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I fully agree. Supply & Demand, seasonals, Weather, COT data etc. are all parts of the puzzle. When they fit together I enter a trade. S&D for me is the most important part.
Selling OTM options allows for moderate errors or changes in the fundamentals.
I had a closer look at the fundamentals of hogs, and came to the conclusion not to enter a trade.
1. Hogs are in a clear downtrend, thus selling puts would be trying to catch the falling knife.
2. One very important reason for the weak prices is the port strike at the West Coast, and, thus, significantly reduced exports. In case the strike is settled, prices for hogs might jump upwards. Not circumstances where I would sell calls.
I am new to futures options but been trading options and futures for a while. Right now mainly focusing on outrights with a low risk.. decent reward strategy on CL.
I really did not like equity option trading since the premiums were so low and i was always going too close while selling them and taking big losses after many small winners. So been reading this futures options thread with more interest as i think even with far OTM option selling, still we can made decent premium..
questions would be
a) What happens to margins if we sell Iron Condors to limit risk? Is it worth it or again too little premium?
b) Does anyone use Open E cry (futures online) for options (considering since they also offer exchange traded spreads) - any broker that offers both recommended?
c) Is there a skype chat group for similar minded traders that we can discuss??
I would finally like to get 2015 to be the year that I can trade consistently with options with receiving the right premium and low risk
I know we want to sell options at about 0.02 delta say about 60 days out.
a) How did u navigate the big fall in CL.. is 20 bucks below enough.. maybe now yes.. but what about when oil was falling?
b) what kinda of position would u open right now?
say May (51 days) 30 puts? gives about 0.12
if oil falls say even 5 bucks that would be 0.33.. if today
but i do see thats its not bad if its gradual
and if its only by March 20th its 5 bucks below.. still we would have made money (value would be at 0.06)
But you will have about zero cushion left if it drops further.
IMO the deltas for CL are too low and I ignore them and use at least 25 below on puts and 30 above on calls.
June 25s is where I would be now. Take profit on them when the premium gets to .03-.04. Make 5-10% monthly ROI depending on your costs and how long you have to hold before exiting.