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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,288 / 5,727
Last Reply:December 2nd, 2016 (12:40 PM) Attachments:642

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Selling Options on Futures?

Old June 16th, 2015, 01:05 AM   #4361 (permalink)
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Rajab, read Cordier's book two or three times to establish in your mind that time decay of options is the only investment strategy that is consistent and reliable.

Then start at Ron99's post #4105 on page 411 and read from there. No need to try to figure out fundamentals of cotton or corn or oil. Profit from time decay of the overall market.

This is truly a brilliant strategy.


Last edited by cnncurt; June 16th, 2015 at 01:14 AM.
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Old June 16th, 2015, 02:07 AM   #4362 (permalink)
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Thanks Ron for setting up this thread and sharing this strategy with all of us.

I have recently started this journey with a small ~$20k ish account. Will update you guys along the way

I am short some ES Puts (just like Ron). Markets were down yesterday and even though my P&L open and day were in the red, I know very well that my positions are safe because I am so far out of the money to be threatened.

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Old June 16th, 2015, 02:25 AM   #4363 (permalink)
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virileblood View Post
Thanks Ron for setting up this thread and sharing this strategy with all of us.

I have recently started this journey with a small ~$20k ish account. Will update you guys along the way

I am short some ES Puts (just like Ron). Markets were down yesterday and even though my P&L open and day were in the red, I know very well that my positions are safe because I am so far out of the money to be threatened.

Looking forward to your updates. Not to rain on your parade, but having traded options for almost 10 years there has been many occasions where I thought the same thing, and while I watched the option premium rise and rise eventually selling for a lost or taking assignment. With Ron's strategy, 2/3 or more of the account available for margin increases is essential in this period of low IV

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Old June 16th, 2015, 02:37 AM   #4364 (permalink)
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blb014 View Post
Looking forward to your updates. Not to rain on your parade, but having traded options for almost 10 years there has been many occasions where I thought the same thing, and while I watched the option premium rise and rise eventually selling for a lost or taking assignment. With Ron's strategy, 2/3 or more of the account available for margin increases is essential in this period of low IV

Thanks blb014, I realise that with Ron's strategy, I will be forced out of my trade (using his 2x excess rule) before the future ever goes into the money.

I agree with you, in this period of low (but increasing?) IV, it is prudent to keep excess to ride out any spikes in the VIX.

Cheers.

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Old June 17th, 2015, 12:44 PM   #4365 (permalink)
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Futures Edge on FIO

Are you a NinjaTrader user?

 
Here are great charts showing world planting and harvesting of all crops by month from USDA.

USDA | Office of the Chief Economist | Weather and Climate | Crop Calendars

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Old June 17th, 2015, 01:33 PM   #4366 (permalink)
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Ron,

Say I had a position open with 120 days to expiry and it has now been open for 60 days with another 60 days to expiry. Also, say the market has been all over the place and you have not seen the premium decrease by 50%, instead lets say it's 25%-30%. At this point would you just exit and take the smaller gain or keep waiting until you reach 50%.

The reason I ask is you mentioned in a previous post that >60 days provides you with the best safety and ROI. If the market grinds against you would you just take your gains to avoid going below the 60 day mark? I opened a small position some 40 days ago and it's decayed a lot but still hasn't reached the 50% mark. I think I know what to do but wanted a bit of confirmation.

Thanks,
/rsm005/


Last edited by rsm005; June 17th, 2015 at 02:25 PM.
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Old June 17th, 2015, 03:19 PM   #4367 (permalink)
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rsm005 View Post
Ron,

Say I had a position open with 120 days to expiry and it has now been open for 60 days with another 60 days to expiry. Also, say the market has been all over the place and you have not seen the premium decrease by 50%, instead lets say it's 25%-30%. At this point would you just exit and take the smaller gain or keep waiting until you reach 50%.

The reason I ask is you mentioned in a previous post that >60 days provides you with the best safety and ROI. If the market grinds against you would you just take your gains to avoid going below the 60 day mark? I opened a small position some 40 days ago and it's decayed a lot but still hasn't reached the 50% mark. I think I know what to do but wanted a bit of confirmation.

Thanks,
/rsm005/

A few minutes ago there ended an important FED meeting that has kept volatility high for some time. The result of the meeting was more or less zero, and as expected. Volatility should come down during the next couple of days, and the value of your options should decrease quickly.

Best regards, Myrrdin

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Old June 17th, 2015, 03:30 PM   #4368 (permalink)
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rsm005 View Post
Ron,

Say I had a position open with 120 days to expiry and it has now been open for 60 days with another 60 days to expiry. Also, say the market has been all over the place and you have not seen the premium decrease by 50%, instead lets say it's 25%-30%. At this point would you just exit and take the smaller gain or keep waiting until you reach 50%.

The reason I ask is you mentioned in a previous post that >60 days provides you with the best safety and ROI. If the market grinds against you would you just take your gains to avoid going below the 60 day mark? I opened a small position some 40 days ago and it's decayed a lot but still hasn't reached the 50% mark. I think I know what to do but wanted a bit of confirmation.

Thanks,
/rsm005/

I would keep position. You already have some safety built in with the decay of the premium.

I know how you feel. I have some positions that I have had for 27 days and they are only at 27%. The last positions I exited were held 36 & 30 days.

The study I posted earlier that covered 2.5 years had an average days held of 27. So this is not out of the ordinary. But it is boring.

Here is a little study about price erosion. These are Aug 2015 ES puts. On 5/15/2015 they were 98 DTE.

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

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Old June 18th, 2015, 12:08 PM   #4369 (permalink)
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Based on ES seasonal trends, ES futures at 8:30-9:00 am ET the Friday of futures expiration (Mar, Jun, Sep, Dec), 6/19/15 this month, will be higher than the settlement price on Thursday (today). It has done that 22 of the last 25. Two of the losers were 1.00 & 1.50. The other loser (21.75) was Dec 2012 when US Congress was screwing around.

The last 8 have averaged +5.60.

So if you are selling puts you want to have them on about a week before the future expiration.

18 of last 25 times ES has dropped from Friday 8:30-9:00 am ET to Friday expiration. But it was up the last two.

There is a tendency for ES futures to then drop the week after expiration. But it isn't as consistent. Especially on the timing. Then it rises into early July.

Of course something like Greece situation could throw everything off.

So if you are needing to add ES puts, wait till next week.


Last edited by ron99; June 18th, 2015 at 02:03 PM. Reason: Removed, Definitely not today.
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Old June 18th, 2015, 02:35 PM   #4370 (permalink)
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From the DeCarley newsletter.


Quoting 
The June Triple Witch has a track record of being somewhat of a last hurrah rally, at least in the short-term. Sometimes the stock index futures markets peak precisely when the expiring futures contracts ceases trading (early Friday morning on the Triple Witch day), but on other occasions the selling doesn’t come in until the following week.

In fact, according to the Stock Trader’s Almanac, the Dow has been down the week after the June Triple Witch on 21 of the previous 24 occasions. Generally speaking, the market weakness often extends into late June. Specifically, the last trading day of the second quarter (June 30th) has seen the Dow settle lower in 16 of the last 23 years.

https://madmimi.com/p/e1fa56?fe=1&pact=31080851743

EDIT Posted with Carley's permission.


Last edited by ron99; June 18th, 2015 at 03:17 PM.
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