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Yes I have worked up a few strangles and it is not good. Oh well, one has to explore these things. Thanks Kevin, I am slowly starting to diversify my activities. There is a bit to learn when looking further a field or rather exploring the numbers and assessing alternative trades. I have found the ROI a good method for this comparison matched with probability. BEAN OIL IS OUT!
I calculate a 1.3% monthly ROI on that, assuming you still keep the 3X margin excess. If you decide to keep less excess because of the 72P purchase, you will have a better return.
I have finally finished reading the full thread. Thank you to everyone who selflessly shared their systems and ideas and especially to Ron for initiating the thread and offering his constant advice. My name is Frank. I used to be a professional trader on OTC energy and environmental markets (Carbon, Electricity, Gas) for utilities.
I have been trading options on the side for 14 years and I can say that the only strategy that has given me consistent results over the years was selling premium. There is very little literature on the topic that goes beyond theory, so when I found this thread I was surprised and amazed that I am not alone as an individual options seller vs professional trading houses. I have learned a lot from you and I intend to keep learning. Like many of you I started off trading stocks and stock options then I moved to index options. I also traded futures for a while but I only started doing futures options recently. Which kind of closes the full circle.
I have a question regarding OX spreads margins. I know from this thread that the Trade Calc does not properly work, so I addressed the issue through customer service at OX. After a long discussion with several reps they brought in one of the futures brokers. She indicated that Trade Calc computes margin properly for spread options on futures using SPAN. I showed them how margin differs dramatically for 1 contract vs 2 contracts. Also if you keep adding contracts margin requirements decrease dramatically when you reach 100 contracts and tend to stay there. For example, an iron condor with 78 DTE on CL requires $912 IM for 1 contract ($70 premium) and $966 for 2 ($140 premium) which makes no sense. But it only requires 31% premium to margin ratio when you enter 5 contracts. The IM starts decreasing as you enter more contracts, so when you reach 100 contracts the requirement is only around 45% and it does not change much if you enter 1000 or 2000 contracts. I asked them if substracting IMs for 1 and 2 contracts could fix it (as suggested in several parts of this thread) and they had no idea what I was talking about.
They pointed out that SPAN requires less margin as the volume of contracts increases, and that the computations were accurate. I am not familiar with SPAN and I wanted to post the question in this forum in case any of you have heard of anything like this. It does not sound right to me but they kept insisting there are no issues with Trade Calc.
Thanks
SPAN margin does not decrease per option/spread with more quantity.
Here are the emails I got from OX.
Feel free to copy these emails and send them to OX.
The quality of customer service has dropped since Schwab bought them. I had one rep insist that nobody can trade futures in an IRA account. But we all know that is not correct. It is just a OX rule.
I just emailed Seth James about this. Let's see what his response is to me.
Phillip Bennett no longer works for OX. That's too bad because he was excellent in getting problems fixed.
So if the margin in the trade calculator is incorrect in OX then the margin in your account balances must also be incorrect. I don't see a difference between them.
THAT HAS TO BE ALARMING! Right? Particularly when that is what you are going on in order to maximize your capital and trade exposure.