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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,106 / 5,727
Last Reply:December 2nd, 2016 (12:40 PM) Attachments:642

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Selling Options on Futures?

Old May 19th, 2015, 12:06 PM   #4221 (permalink)
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myrrdin View Post
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

I used 7.50 for costs per RT per contract.

If brokers see these tables I can hear them all saying "look, you can get almost the same ROI with covered spreads and get the protection in case of a huge price drop." While in their heads they are saying, "and I get double commissions!!!!"

I am hoping to get option prices on flash crash day to do research to see if the spreads helped on that big down day. As you saw in my table from last fall the spreads didn't help much at all.

Anybody have ES option settlements for 5/5/10 & 5/6/10? QST doesn't go back that far for options.


Last edited by ron99; May 19th, 2015 at 12:11 PM.
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Old May 19th, 2015, 09:17 PM   #4222 (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.

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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.



Ron, What was the ES trading at when you made this study??

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Old May 19th, 2015, 11:57 PM   #4223 (permalink)
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aron1234 View Post
Thanks ron
As a option on es trader from 2007
i by time you hit the exit loss will be closer to 40%
basing the strategy on es points could be mistake any testing has to be based on % to have aqqurate numbers as a move like 2011 from 1320 to 1070 is like today from 2100 to in the 1600
Just my 2cent i think if you not following a strategy that has a edge predicting the move than you need yo sell calls to , to be delta neutral and have enough premium from both sides for the times you need to give it back as taking a loss or moving the position

Great advice especially trading naked puts

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Old May 20th, 2015, 10:15 AM   #4224 (permalink)
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Quoting 
Just my 2cent i think if you not following a strategy that has a edge predicting the move than you need yo sell calls to , to be delta neutral and have enough premium from both sides for the times you need to give it back as taking a loss or moving the position


blb014 View Post
Great advice especially trading naked puts

I disagree with both of you.

Selling calls in ES is a horrible waste of money because the sky high margin will force you to trade way less positions and thus you will have way less profit at the end of the year. Or you will be fat too close to ITM and have high risk. Plus the "protection" it gives you is small.

Selling both sides in other commodities just for "protection" and not because fundamentals say the market is in balance when we are selling far OTM doesn't give you much "protection" because of the small premiums.

"Predicting the move" is rarely done consistently.

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Old May 20th, 2015, 10:16 AM   #4225 (permalink)
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gold101 View Post
Ron, What was the ES trading at when you made this study??

What was ES on 2/19/15? 2095.25

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Old May 20th, 2015, 05:10 PM   #4226 (permalink)
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ron99 View Post
I disagree with both of you.

Selling calls in ES is a horrible waste of money because the sky high margin will force you to trade way less positions and thus you will have way less profit at the end of the year. Or you will be fat too close to ITM and have high risk. Plus the "protection" it gives you is small.

Selling both sides in other commodities just for "protection" and not because fundamentals say the market is in balance when we are selling far OTM doesn't give you much "protection" because of the small premiums.

"Predicting the move" is rarely done consistently.

"Predicting the move" I definitely agree; for me it would be more of "protecting against the move" Especially during volatile periods 08-10, because when the move comes it usually wipes out the option sellers that are margined to the hilt. I rarely use margin, but I can point to 4 or 5 instances where selling calls save me massive losses.


Last edited by blb014; May 20th, 2015 at 05:16 PM.
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Old May 20th, 2015, 05:36 PM   #4227 (permalink)
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blb014 View Post
"Predicting the move" I definitely agree; for me it would be more of "protecting against the move" Especially during volatile periods 08-10, because when the move comes it usually wipes out the option sellers that are margined to the hilt. I rarely use margin, but I can point to 4 or 5 instances where selling calls save me massive losses.

That is why I recommend only using 33% of account for margin and 67% for excess.

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Old May 20th, 2015, 09:39 PM   #4228 (permalink)
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I ran a real life backtest of my new ES strategy starting on 1/1/2013. I started with $100,000. I picked an ES put that was 90+ DTE and as close to 0.0300 delta. I exited the position the day the option settled at 50% or more drop from the price when acquired. The exit price was 50%+ of entry price. I used 7.50 per RT for costs. I entered the next option the day I exited the prior position using the settlement for that day.

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In 2013 the strategy made 62.6%. In 2014 it made about 40.2% (it wasn't a full 12 months). In 2015 it was up 25.8% in 4 months.

For the entire time period, 28 months, it made 186.8% for 31 trades. 100% winners. The worst day the margin was using 88.2% of the account balance.

I never would have attempted this research without Dudetooth's SPAN excel spreadsheet.


Last edited by ron99; May 21st, 2015 at 11:52 AM. Reason: Fixed table
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Old May 20th, 2015, 10:46 PM   #4229 (permalink)
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Very nice study Ron.

One question comes to mind is that during this time, ES has generally been in an uptrend. Would it be possible, when you get some time, do a shorter study for a year when market has been a choppy market and also when the market is in some down trend.

Also, it would be beneficial, for a novice like me, if you could add a column, listing the value of the ES, so that we can quickly see, how low your strike prices are.

Thanks.



I have learnt a lot from this site... Thanks




ron99 View Post
I ran a real life backtest of my new ES strategy starting on 1/1/2013. I started with $100,000. I picked an ES put that was 90+ DTE and as close to 0.0300 delta. I exited the position the day the option settled at 50% or more drop from the price when acquired. The exit price was 50%+ of entry price. I used 7.50 per RT for costs. I entered the next option the day I exited the prior position using the settlement for that day.

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


In 2013 the strategy made 62.6%. In 2014 it made about 40.2% (it wasn't a full 12 months). In 2015 it was up 25.8% in 4 months.

For the entire time period, 28 months, it made 186.8% for 31 trades. 100% winners. The worst day the margin was using 88.2% of the account balance.

I never would have attempted this research without Dudetooth's SPAN excel spreadsheet.


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Old May 20th, 2015, 11:36 PM   #4230 (permalink)
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gold101 View Post
Very nice study Ron.

One question comes to mind is that during this time, ES has generally been in an uptrend. Would it be possible, when you get some time, do a shorter study for a year when market has been a choppy market and also when the market is in some down trend.

Also, it would be beneficial, for a novice like me, if you could add a column, listing the value of the ES, so that we can quickly see, how low your strike prices are.

Thanks.



I have learnt a lot from this site... Thanks



Some thoughts on market during 2013:



"The S&P 500 index rallied steadily during 2013 and progressively posted new record highs. The S&P 500 index rallied by 30% in 2013 and extended the sharp recovery rally that began in early 2009. The U.S. stock market during 2013 received a boost from decent U.S. economic and global economic growth and from the Fed's continued aggressive monetary policy involving zero interest rates and its QE3 program.

The stock market rallied in 2013 despite several headwinds for consumers that included (1) $150 billion in higher taxes on January 1 with the end of the 2 percent payroll tax holiday, (2) the $1.2 trillion of automatic spending cuts over 10 years that went into effect on March 1, 2013, resulting in significant across-the-board spending cuts for social and defense spending due to sequester, and (3) a hike in tax rates on joint income above $450,000.

The stock market in 2013 saw support from the Fed's willingness to continue its third quantitative easing program (QE3) involving the purchase of $85 billion per month of Treasury and mortgage securities."

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