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If I heard it right, the lady said she goes out: Index-100 and then less 12% of that number. So taking todays's close on the SPX, its 1593-100 = 1493. Then 12% of 1493 = 179.16; so look for selling around 1314 with 56 DTE. Take any instrument the ES, SPX, OEX or SPY and you won't even get 1% ROI/month. Thats what makes me want to look at her trades if she will share
Can you help answer these questions from other members on NexusFi?
Actually EWK31340P is the end of the month (EOM) ES options. But everything else you posted is correct.
I did find out today working on this that OX charges the same margin for the regular ES options for the weekly and EOM options. On some that is more or some less depending where the option you are selling is in relation to the regular ES option.
I often think of trade ideas, but seldom have time to perform analysis on them. I have even thought of hiring an "intern" type of person that could crunch numbers all day, but I thought I would try this thread first.
I worked through getting a more real life accurate ROI% for selling options.
Using that 2.1% from the prior example.
Reducing the cash excess the last 14 days from 2X to 1X at 14 days (if the option is still far OTM) and then 0X at 7 days reduces the excess factor from 2X IM to 1.4. That turns the 2.1% into 2.8%.
The margin drops off when the option gets closer to expiration (as long as futures don't go the wrong way) Assuming flat futures, the margin will average 65% of the IM at 56 days (calculated using SPAN for ES options weekly and EOM). That turns the 2.8% into 3.8%.
Compound the 3.8% monthly and in a year that equals 56.4%.
So 2.1% sounds low but 56% sounds real good to me.
This gives you monthly ROI%. Then this number needs to be compounded for a year. I did that using a spreadsheet table. (is there a way to do that in a formula?)
I compare selling options on commodities to the risk of taking a tiger for a walk in the park but I would say that selling options on the ES is like kissing the tiger in the mouth......
I remember the day in 1987 when the Dow came down like 700 points in a few hours (if I remember correctly, the Dow at the time was around 2.000. Something like 35%. It would mean a drop of 5.000 points today).
When stocks come down they REALLY COME ALL DOWN. A frenzy.
That was the last day I sold options until a year ago. I will never sell or buy anything related to stocks.
Margins are calculated based on the prior days' close. So using the 1582.75 ES settlement for 4/10 her formula would be 1305. Margin for a EWk31305p is 372. Premium at the start of today was $40. ROI% is 1.9. But this is 50 DTE.
On some that is more or some less depending where the option you are selling is in relation to the regular ES option.
