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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,132 / 5,728
Last Reply:December 6th, 2016 (05:26 PM) Attachments:642

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Selling Options on Futures?

Old September 26th, 2013, 08:56 PM   #2121 (permalink)
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Application of Seasonal Study to Trading

So here is an application of the work I have been doing on seasonality.

It is for a potential trading in NG for the period of October to November.

The seasonal average for the past 3 years shows a sideways movement during this period. (Why? I don't know. Any thoughts welcome!)

The chart shows price movement remains within a band of say 10%.

Here are the charts. Any comments, warnings welcomed!

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Old September 26th, 2013, 09:09 PM   #2122 (permalink)
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Lean Hog

As I start to look at diversifying my writing in CL I have considered Lean Hog. But looking at the front month continuous contract I have noticed that in every August price seems to gap down.

Could someone let me know if I am doing something wrong (data from Quandl) or let me know what I might not be understanding here in Lean Hog? Thanks in advance.


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Old September 26th, 2013, 11:19 PM   #2123 (permalink)
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ron99 View Post
I have been selling options on futures for years. But it is rare to find others doing it. I was wondering if there are others here doing it.

I have been doing it for 5 years. Learned it from James Cordier's book.

I have sold energy, grain, softs and metal options. Far out of the money. Usually less than 90 days from expiration.

just selling naked futures or are you using spreads? How much premium can you collect? thanks

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Old September 27th, 2013, 12:24 AM   #2124 (permalink)
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BlueRoo View Post
Thanks for the question Josh. I have normalized the prices of each asset. I do this by assigning a percentile calculation for each price in the period over the whole period in the study (here it is one year). This way the movements of each asset is directly comparable. In this chart the 3 year average for each asset is then just an average of the percentile. I then apply a 9 day smoothing average which is why the gap at the start of the chart.

So, the left axis is a percentile value where 1 is 100%. Price at this level is the average percentile for the period of the study.

The "compressed" as you say S&P line tells you that price range for the S&P was narrower in comparison to the price movements in the other assets in the study.

Hoping to continue to develop this further so all questions, comments and observations are welcome.

Thanks for the reply BlueRoo. Let me try to get some clarification if possible. So, USO ranged from 0.9 to 1.15? How are you determining the lower and upper bounds? I would think to normalize it, that the lower would be zero, and the upper would be one, as opposed to the most common value being 1. Sorry if I'm being dense, I'm just trying to understand your methodology, so I can examine the best way to compare across instruments. I would think that to do so, you need to compare percentage movement of the product itself.

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Old September 27th, 2013, 03:04 AM   #2125 (permalink)
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Seasonal Chart

Futures Edge on FIO
Josh,

This works much like taking historical volatility and turning it into a percentile so you can measure the volatility of the current daily price against its history.

Each daily price is calculated as a percentile for the period of the study.

It is really simple.

If the average price for the period of the study is $1.00 and today's price is 80 cents then today's price is 20% below the average for the period (or a percentile of .8). If today's price is $1.20 then today's price is 20% above the average for the period (or a pecentile of 1.2).

For the range you mentioned of .9 to 1.15. Remember 1 is the average. But the distribution of price for the period of the study is skewed to the upper side. Therefore price spent more time above the average then below it for the period of the study.

Very happy to have anyone improve what I am doing so critical comments welcomed.

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Old September 27th, 2013, 04:47 AM   #2126 (permalink)
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BlueRoo View Post
... looking at the front month continuous contract I have noticed that in every August price seems to gap down.

Hi Roo,

The apparent gap each August will be due to the continuous contract. Here are the August and October contracts for 2012.

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The vertical lines are at August 14. The August contract closed on that day at about 91.7, the October contract at 77.4. Whichever way you stitch the two together you're going to get a gap.


Chris

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Old September 27th, 2013, 04:52 AM   #2127 (permalink)
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This is the October Lean Hogs contract from 2005-13.

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Is there a seasonal tendency here?


Chris

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Old September 29th, 2013, 09:53 PM   #2128 (permalink)
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Seasonal Lean Hog 2010-2012


MGBRoadster View Post
This is the October Lean Hogs contract from 2005-13.

Is there a seasonal tendency here?

Chris


Chris (MGBRoadster), Saw you chart post for Lean hog for October contract. Looking at your charts it looks like there is no seasonal pattern. Using the work I have been doing and you may have seen my other posts I post the Lean Hog continuous contract seasonal chart below. (Need to do some more work before I can create seasonal charts for each contract month on the fly). It has been my understanding that lean hog tends to rally into Christmas. To test this idea I have used the last 3 years to create the seasonal chart below. At least for the last 3 years it seems that this is the case.

No this brings up a good point. How many years should a seasonal chart be based upon? And what effect does this choice have on reliability?

Questions aside let me know what your thoughts are Chris on this seasonal chart for Lean Hog?

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Note: If anyone sees these charts and thinks they are incorrect compared to work they are doing please let me know. I am happy to be corrected.

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Old September 29th, 2013, 10:19 PM   #2129 (permalink)
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Dec Lean Hogs

Here are some seasonal charts on December Lean Hogs:

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Old September 29th, 2013, 10:33 PM   #2130 (permalink)
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kevinkdog View Post
Here are some seasonal charts on December Lean Hogs:

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looks like being long through november has been a pretty decent trade, what software are you using here?

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