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Selling Options on Futures?
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Created: by ron99 Attachments:735

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Selling Options on Futures?

  #4211 (permalink)
Trading Apprentice
Zurich
 
Futures Experience: Intermediate
Platform: Amibroker
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Ron, I really like and enjoy your trading style and do consider it the ultimate fit for my personality. Unfortunately my broker recommends to switch to covered instead of naked, as they will increase markup on exchange minimum (RJO UK).

If I traded your style with a slight modification (1 put pair of 3 delta short, 1 ((or lowest available delta)) long), would this work within the ca 30 day hold (starting at 110 DTE)? Or will Theta decay be higher on the long put than on the short put?

Could your database answer any of these questions?

Thanks

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  #4212 (permalink)
Market Wizard
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Forex37 View Post
Ron, I really like and enjoy your trading style and do consider it the ultimate fit for my personality. Unfortunately my broker recommends to switch to covered instead of naked, as they will increase markup on exchange minimum (RJO UK).

If I traded your style with a slight modification (1 put pair of 3 delta short, 1 ((or lowest available delta)) long), would this work within the ca 30 day hold (starting at 110 DTE)? Or will Theta decay be higher on the long put than on the short put?

Could your database answer any of these questions?

Thanks

I moved to another broker end of 2014, because IB obviously does not like naked option selling.

I do not think it is a good idea to change the trading style, because the broker does not like it.

Best regards, Myrrdin

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  #4213 (permalink)
Trading Apprentice
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Myrrdin,

this is not my IB account but new account with RJO. Switching brokers will get difficult for me as I turn 70 and leave my employment.

Regards

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  #4214 (permalink)
Elite Member
Zurich, Switzerland
 
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I wrote an email to the CME and asked for old SPAN files. The CME is looking into the possibility of selling these files. Below is the email conversation with the names redacted.


Quoting 
---------- Forwarded message ----------
From: Clearing Risk Management <Clearing.RiskManagement@cmegroup.com>
Date: Mon, May 18, 2015 at 4:58 PM
Subject: RE: Historical SPAN files pre 2013
To: X , Clearing Risk Management <Clearing.RiskManagement@cmegroup.com>

X,

I apologize for the delay.

We have not previously offered old settlement files that are no longer listed on our ftp directory. However, we are now looking into the possibility of selling these files to those interested. I will let you know as soon as I hear back from our data sales team regarding this.

Kind regards,
Y

From: X
Sent: Monday, May 18, 2015 9:52 AM
To: Clearing Risk Management
Subject: Re: Historical SPAN files pre 2013

Dear Y,

Did you get a chance to look at this?

Thanks,
X

On Monday, May 11, 2015, X wrote:

Hi Y,

Thank you for the swift reply. I'm looking for the files named
cme.YYYYMMDD.s.pa2.zip pre 2013 stored in the folder
ftp://ftp.cmegroup.com/pub/span/data/cme/

I'm not aware of any commercial data provider, which sells historical
Futures Options data including SPAN margin rates. Hence, I use the
SPAN files to extract the Risk Arrays
http://www.cmegroup.com/confluence/display/pubspan/Risk+Arrays and
calculate the SPAN margin for Futures Options traded on the CME. I
need the SPAN margin values to simulate and trade quantitative futures
option trading strategies.

Best,
X

On Mon, May 11, 2015 at 4:47 PM, Clearing Risk Management
<Clearing.RiskManagement@cmegroup.com> wrote:
> Hello X,
>
> Which files in particular are you looking for?
>
> Also, can I ask what you are using them for?
>
> Regards,
> Y
>
> -----Original Message-----
> From: X
> Sent: Monday, May 11, 2015 2:52 AM
> To: Clearing Risk Management
> Subject: Historical SPAN files pre 2013
>
> Dear CME,
>
> The SPAN files on the CME FTP
> ftp://ftp.cmegroup.com/pub/span/data/cme/ only go back to January 2013. Does the CME offer/provide historical SPAN files before January 2013, e.g., going back to 2007? I'm willing to pay for those SPAN files.
>
> Thanks,
> X



Last edited by volemont; May 18th, 2015 at 02:36 PM. Reason: typo
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  #4215 (permalink)
Market Wizard
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Slightly off topic but informational for everybody in this thread.
The CME has launched a set of new free option activity reports for energy options that you can have emailed to you daily.

