How long $3000 will last option trading

With commodities you can EASILY lose more money than you have in your account. Say you have a position and a couple of days it makes limit moves in the opposite direction. You can't get out. All you can do is set there and cry.

T
 
Quote from trkarl:

With commodities you can EASILY lose more money than you have in your account. Say you have a position and a couple of days it makes limit moves in the opposite direction. You can't get out. All you can do is set there and cry.

T
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That's why with a small amount , you sell deep out of the moneys.
Option selling is inherently less risky than trading the underlying.
 
Well each commodity has a margin requirement. I can't remember off the top of my head but say you bought 1 contract of NKD (nikkei 250 futures contract) and the position moved against you.

If you have $4000 and the requirement is $3000, if the NKD drop more than 200 points ( $1000 because of a multiplier of 5), your position will automatically be liquidated since it'll fall below $3000.00

The problem with this is that NKD do not trade for 24 hours so it could open down 1000 points (equivalent to $5000 drop) and then you'll owe more than what's in your account.

Now if you trade with more liquid and virtually 24-hour futures such as NQ, ES, YM, or ER2, the chances of a gap against you is smaller (not necessarily zero) so your account may get liquidated closer to the margin requirement.

hope that makes sense.


Quote from skanan:

I read the trade. I probably won't sell naked but it is an interesting strategy. One thing I am no so sure since I've never trade commodity.

If I put $3000 in my commodity account, would my max loss be limit to $3000 ? Can trading firm require me to put more money in ?

Thanks,
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Thanks! Supposed after liquidating my account, the brokerage firm figure that I still owed extra $2000. Do they require me to give them more money ?

Quote from polpolik:



If you have $4000 and the requirement is $3000, if the NKD drop more than 200 points ( $1000 because of a multiplier of 5), your position will automatically be liquidated since it'll fall below $3000.00

The problem with this is that NKD do not trade for 24 hours so it could open down 1000 points (equivalent to $5000 drop) and then you'll owe more than what's in your account.
More...
 
Quote from skanan:

Thanks! Supposed after liquidating my account, the brokerage firm figure that I still owed extra $2000. Do they require me to give them more money ?
More...

Technically yes, but it would be on them to collect it from you.
 
SOLD -1 VERTICAL MRK 100 APR 06 35/37.5 CALL @.35 ISE, MRK MARK 34.46

SOLD -4 VERTICAL SPX 100 MAY 06 1225/1215 PUT @.45 CBOE, SPX MARK 1298.36

BOT +1 VIX 100 MAY 06 20 CALL @.25 CBOE, VIX MARK 12.20

I followed Coach Phil SPX/VIX trade.

SOLD -2 VERTICAL SPX 100 MAY 06 1225/1215 PUT @.50 using interactive brokers.
 
SOLD -1 DIAGONAL SPY 100 MAY 06/APR 06 126/125 PUT @.50 ISE, SPY MARK 129.92

Rolled my calendar APR/JUN 125 to diag
short MAY 126 PUT/LONG JUN 125 PUT
 
Bought MAY 129 XSP put in the morning for $1.85. This is probably my hedge.

Sold 1x 1215/1225 May put for $0.60.

Sold SPY 100 MAY 06/APR 06 126/126 PUT @.65
. Rolled my calendar APR/JUN 126 to MAY/JUN 126 put.

Total on SPX
-1 1220/1230 MAY put
-7 1225/1235 MAY put
-1 1260/1265 APR put
-1 1230/1235 APR call
-1 1250/1260 APR put
-1 1335/1345 APR call
 
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