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Selling Options on Futures?
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Selling Options on Futures?

  #4171 (permalink)
Elite Member
vancouver BC/Canada
 
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The idea of investing in ES really appeals to me ever since I saw the videos from SuperTrader Karen. The only other thing that's kept me from moving forward is this never ending chatter about an upcoming correction. I know there's no way to predict it but for whatever reason, rational or not, that fear has kept me from moving forward with it.

Is there a different psychology to trading ES than other futures?

/rsm005/

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  #4172 (permalink)
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effective View Post
You will be assigned futures, but this way of thinking really makes no sense in this context. If the violent move occurs you just get out at whatever criteria you SET BEFOREHAND, wait till things settled down, and then get back in.

This would have been the worst possible outcome during the flash crash. Luckily I was away from my computer and phone at the time and I didn't take any drastic measures. I wasn't even assigned any of my positions, even though I held several in the money put contracts at the time during the flash crash

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  #4173 (permalink)
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ron99 View Post
My QST is a little weird but it does give me option prices for the Nov 2011 970 put for 8/08/11. 38.50. It won't give me the price on 7/11/11 or 8/09/11. It does give me the price on 8/12/11. 19.75. ??? I don't know for sure if that is correct.

It won't give me 2010 option prices at all. It won't give me any volatility numbers at all.

Thanks for your work.

Thanks for providing that. Yes, we should keep in mind that the model will not perfectly match actual option prices for a variety of reasons (buying/selling sentiment, slight errors in data, etc.). Particularly during times of panic the market will price in extra fear factor beyond what the model is predicting.

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  #4174 (permalink)
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rsm005 View Post
Interesting...would this same strategy work with SPY or SPX? My biggest fear with trading the S&P is getting slammed with a huge move down. I'm almost thinking of trading with enough capital to just tolerate getting assigned, if it happens, and sell calls until I can get out. I know a few people who do this with individual stocks. I'll give it a try with paper trading and see what happens. Right now I'm just waiting out my current positions...

/rsm005/


effective View Post
You will be assigned futures, but this way of thinking really makes no sense in this context. If the violent move occurs you just get out at whatever criteria you SET BEFOREHAND, wait till things settled down, and then get back in.

The futures would be cash settled at expiration of the contract and SPX is cash settled unlike SPY which is a ETF.
IMHO SPY would be the way to go for just starting out. If you were assigned a contract you would be looking 20k versus 200k with SPX and ES

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  #4175 (permalink)
Market Wizard
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rsm005 View Post
The idea of investing in ES really appeals to me ever since I saw the videos from SuperTrader Karen. The only other thing that's kept me from moving forward is this never ending chatter about an upcoming correction. I know there's no way to predict it but for whatever reason, rational or not, that fear has kept me from moving forward with it.

Is there a different psychology to trading ES than other futures?

/rsm005/

That chatter about a correction has been going on for years. You have to ignore chatter and study fundamentals that would predict a recession. I missed that in 2008 but I am ready to predict one when it comes.

Karen was the one that gave me the idea for my strategy. I just took her idea and changed it to suit me. For the better IMO.

Look at my table https://futures.io/options-cfd-trading/12309-selling-options-futures-412.html#post490353

The biggest drop since the recession was the gov shutdown and credit downgrade in 2011. That was totally foreseen. They were talking about a shutdown for days before it happened.

The next biggest drop in 30 days was 157.75. That is easily able to be rode out with excess.

Karen says in one of the videos that she doesn't pay attention to outside fundamentals. At first I wondered about that but I have come around to believing that and I now just put puts on without any regard for outside influences. When I think to myself what will ES do in the next 20 days I have no clue. Nobody does really.

But if something like a gov shutdown or war or other thing was about to happen that is when I would get out.

I believe that Karen hasn't had a losing month since 2011. I haven't lost money on a short ES put since 2011. 34,629 options total. 75 losing contracts (lost 3,459 net). 99.8% winners. Made a net profit of $1,633,353.20 on all ES puts in 5 years.

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  #4176 (permalink)
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blb014 View Post
The futures would be cash settled at expiration of the contract and SPX is cash settled unlike SPY which is a ETF.
IMHO SPY would be the way to go for just starting out. If you were assigned a contract you would be looking 20k versus 200k with SPX and ES

Slight correction:

ES notional value at 2116 (current price) is equal to 2116 X 50 (the big point value) = $105,800. However, if you are assigned margin for the ES is ~$5,000 or 21:1 leverage. This would only apply if you were assigned fully ITM at a delta of 1.

If you are assigned ATM for the ES option your delta is 0.5 so notional value is actually $52,900 and margin would be $2500.

Your overall point is still accurate though = trading SPX is inherently less leveraged than ES.

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  #4177 (permalink)
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rsm005 View Post
The idea of investing in ES really appeals to me ever since I saw the videos from SuperTrader Karen. The only other thing that's kept me from moving forward is this never ending chatter about an upcoming correction. I know there's no way to predict it but for whatever reason, rational or not, that fear has kept me from moving forward with it.

Is there a different psychology to trading ES than other futures?

/rsm005/

This was the same chatter that predicted 3,000 for the DJI in 2008-09 but the DJI has almost tripled since then. No way to predict the future but this fear has kept many on the sidelines during one the best times to be investing in history.

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  #4178 (permalink)
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eudamonia View Post
Slight correction:

ES notional value at 2116 (current price) is equal to 2116 X 50 (the big point value) = $105,800. However, if you are assigned margin for the ES is ~$5,000 or 21:1 leverage. This would only apply if you were assigned fully ITM at a delta of 1.

If you are assigned ATM for the ES option your delta is 0.5 so notional value is actually $52,900 and margin would be $2500.

Your overall point is still accurate though = trading SPX is inherently less leveraged than ES.

I was referring to the above example of taking assignment of the contract at expiration and selling calls, not margin. If I read that correctly 1 futures option contract = 50 contracts unlike stock, etf and index options which are 1=100.

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  #4179 (permalink)
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blb014 View Post
I was referring to the above example of taking assignment of the contract at expiration and selling calls, not margin. If I read that correctly 1 futures option contract = 50 contracts unlike stock, etf and index options which are 1=100.

One option on future equals one future contract.

One point of ES is equal to $50.

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  #4180 (permalink)
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ron99 View Post
One option on future equals one future contract.

Thanks, that clarifies his example.

Just looking at open interest there is quite bit more in SPY and SPX than ES

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