Options on Futures - Electronic/ Pit Combo Orders

Discussion in 'Options' started by CPTrader, Apr 10, 2006.

  1. How easy is it to place combo orders for spread positions on futures options and thus avoid the risk of legging into the position.

    For example is there any trading patform that would allow me to automatically place an order for a buttefly, condor or double diagonal position as a combo order?

    For options traded in the pit, are there reliable brokers that can execute these positions: buttefly, condor, double diagonal as a combo position?

    Any broker recommendations?

    Any execution tips, warnings?

    Any things to bear in mind about trading these positions.

  2. Wow! With all the options gurus on ET, no reply to this??

    Please help!

    Let me try again:

    How easy is it, if possible to execute at once as a combo order certain options spreads - electronically or via the pit.

    For example, can I get a quote and complete fill for an iron condor or a double diagonal spread position in the indices, currencies or interest rate futures markets or do I have to expose my self to market risk by legging into the position.

    Any other ideas or tips on this?

    Any recommendations on reliable future’s options brokers.

    Finally, apart from purchasing the PC- SPAN software from the CME is there any other way to estimate margin requirements for these spread positions.

    Many Thanks!
  3. What brokers out there allow futures options trades? good questions..hope you get some public answers.
  4. theguy


    As an ex broker I have placed many option orders. Legging into spreads can be done but the risk there involves not be filled on a certain leg and then having the market move against you. When I placed spreads I almost always placed them as a spread with our floor brokers.

    Sequence of events: When a client called me I would put them on hold and call the floor for the most recent quote-this quote is far more exact then online quotes. Then based on the bid-ask and what the market is doing we could place the trade with the floor broker.

    Please PM if you ave any further questions and I can refer a broker to you at that time.

    Margins can fluctuate based on vol of market and option spread. The margin for uncovered options is the same as futures contracts. A spread margin takes into account total risk on trade minus any credits collected. If one does 2 credit spreads in crude oil (above and below the market) the approxamate mrgin can be figured out. The following trade example will show margin. The trade uses closing prices for 4/18/06

    Buy 1 June Crude 76 Call $1.26 ($1260 real value)
    Sell 1 June Crude 73 Call $2.42 ($2420 real value)
    Sell 1 June Crude 68 Put $0.67 ($670 real value)
    Buy 1 June Crude 64 Put $0.19 ($190 real value)

    credit of trade (excluding commission and fees): $1640 (this is derived by adding all credit and debits for above options)

    Total risk equals call or put strike differential minus credit collected. $4000-$1640= $2360 per spread. this would also be approx margin, please rember that the market will never be both above 73 and below 68 so at least one of these spreads will expire out if the money. Hopefully both will. Let's watch this trade because it expires on 5/17/06 with 29 days till expiration. This could be a good trade because options tend to lose most of their value in the last 30 days and CL (crude oil not craig's list) seems to test new highs and fail.
  5. Crude is a bad example, IMO. I traded flies 1000up in crude as routine practice and I will get markets in the single-wide fly of 18x28, 20x30 and 30x50 on occasion.

    The only market outside of equities in which I would attempt complex spreads/combos would the following; in order of preference[exc. intl markets]:

    CBOT Treasury complex
    CBOT Beans, Corn
  6. Thanks "theguy" this is an interesting trade and thanks for your comments on legging vs spread trades.

    The max risk on this trade (a short iron condor) is about $4k while the max profit is the premium received

    Would you know the net gamma/vega/delta on this spread?

    Also since crude has several monthly contracts what month is used as the undelying for the various expirations?

    What do you think about Crude oil options. What's the liquidity and bid/ask spread like.

    I have always felt that the NYMEX was an awful exchange.....the brokers there from my experience tend to be borderline dishonest unlike the CME/CBOt where you can actually get positive slippage at times. Hence my reluctance to trade crude oil options.

    Any thoughts you can share...?

    Thanks in advance.
  7. riskarb, I see our posts crossed.

    Your thoughts are exactly my thoughts, crude is not agood market for these kind of spreads.

    Even in equities apart from the S&P I don't really see any other good market, unless you move to the index options and there you don't have SPAN margins.

    Overseas like on EUREX from what I've gathered you have to deal with off-floor/broker pre-arranged markets, which I think is disadvantageous.
  8. SPAN is not an issue on flies, verticals and other limited risk positions.
  9. Thx.

    So what equity markets would you favor for these kind of trades? How about currencies?

    A quick question, slightly off topic.

    Will butterflies and condors always be short gamma/vega ( at lest at trade outset)?

    Are there any other option spreads that are short gamma/vega , yet limited risk?

  10. theguy


    I didn't figure out greeks for spread.
    Energy options contracts all correspond to same month underlying as energy is produced all year around. There are no serial month options in energies.

    I agree for the most part regarding what you about NYMEX, but the firm I worked with hand picked their floor brokers and have a good relationship with them.
    #10     Apr 19, 2006