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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:567,857 / 5,727
Last Reply:11 Hours Ago (12:40 PM) Attachments:642

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Selling Options on Futures?

Old October 25th, 2013, 11:08 AM   #2271 (permalink)
World'sWorstTrader
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MJ888 View Post
In my opinion, Cordier's 200% rule does not work when selling options that are very far out of the money simply because the premium can double too easily. In your case 0.1 doubled to 0.2. You will find yourself exiting almost all of your far out of the money positions by following this rule. And then a few days/weeks later, many of these same positions will expire worthless. Can be very frustrating.

I would suggest scrolling back in this thread and read what Ron99 wrote about keeping 66% of his account in cash to be able to ride out the volatility.

IM -> Initial margin. Point to consider exit: (SPAN Margin +loss in position) approaches 2 * IM .

If I read Ron99's description correctly this is the exit criteria in short form?

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Old October 25th, 2013, 11:09 AM   #2272 (permalink)
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MGBRoadster View Post
Ron,

I think I must have misunderstood this part of your strategy.

I think you once said that you have 1/3 IM and 2/3 cash excess, so in this case I would have had $500 margin and $1000 excess giving a total allocated to the trade of $1500.

I would exit when margin + increased premium exceeds my allocation (eg when the margin increases to $1400 and the premium is higher than $200).

Am I missing something?


Chris

No. I am the one missing something.

Your post is correct. I will go back and correct that post.
Edit: I guess I can't go back and edit that post.

For example, when position opened. $500 IM. $1000 cash excess. $100 premium.

Exit when IM plus (premium minus $100 initial premium) is $1500 or higher.
Or stated another way $1500 minus $100 initial premium = 1400.

So if IM goes to 1200 and premium is 300+. then time to exit.


Last edited by ron99; October 25th, 2013 at 11:22 AM.
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Old October 25th, 2013, 11:18 AM   #2273 (permalink)
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datahogg View Post
IM -> Initial margin. Point to consider exit: (SPAN Margin +loss in position) approaches 2 * IM .

If I read Ron99's description correctly this is the exit criteria in short form?

It would be (SPAN Margin +loss in position) approaches 3 * IM .

500 IM times 3 = 1500.

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Old October 25th, 2013, 11:22 AM   #2274 (permalink)
World'sWorstTrader
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kevinkdog View Post
With the big drop in crude this week, I thought it would be interesting to calculate my possible exit point, using Ron's method shown above. This is what I get (I hope it is clear).

Only as additional information, with the TOS platform with the analyze profit/loss chart the TOS SPAN margin
is shown for any price point along with the estimated gain/loss for the position. Move the vertical line to a point
(to the left for put options) where (loss +SPAN Margin) approaches 2 * (Initial Margin) and this would be the
price to watch for a possible exit.

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Old October 25th, 2013, 11:27 AM   #2275 (permalink)
World'sWorstTrader
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TOS

Futures Edge on FIO

vmaiya73 View Post
Thanks for the reply Ron

Yea im not sure where that quote is coming from. Im on the TOS platform; maybe Sunday when the futures markets open it will correct itself.

V

I think that TOS after hours numbers are a mess. Usually clear up in active hours.

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Old October 25th, 2013, 11:40 AM   #2276 (permalink)
World'sWorstTrader
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datahogg View Post
Only as additional information, with the TOS platform with the analyze profit/loss chart the TOS SPAN margin
is shown for any price point along with the estimated gain/loss for the position. Move the vertical line to a point
(to the left for put options) where (loss +SPAN Margin) approaches 3 * (Initial Margin) and this would be the
price to watch for a possible exit.


Please pardon my error , the multiplier would be 3.

thanks HH.

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Old October 25th, 2013, 05:01 PM   #2277 (permalink)
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My Positions

I had a bunch of options expire today (US, S, C), and I have a few expiring next week (shown in gray below).

So, here is what I am currently in. By my count, I am in 11 different positions (accounting for correlation, and counting puts and calls on the same instrument as 2 uncorrelated positions).

I know some people here tend to do more analysis, and then concentrate on a few core positions. For the most part, I am taking the opposite approach - I am focusing more on having a diversified and unconcentrated portfolio, which will likely mean I will have more frequent, hopefully smaller, losses (as a percentage of account).

Anyhow, feel free to pick my list apart, or use it for ideas.

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Old October 25th, 2013, 06:40 PM   #2278 (permalink)
Trading for Fun
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kevinkdog View Post
I had a bunch of options expire today (US, S, C), and I have a few expiring next week (shown in gray below).

So, here is what I am currently in. By my count, I am in 11 different positions (accounting for correlation, and counting puts and calls on the same instrument as 2 uncorrelated positions).

I know some people here tend to do more analysis, and then concentrate on a few core positions. For the most part, I am taking the opposite approach - I am focusing more on having a diversified and unconcentrated portfolio, which will likely mean I will have more frequent, hopefully smaller, losses (as a percentage of account).

Anyhow, feel free to pick my list apart, or use it for ideas.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).



Note: All these expire before the end of the year.

Good diversity! I am in all of those too except for US. I do trade some TY instead. Pretty much the same except that it seems like TY has more volume.
r

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Old October 26th, 2013, 05:11 AM   #2279 (permalink)
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ron99 View Post
Yes different commodities have different time erosion rates.

The CL curve probably stays wider because of more volume traded on those options compared to NG. More demand keeps premium higher.

Could you explain which month you are talking about when you mention "back month"?

I agree the curve becomes thinner. I don't see taller.

Yes. Not taller. Thanks for confirming Ron. This makes a huge impact for my point of view. I now see why you would trade 60 days out and not to expiry. Makes great sense. Want to do some work and studies here. To better understand the internal characteristics. By back month I mean one month out. The front month is the current series expiring and the back month is the next series expiring. I trade both of these on continuous data and then each contract month separately.

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Old October 27th, 2013, 09:55 AM   #2280 (permalink)
World'sWorstTrader
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Homerjay View Post
I actually use an indicator I created that uses the underlying commodities price behaviour to indentify volatility spikes as an entry filter, I have a few variations for different markets that I've developed over time but for most markets it gives additional weighting to downside movement vs. upside based on observations with actual options pricing behaviour in that market.

Given how far OTM I usually am I find the benefits of using volatility measured on the underlying price (simplicity in calc and no need for additional EOD data download/input into mechanical system other than OHLC) outweighs any accuracy gains that would come from using actual implied volatility values to filter entry signals (as I'm looking for a relative vol increase, not a specific number, in order to trigger a favourable entry point).

Is statistical volatility, or ATR (average true range) of the price (not IV) the variable that you use??
thanks HH.

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