This is what I do not understand about options...You sold someone the right to sell something a year later, with unlimited risk. You could have the barrels put to you. If it is a directional trade, and you feel it will not go below 20, and in fact would be higher by then, why not just buy some deep OTM calls at that same strike, expiring a year from now? You spend a bit to lock yourself in, and if it is wrong, oh well. But if it is right? Exercise it and WHEEE!
Out of all 4 positions now with a 1k profit instead of 15k loss. Although I still think it is a good trade, but with such shit going on I chickened out.. Could wake up tomorrow to see this is now trading in IV of 2000% and IB sold me out of positions.. I am not playing this game
Thanks to all for help. Sorry for some stupid questions / comments, but this was stressfull to say the least..
Are you going to make the same mistake tomorrow, or next week? Next month? Gonna' sell naked puts in energies, which blows up most people?
Well if you sell put it just leaves you soo much more room to be right. And you know how good it feels to be right.. I could earn 10k with oil droping 50 % from where it trades now, theta works for me. Sure vega works against, but I was not planing to hold this till expiration and am fairly convinced oil will be at least 30$ in a year. But the problem is those futures one year from now already are at 30$.. So no way for me to just buy cheap calls as I think CL is failry priced down the curvature.. Could go to 40$ and more, but with end of 2021 pricing already trading at 35$ there is not much room to make money.. Where I did see oportunity is to just sell 20 put 300 days out.. Yes curvature will move up and down, but I expect it to move mostly up, to narrow the huge contango and production cuts and economy reopening should make sure we do not see CL at 20 in one year as no one makes money at that price.. But ok I could be wrong, there could be more lockdowns down the road etc etc... Turned out fine, learned a new lesson.. I doubt I will have much to do with options going forward as I see I am not good enough for this game.. Should have taken notes from the chapter in the book where PoppyDeek wrote that he advises against them for retail
@Tomaz26 You are probably being cornered. You sold the 4 puts yesterday and that was all the volume done for the whole of the day. IB must value your position through their algorithm. The algorithm details are not known, but it uses a series of prices in order to value your position as accurately and realistically as possible. The algorithm is a large series of IFs, If the security is very liquid, it will use the last price, moderately liquid, it will use the mid-point between Bid/Ask, illiquid, it will use the Ask price if there is one. If there is no Ask price, they will have to derive a proper price to value the position (In the case of options, they will interpolate), if there is an extremely wide bid/ask, they will derive another interpolated price and compare it with mid-point and value at the worst of them to your position, and so on. The ultimate goal is to ensure that your position is valued at the most realistic price possible. There is someone on the other side of your trade. In a very illiquid instrument, it doesn't hurt to try to knock you off by trying to trick your brokers' algorithm to force a margin call & consequently an auto-liquidation. You must take this into consideration when placing the trade, you will need capital to protect your position against such practices, or you will need to have an offsetting position, either in another option or in the underlying.
For sure not next week. Next month? Probably Nah, I think I am done with options.. Some $$$ here and there, but too unpredictable. Sold some crazy priced ES puts on 1600 level when market was at 2200, only to close them a few days later for a chump change compared to where markets are now.. So my experience really is that you pick pennies, and good for me there was no big steamroller yet so I should quit while "ahead"
Thanks. I think I was played too. I knew this was very iliquid when I sold them yesterday, but there was already quite big open interest with 1.000+ 20s being sold by others before me. I checked some earlier and further out expirations which had 0 OI so I avoided those and I also avoided strikes without any VOL. But I never expected something like that could happen. Really. It now looks to me exactly the way you describe it. Something similar to stop hunting but in this case margin call hunting.. Just price option with some crazy bat shit number and algos will do the rest and force liquidation on accounts.. I do not want to know at what prices IB would liquidate me.. Now when I closed the trade, I did it at 1.85, and ask was 12 I mean if they would sold me out at 12, I would have 40.000$ loss not 15k one.. Shiiiit. That is why I think it really is time for me to stop this shit.. Go directional only and forget about options as I am clearly not cut to survive in this game...