I am wondering if anyone here might wish to comment on the value of diversification in writing strangles. Monthly I write in CL. I work on a 1/3 of my capital for margin. Which would essential on my risk profile eliminate taking on another trade in a different commodity. Diversification may not just refer to a different commodity. It may refer to different time periods or seasonality. The goal of my question is to explore the value of diversifying from my monthly regular trade in CL. Is there room for a more balanced, risk diverse approach? What might such an approach consist of? Any input would be appreciated.
It's not in the realm of futures, but you could try strangles on equities and indexes and risking some earnings plays looking for "implied volatility" "crush". Also can work on some futures ETF's such as gdx,slv, uso, etc. and generally find more liquidity in # options contracts available to work with. But finding good deals in the premium may be hard to come by and requires filtering and searching the option chains for good premium to sell as they often change month to month so a same symbol is hard to rely on for the same monthly trades.
I have an account with Halifax who seem to be more conservative than optionsxpress, I want to sell NOV CLX13 STRIKE 135 CALL @ .06 and there margin requirement is $1682.00.... With my bank of $70k / 5 = $14k I would allocate 5 different instruments then use a 3x margin cover which would be $14k /3 = $4666 of margin.
I am not usually writing strangles, so my situation might not apply. I allocate roughly 10-15% per instrument to achieve diversification. I do not consider different time periods in the same instrument to be more diversification.
Here 's an example of what I have right now. Note that I do have some correlated instruments, so what I am doing is not true diversification.
Maybe this will give you some food for thought.
Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).
If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
The following user says Thank You to kevinkdog for this post:
Hey Everyone. Thanks for the amazing amount of information shared here, and I am reading with great intent. /CL 90p 125c active right now for NOV to observe the reaction while in my initial stages of learning how to read what fundamentals I need to learn.
(Any questions specifically related to my website, please send me a private message only.)
"Obstacles are those frightful things you see when you take your eyes off your goal." -- Henry Ford