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In This Issue
Selling (Writing) Options on Futures
Economic Reports and Expiration Notices
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Newsletter Archives
December 30, 2008
* All times listed in Central Time
CME Group
Floor:
12:00 close: Foreign Exchange and Interest Rate products
*All Other Products Regular Close
GLOBEX
Regular close
NYMEX/COMEX
Floor: Regular close
NYMEX Electronic Trading and Clearport
Regular close
ICE
Regular close
OneChicago
Regular Close
NYSE
Regular Close
CME Group
Floor: Closed
GLOBEX
10:30 close: Equity Index products
12:00 close: Economic Event, Foreign Exchange, Interest Rate, Real Estate and Wood Pulp products
Closed: Commodity, Weather and Ethanol products
NYMEX/COMEX
Floor: Closed
NYMEX Electronic Trading and Clearport
Regular close
ICE
Closed: Soft products
Regular Close: Financial Products
OneChicago
Closed
NYSE
Closed
CME Group
Floor:
12:00 close: Foreign Exchange, Interest Rate, Commodities, GSCI, Real Estate and Weather products
12:15 close: Equity Index products
Closed: Dairy Products
GLOBEX
12:00 close: Commodities, Ethanol and Weather products
12:15 close: Economic Event, Equity Index, Foreign Exchange, Interest Rate and Real Estate products
NYMEX/COMEX
Floor: Regular Close
NYMEX Electronic Trading and Clearport
Regular close
ICE
Regular Close
OneChicago
12:00 Close
NYSE
12:00 Close
*All times listed in Central Time
The above calendar is compiled from sources believed to be reliable. Cannon Trading assumes no responsibility for any errors or omissions. It is meant as an alert to events that may affect trading strategies and is not necessarily complete. The closing times for certain contracts may have been rescheduled.
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E-Futures International
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by Jim Wyckoff
There are old sayings in the futures industry that go something like this: "Eighty percent of all options on futures expire worthless." And, "The only way to make money trading options on futures is to sell them--not buy them." Neither one of these statements is accurate. This educational feature will focus on the advantages and disadvantages of selling (also called "writing") options on futures.
But before I discuss writing options on futures, let me first elaborate on the first "old saying" that 80% of options on futures expire worthless. While I have heard the saying many times through the years, I have seen very few credible statistics on the percentage of futures options "that expire worthless." Consider this: If a trader hedges his straight futures positions with options purchases, and those options do perform their function of limiting risk for a period of time, then those options have performed their intended function--even though they may expire "worthless." Also, most speculative options buyers who make profits on trades do sell their options before they ever expire. Thus, I expect it would be very difficult to have accurate statistics on the number of futures options that are bought and sold that did not successfully fulfill their intended purpose.
A major appealing factor for speculative traders to sell (or write) options, as opposed to purchasing options, is that the odds are more favorable for producing a winning trade. Reason: If a trader is writing options, generally the market can move "against" the trader by a certain amount before the trader sees his option's strike price hit and he starts to lose money. Also, the option writer has "time decay" working in his favor--meaning that the day the option is sold, its time premium starts to decay as the option moves toward expiration.
Now you might be thinking this options-writing stuff all sounds pretty easy, huh? Well, hold on just a minute! Remember that there are trade-offs in every aspect of trading futures. Here's the "rub" with selling options:
--First, the premium traders collect for writing options is generally not nearly as much as the profits a trader would collect on a straight futures trade or a winning options purchase trade. For example, if a trader sells a call option on corn futures for 10 cents, that is his profit. But then he has to wait (or squirm might be a better way to put it) until the option expires to secure his profit. For many traders, pocketing just 10 cents ($500) profit on one corn contract is not much, so they may sell several contracts to make a bigger overall profit. Read on...
--Second, when writing options (just like in straight futures trading) you cannot absolutely limit your risk of loss. Margin money is required by the broker.
-- Finally, there is one more "old saying" regarding writing options on futures. It goes something like this: "A trader will make money and make money and make money writing options...until that one time when an option sale will go against the seller. And that one options sale will then take back all the profits that were made on the previous winning options sales--and then some."
I do want to be clear on one point. There are very good and successful traders who do employ options-writing strategies. I have another "old saying" that I use frequently when discussing a trader's trading methodology. "If it ain't broke, don't fix it." If there are options writers reading this educational feature and you are having and have had consistent success--more power to you! The main point I want to make in this feature is that there is generally more risk and generally less reward involved (per contract) in writing options than in purchasing options on futures. The one big advantage of buying options on futures is that the price you pay for the option is the most you will ever lose on that trade. Also, there is no margin required. That's very good money management.
Jim has an EXCELLENT daily newsletter where he reviews different markets, alerts you for potential trades and much more. Included is his great bi-weekly newsletter with charts and a little longer term outlook. We recommend checking out his website, educational CDROM, and services at JimWyckoff.com
Source: Moore Research Center, Inc.
| Date | Reports | Expiration & Notice Dates |
|---|---|---|
| 11/26 Wed |
7:30 AM CDT - Initial Claims-Weekly
7:30 AM CDT - Durable Orders(Oct) 7:30 AM CDT - Personal Income & Spending(Oct) 8:45 AM CDT - Chicago PMI(Nov) 9:00 AM CDT - Mich Sentiment-Rev(Nov) 9:00 AM CDT - New Home Sales(Oct) 9:35 AM CDT - API & DOE Energy Stats |
FN: Dec Natural Gas(NYM)
Lt: Nov Fed Funds(CBT) |
| 11/27 Thu |
Thanksgiving Day Holiday
|
|
| 11/28 Fri |
7:30 AM CDT - Dairy Products Prices
7:30 AM CDT - USDA Weekly Export Sales 9:35 AM CDT - EIA Gas Storage 2:00 PM CDT - Agricultural Prices 3:30 PM CDT - Money Supply |
FN: Dec Corn(CBT)
Dec Wheat(CBT) Dec Oats(CBT) Dec Soybean Meal(CBT) Dec Soybean Oil(CBT) Dec 2,5 & 10 Year Notes(CBT) Dec Copper(CMX) Dec Platinum(CMX) Dec Palladium(CMX) Dec Silver(CMX) Dec Gold(CMX) Dec US Bonds(CBT) LT: Dec Heating Oil(NYM) Dec RB Gasoline(NYM) Dec Lumber Options(CME) |
| 12/01 Mon |
9:00 CDT - Construction Spending(Oct)
9:00 CDT - ISM Index(Nov) |
|
| 12/02 Tue |
Auto & Truck Sales
|
FN: Dec Heating Oil(NYM)
Dec RB Gasoline(NYM) |
| 12/03 Wed |
7:15 AM CDT - ADP Employment(Nov)
7:30 AM CDT - Productivity-Rev(Q3) 9:00 AM CDT - ISM Services(Nov) 9:35 AM CDT - API & DOE Energy Stats 1:00 PM CDT - Fed's Beige Book |
|
| 12/04 Thu |
7:30 AM CDT - USDA Weekly Export Sales
7:30 AM CDT - Initial Claims-Weekly 9:00 AM CDT - Factory Orders(Oct) 9:35 AM CDT - EIA Gas Storage 3:30 PM CDT - Money Supply |
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* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.
** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.
*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!