Sample report...
http://www.cmegroup.com/reports/top-nymex-crude-oil-options-daily-market-update.pdf

Signup page...
http://pages.cmegroup.com/2015-reports-sub-center.html

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  #4216 (permalink)
Market Wizard
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Forex37 View Post
Ron, I really like and enjoy your trading style and do consider it the ultimate fit for my personality. Unfortunately my broker recommends to switch to covered instead of naked, as they will increase markup on exchange minimum (RJO UK).

If I traded your style with a slight modification (1 put pair of 3 delta short, 1 ((or lowest available delta)) long), would this work within the ca 30 day hold (starting at 110 DTE)? Or will Theta decay be higher on the long put than on the short put?

Could your database answer any of these questions?

Thanks

First I wanted to see if a spread gave the same protection during a major drop as a naked put. I used 9/19/14 to 10/15/14. A drop of 157 for ES.

For the spread I used a delta close to 0.0400 for the short leg and a delta close to 0.0100 for the long leg.

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For the options 63 DTE, the spread was worse covering the drop and you were further negative on Buying Power. -444 vs -658.

For the options 91 DTE, the spread was worse again but not quite as bad as the 63 DTE options.

For the options 119 DTE, the spread was much safer. The price change was almost identical but the IM did not increase as much. 398 vs 714.

I have no idea why the Jan spread performed so different than the others. It started with a higher IM and then the IM didn't increase as much as the other spreads.

Now lets look at monthly ROI of a spread vs naked option.

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I used 7.50 for costs per RT per contract. This assumed no slippage on getting out of both sides of spread.

I randomly picked a starting date and used the 50% drop exit rule. The Monthly ROI was about identical.

These results are surprising to me. I expected spreads to give more coverage on a big drop and to make a lower ROI. These did the opposite except for more coverage on the 119 DTE spreads.

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  #4217 (permalink)
Market Wizard
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Here's another little study comparing naked puts with spreads.

Starting date chosen at random. Deltas near 0.300. Exit at 50% drop of premium.

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I used 7.50 for costs per RT per contract.

Again the spread ROI is very similar to the naked option.

Remember the <70 DTE options give you less coverage if there is a big price drop.


Last edited by ron99; May 19th, 2015 at 11:14 AM. Reason: Changed table to show 7.50 RT costs
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  #4218 (permalink)
Market Wizard
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Futures Experience: Advanced
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Favorite Futures: Options on Futures
 
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SMCJB View Post
Slightly off topic but informational for everybody in this thread.
The CME has launched a set of new free option activity reports for energy options that you can have emailed to you daily.

Sample report...
http://www.cmegroup.com/reports/top-nymex-crude-oil-options-daily-market-update.pdf

Signup page...
http://pages.cmegroup.com/2015-reports-sub-center.html

This goes into more depth than these pages I have been using.

http://www.cmegroup.com/market-data/volume-open-interest/energy-volume.html

http://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_quotes_volume_voi.html?optid=190

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  #4219 (permalink)
Market Wizard
Houston, TX
 
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Favorite Futures: Energy
 
Posts: 2,049 since Dec 2013
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SMCJB View Post
Slightly off topic but informational for everybody in this thread.
The CME has launched a set of new free option activity reports for energy options that you can have emailed to you daily.

Sample report...
http://www.cmegroup.com/reports/top-nymex-crude-oil-options-daily-market-update.pdf

Signup page...
http://pages.cmegroup.com/2015-reports-sub-center.html



I believe ICE is beginning to eat into NYMEX's business with the Capital efficienies of clearing WTI & Brent in the same place, and NYMEX are doing things to fight back.

ICE WTI Options: Open Interest Surpasses 1 Million Contracts
ICE West Texas Intermediate (WTI) options open interest (OI) surpassed 1 million contracts for the first time on May 4, 2015, reaching a record 1,040,582 contracts on May 11, 2015. Capital efficiencies achieved by trading Brent and WTI options on the ICE platform, competitive fees and enhanced WebICE options functionality are driving volume growth:
ICE WTI options YTD average daily volume (ADV) is 23,262 contracts, + 34% YoY
YTD volume for ICE WTI options is 2,116,809 contracts

ICE WTI OPTIONS AVERAGE DAILY VOLUME & OPEN INTEREST
Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

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  #4220 (permalink)
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ron99 View Post
Here's another little study comparing naked puts with spreads.

Starting date chosen at random. Deltas near 0.300. Exit at 50% drop of premium.


Again the spread ROI is very similar to the naked option.

Remember the <70 DTE options give you less coverage if there is a big price drop.

Thank you for this comparison. I am not sure if commission and fees are considered. If not, the performance of naked puts would further improve compared to the performance of the spread.

Best regards, Myrrdin

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