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Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,057 since Dec 2013
Thanks Given: 4,409
Thanks Received: 10,225
It's a financial spread option on the March-April spread that expires on March penultimate so Tuesday 25th February.
Payout is exactly the same as any normal financially settled call option but the payout is based upon the settlement price of the March-April spread on that date.
Spread Options are priced very differently than normal options. Inputs to a spread option model are the normal Strike, Interest Rate & Days to Expiration, plus the underlying Price and Volatility for both March and April individually, plus the correlation between March and April. The biggest factor in pricing being the correlation for (hopefully) obvious reasons.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,057 since Dec 2013
Thanks Given: 4,409
Thanks Received: 10,225
400 I believe
These things trade all day long OTC in some pretty decent volumes.
I just happened to see it trade when typing a message here so thought I would share.
I would say the ROI is telling you that the ES is less risky. The only difference in the ROI for both is the margin required. The exchange is saying Crude is riskier, and therefore demands more margin. The exchange always wants to balance risk and volume (they want margins low to stimulated trading, but not so low that people run into trouble with positions).
Look at NG for an example. ROIs were 20-40% over the past month. It is because they are very risky.
The trick, then, becomes finding high ROI where the margin requirement does not necessarily mean a position is riskier.
^ On a related note, can you find sufficient liquidity to sell a bunch of 1-Delta (.01) options with a premium of $40? I imagine there is plenty of liquidity in ES and maybe CL if you pick common, round number strikes, but what about some of the other physical commodity markets?
I realize everyone has their own number, but let's say to cover trade research and monitoring time, commissions and provide a decent profit, a trade won't be considered unless it's $1000 in gross premium (or $2000 or $10,000 or whatever). Even with a $1000 hurdle, can you get filled on 25 options without selling at or close to the bid?