Future Option trader with ~30% annual returns (for the most part have traded all cleared instruments)
Only trade the ES
I have use several brokers
Heavy statistical focus on where to trade the ES (used to use market profile but realized that sigmas provided a better pictures for my strategy)
Keep duration to 7 days (reduce risk and re-position back to the statistical movements)
I initially started selling deep OTM put options. I have a full time job (which might delay my responses to questions or comments). I cannot monitor real time and become concerned with volatility moves.
I switched to credit spreads (see sample below).
Buy 1 ES FOP JUN 14 ’13 1570 Put
Sell 1 ES FOP JUN 14 ’13 1590 Put
Questions to all
Why not use credit spread? The spreads allow you to know your maximum loss.
My notional value (delivery value) of the portfolio when I was selling deep OTM put options was huge. Are there any concerns on notional? I assume you are run between 20 to 40 times cash to notional value.
Last edited by UnZane; June 9th, 2013 at 07:12 PM.
There is absolutely nothing wrong with writing credit spreads instead of outright uncovered positions. I recently opened up another account with TOS to specifically write credit spreads on certain stocks and maybe some ETF's. The commissions for those are lower vs. OX. But, the commissions for the futures options are lower for me at OX along with the margins so I now have two accounts. As far as the spread goes, you might have to write them a little closer because you now have to pay for an extra commission on the buy side in addition to maybe having a wider spread (higher max loss) to increase the premium you would receive. The only real drawback I see is that you might have to write the spread closer to the underlying which means your timing of the entry has to be a little 'better' as far as being correct in the market direction. If you are good at understanding the fundamentals of what is driving a current trend then your ahead of most people, it's the market entry timing that might be the key for you. Writing the options uncovered further away can give you more 'bad timing' room to still be correct. Right now the 1570 put is about 67 points away and the ES has been moving up/down 10, 20 points a day = volatility up. I'm watching the ES options also for the week. I stayed away from the indices last week because of all the news.
Anyway, nothing wrong with spreads. Whatever fits your style, time allotment, goals....if it works for you don't change it.
I meant the 1590 put is about 47 points away........
The following user says Thank You to opts for this post: