you have had sufficient success and confidence in your skills to warrant the move up.

Many sophisticated futures traders use futures options to hedge large positions, in a different fashion than hedging stock positions, eg, in limitdown situations which are more threatening in the futures trading arenas.

Of course, I may have misjudged you, in which case, best of luck!:)
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Thank you for the warnings. I agree with you in your summary of what to look out for as well as your conclusion that options are complex.

I was thinking of setting up a couple of simple strangles with the spx emini options. Do any of you have any thoughts/warnings?
 
Originally posted by StockApprentice


I was thinking of setting up a couple of simple strangles with the spx emini options. Do any of you have any thoughts/warnings?
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As to whether SPX cash options or emini options are more suitable for you, I have no idea.

But if you are thinking about selling a strangle, consider this dismaying observation: Since volatility has been extremely low for quite some time now, options are also relatively cheap now. Traders are "already expecting" the price to make no substantial movements in the near future.

So just be sure you know about vega and that kind of stuff, that your model is appropriate, and that your trading decision is based on something you think you know but at the same time you think the majority of traders does not know/anticipate. Just selling strangles because you are bored with the current nonexistence of a bullish or bearish trend in the underlying might not bring you the rewards you are looking for.
 
If you want to use them you got to know something more compare to futures if not you can lose on this options hell a lot of money.I don't know if IB impose any special margin on short e-mini options beside the Span parameters.
 
StockApprentice,

As Lobster said above, this is not the ideal time to sell an options strategy because the VIX is low.

However, if you so choose, you could buy a strangle.

Those have two key variables: their width/length, and the timing of exiting.

I've done this several times and the best way I know how to make money from strangles is to design them fairly narrow and short. Then, when the anticipated fast/explosive move happens, get out of the whole thing at the same time, benefitting from the fact that the option that's favored by the move will probably appreciate faster than the other one will lose value. Smaller profit but more secure.

Microtiming the market, especially after fast moves, is very tricky, and I've never been lucky doing that. Keeping the option that's favored too much longer, just sets you up for losing the whole thing as the market might spring back for a moment or two just to scare you :) not to mention aggravate you as you dump the whole strategy in fear and dismay.

However, there's a bigger issue here: this market is currently not neutral, as chances are it will go up later this spring. Why not play a bull call spread? Just an idea.
 
I don't know where is going to be the market in the spring in general when I pick my options I look also the fundamentals.May be the market is going to be flat in the next month or two and than is going to be better to sell some options.What I don't like in the e-mini options is the very large spreads in most cases for more then 100 buck and also the iliquidity.Anyway if some is using this option has to be carefull.They have a huge levarage in them and the lost it could be much more than regular index options.I hope in the future they will get more liquid.
 
I also forgot to mention if you want to win in the options game you got to find a way to deal with the fear. :cool:
 
Interesting point about fear... I believe that you are correct. Before taking any position I lament over whether I can handle the risk. I always get horrific visions of the market moving drastically against me....

However, I have been combating those thoughts by considering the probabilities/standard deviation of the positions and securities that I've been conducting business.

What methods do you employ to combat your fears? :)
 
StockApprentice,

I sometimes close my eyes and keep on driving faster...:)

Sometimes, I just have something good to eat...:D

And then, there's this friend of mine who trades with a whiskey bottle right next to him... :p

But, seriously now, although there are psychological methods to analyze your feelings and handle fear, I think there's nothing like trusting your method or system. And that takes both backtesting or a solid history of trades - AND lots of papertrading, trading with small lots, etc. If there's still fear or hesitation, keep on papertrading and/or trading with small lots.

A cheap broker like IB helps in this phase enormously, because it would just feel stupid to pay a high price while you are just getting the bugs out of the system.
 
You could also look in to a broker assisted account. Commissions will be a little higher but you can have a broker teaching you some tricks of the trade. Just make sure to find a knowledgable broker.
 
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