ES mini futures Options liquidity problem far OTM

[der_kommissar]

I was in a bunch of spreads going into 8/24...as RMorse stated, there are going to be enormously wide spreads in very illiquid, volatile markets...For the week or so following that event, I was basically just trying to adjust the best I could...some itm options were trading 5 wide and otm's were 2 wide...as others have alluded, you have a better shot just keeping it small with the futures and if you want to hedge with the futs options then maybe do that...

I have some of those far otm's up since I still have a few dead spreads in them and even the sub 1.00's can trade 20-30 cents wide and it's a toss up whether you will fill if you split the bid/offer.

 

[Handle123]

PROS

• N/A

CONS

• The margin required for the short option.
• The risk of the short option.
• Small premium.
• Could be the next ET Margin debt negotiations type of thread.

If you have to be worried about the margin doing long term trades, you shouldn't be trading long term commodities. As price is screaming up as example, I am using two minute chart waiting for certain pattern based on price and volume drying up and sell OTM calls and short the futures, but I don't buy the ATM yet and wait for so much time as prem declines then buy the ATM, so yes, there is double risk. But I have been trading this approach long time and simple isn't any better way I have tested. Never have seen any small prem, LOL not at contract highs. I take 3/4ths of 1% of my account, I know the risk divided into this 0.75% to come up with number of contracts to trade, so chances of not having enough funding is nill. If you don't have the funds to play the game, you shouldn't play. And that is why people Margin debt negotiations .

 

[OTM-Options]

If you have to be worried about the margin doing long term trades, you shouldn't be trading long term commodities. As price is screaming up as example, I am using two minute chart waiting for certain pattern based on price and volume drying up and sell OTM calls and short the futures, but I don't buy the ATM yet and wait for so much time as prem declines then buy the ATM, so yes, there is double risk. But I have been trading this approach long time and simple isn't any better way I have tested. Never have seen any small prem, LOL not at contract highs. I take 3/4ths of 1% of my account, I know the risk divided into this 0.75% to come up with number of contracts to trade, so chances of not having enough funding is nill.

You suggested "adjusting" a losing Debit Spread into a short option position by closing the long leg and keeping the short position open. That is a stupid idea.

If you don't have the funds to play the game, you shouldn't play. And that is why people Margin debt negotiations .

Or avoid naked short option positions.

 

[Handle123]

You suggested "adjusting" a losing Debit Spread into a short option position by closing the long leg and keeping the short position open. That is a stupid idea.
Or avoid naked short option positions.

To each it's own, we all have different back testing results/trading and what works for us. If someone can't handle to risk, they can put them on as spreads.