Euro FX Short Strangle

Discussion in 'Options' started by Prevail, Jun 18, 2005.

  1. Prevail

    Prevail Guest

    I just set up my first fx options trade at the cme to feel things out.

    Sold the July 118p x 126.5c for 20 tics. $12.5/tic.

    Margin to set up this trade is around $900.
    Premium generated is $250.

    Not including expenses, return on initial margin is 27% with 15 week days left until expiration.

    Anyone else making options trades on fx at the cme?
  2. just21


    Was this on globex?
  3. What were the delta's like?

    Seems like a "small" return dollarwise for a lot of potential risk if the Euro blows chunks one way or another...

    But I guess that's what writing strangles is all about..
  4. Prevail

    Prevail Guest

    Mine were filled in the pit. I don't trust globex options trading yet.

    That is what strangles are all about, as you said. Perhaps you could take the other side of the trade?
  5. Anseld


    what implied volatility were those trading at?
  6. Prevail

    Prevail Guest

    10.7 for the calls and 8.3 for the puts. This market does not have the skew the sp has.
  7. Here is a guess at to what your situation is; You read some where that 95% of all options expire worthless so you decided to try to sell options in a market neutral fashion. There problem with this is that even if 95% of options on the euro futures expire worthless you probably do not have enough margin to get you through that 5% of the time when the strategy fails.
    If you want to play this strategy please use spreads. It will greatly reduce the amount of margin required and your risk. Most importantly it will allow you to be wrong more times while learning so you can keep enough capital to get through to being a skilled profitable trader.
    Good luck
  8. Prevail

    Prevail Guest

    Actually, I'm not a beginner but thanks for the concern.

    This trade has a 78.6% chance of having one of the legs not hit using the last 10 years of data. Those looking for 95% winners trade based on standard deviations which is less relevant when it comes to actual market movement.

    When targeting high returns on an account the protection of spreads is an illusion.
  9. just21


    Can't you hedge the deltas when the strike is hit?
  10. Sorry Prevail,

    I might have just revealed a little bit about myself 3 years ago.

    As far as spreading goes I always like to be in a limited risk situation. Lately though I having been long options and trading futures against my option position. Our risk preferences are likely a result of the amount of capital we are trading with.
    #10     Jun 20, 2005