I did some research on largest gains and drops for ES. This table shows the largest drops and gains within a 56 day period for the last 7 years.
What I did was start at the first day of the month when the prior contract was expiring. Then I checked the next 55 days' settlements to find the highest price and lowest price. I did this for all days for that contract until there were 56 DTE. I then found the largest drop and gain for that contract.
For example, the first line is Mar ES 2007. In includes Dec 1st, 2006 (about when this contract is gaining volume) thru Jan 20th, 2007. Jan 20th is the 56th DTE. I then performed these calculations on each of those dates.
Min(day 2 thru day 56)-price day 1.
Max(day 2 thru day 56)-price day 1.
So in other words, if you put on contracts each day from Dec 1st to Jan 20th this shows the worst day for a put or a call.
I then found the largest drop and the largest gain for all of those dates to give me those numbers for that contract.
Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).
If you throw out the anomaly of 4th quarter 2008, the largest drop was 240.50. Which is interesting because Karen from the You Tube video was selling S&P puts 250-270 OTM. Just outside the largest drop.
The following 13 users say Thank You to ron99 for this post:
It confirms me selling ES puts more than 250 OTM. It also confirms that you really can't sell ES calls because if you go more than the largest gains of 200, there is very low premium and a very low ROI% at those strikes.
Remember that you need to be further out than 250 because if it drops 250 you will be forced out by increased margin even though you aren't ITM.
I just had a chance to review those videos you posted a few pages back. Pretty amazing.
One thing that Karen mentioned in the 2nd video was that once a position moved from approximately 5% chance of ITM to 30% chance of ITM she would start looking at it more closely and adjust if needed. One of the adjustments she mentioned was rolling the position out to a further month.
Any thoughts on the value of doing this? I assume the purpose of this is to get the trade further out and buy time for a fundamental driven theory to play out. Seems to me this would make sense only if the long-term big picture supported it.
Great research Ron! What kind of margin is OX charging for ES puts? Following the above formula(Karen's), the puts I get are about 2500 IM each at IB. That's for apx 80-100$ premium.
A very interesting and simple plan , but at 2500IM is there enough return?
As stated a few times on the thread IB doesn't give competitive margin rates anywhere near the CME SPAN rate. To emulate Karen's method as closely as possible I went out 50 DTE (close as I could get to 56 DTE) and down 250 points from today's close.
This would be the EWK31340P (3rd week of May on the ES at 1340). The margin for this put is $471.90 at OX, the premium is $57.50 and the delta is 0.02.
Of course this is a pretty poor time to pick up puts (with the market grinding up) so the return is about 2.1% ROI per month (not amazing). But you could easily pick up quite a bit more premium by waiting for the market to go down a bit first.
The following user says Thank You to eudamonia for this post: