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Ron, I really like and enjoy your trading style and do consider it the ultimate fit for my personality. Unfortunately my broker recommends to switch to covered instead of naked, as they will increase markup on exchange minimum (RJO UK).
If I traded your style with a slight modification (1 put pair of 3 delta short, 1 ((or lowest available delta)) long), would this work within the ca 30 day hold (starting at 110 DTE)? Or will Theta decay be higher on the long put than on the short put?
Could your database answer any of these questions?
I wrote an email to the CME and asked for old SPAN files. The CME is looking into the possibility of selling these files. Below is the email conversation with the names redacted.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,386
Thanks Received: 10,206
Slightly off topic but informational for everybody in this thread.
The CME has launched a set of new free option activity reports for energy options that you can have emailed to you daily.
First I wanted to see if a spread gave the same protection during a major drop as a naked put. I used 9/19/14 to 10/15/14. A drop of 157 for ES.
For the spread I used a delta close to 0.0400 for the short leg and a delta close to 0.0100 for the long leg.
For the options 63 DTE, the spread was worse covering the drop and you were further negative on Buying Power. -444 vs -658.
For the options 91 DTE, the spread was worse again but not quite as bad as the 63 DTE options.
For the options 119 DTE, the spread was much safer. The price change was almost identical but the IM did not increase as much. 398 vs 714.
I have no idea why the Jan spread performed so different than the others. It started with a higher IM and then the IM didn't increase as much as the other spreads.
Now lets look at monthly ROI of a spread vs naked option.
I used 7.50 for costs per RT per contract. This assumed no slippage on getting out of both sides of spread.
I randomly picked a starting date and used the 50% drop exit rule. The Monthly ROI was about identical.
These results are surprising to me. I expected spreads to give more coverage on a big drop and to make a lower ROI. These did the opposite except for more coverage on the 119 DTE spreads.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,386
Thanks Received: 10,206
I believe ICE is beginning to eat into NYMEX's business with the Capital efficienies of clearing WTI & Brent in the same place, and NYMEX are doing things to fight back.
ICE WTI Options: Open Interest Surpasses 1 Million Contracts
ICE West Texas Intermediate (WTI) options open interest (OI) surpassed 1 million contracts for the first time on May 4, 2015, reaching a record 1,040,582 contracts on May 11, 2015. Capital efficiencies achieved by trading Brent and WTI options on the ICE platform, competitive fees and enhanced WebICE options functionality are driving volume growth:
• ICE WTI options YTD average daily volume (ADV) is 23,262 contracts, + 34% YoY
• YTD volume for ICE WTI options is 2,116,809 contracts
ICE WTI OPTIONS — AVERAGE DAILY VOLUME & OPEN INTEREST
Thank you for this comparison. I am not sure if commission and fees are considered. If not, the performance of naked puts would further improve compared to the performance of the spread.
