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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,925 / 5,728
Last Reply:15 Hours Ago (05:26 PM) Attachments:642

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Selling Options on Futures?

Old June 19th, 2015, 12:16 PM   #4371 (permalink)
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Ron,

Do you ever go out 130 days on ES for the 50% strategy?

Thanks,
/rsm005/

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Old June 19th, 2015, 12:44 PM   #4372 (permalink)
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rsm005 View Post
Ron,

Do you ever go out 130 days on ES for the 50% strategy?

Thanks,
/rsm005/

I haven't because of low volume traded on those options.

The last column on the right shows the monthly ROI if the contract is held until the month above it on the list.

So the Oct 1600 if held and bought back at the prices listed for the Sep 1600 would give you 4.8% ROI. So you sell at 3.95 and buy back 28 days later at 2.10 and use 625 as the IM.

The Sep would give you 4.5% if held until prices for Aug 1600. About the same.

The Aug ROI is only 3.1%. Alot less than the further DTE options.

The ROI column is if you held to expiration. 7.50 RT cost is used.

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Old June 19th, 2015, 12:55 PM   #4373 (permalink)
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Risk test


I did some research using SPAN spreadsheet (thanks Dudetooth and Ron).
I just entered different strikes (from 1590 to 1935) with different deltas (from 3 to 30) for time period of last year big drop (2014.09.19 + 30 days) and put all options under test (IMx3, % and DD%).
The biggest surprise: neither option with delta 3 nor option with delta 30 didn't exceed IMx3 threshold!?

How it would be?

I attach Risk test Excel file

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Old June 19th, 2015, 01:39 PM   #4374 (permalink)
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uuu1965 View Post
I did some research using SPAN spreadsheet (thanks Dudetooth and Ron).
I just entered different strikes (from 1590 to 1935) with different deltas (from 3 to 30) for time period of last year big drop (2014.09.19 + 30 days) and put all options under test (IMx3, % and DD%).
The biggest surprise: neither option with delta 3 nor option with delta 30 didn't exceed IMx3 threshold!?

How it would be?

I attach Risk test Excel file

It looks like the IM increased less percentage wise on the higher delta options than the lower delta options.

But to make a profit on the high delta options, which went ITM, you had to have a rise in futures.

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Old June 19th, 2015, 02:20 PM   #4375 (permalink)
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Futures Edge on FIO

ron99 View Post
It looks like the IM increased less percentage wise on the higher delta options than the lower delta options.

But to make a profit on the high delta options, which went ITM, you had to have a rise in futures.

And longer Days Held and lower ROI...

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Old June 19th, 2015, 02:30 PM   #4376 (permalink)
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uuu1965 View Post
And longer Days Held and lower ROI...

I added a column U (the RT cost is in cell V1. I used 6.00.) showing the Monthly ROI if you exit at 50% on that day. The selected cell in that column is the first day the option settled at or below 50%.

For all of the options with a delta under 19.00 the ROI was in a narrow range of 3.0-3.3. The days held was lowest for the lowest delta option.

So then it makes sense to trade the lower delta options because your ROI is about the same and your days held is less which should increase yearly profit.

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Old June 20th, 2015, 02:39 PM   #4377 (permalink)
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ron99 View Post
I added a column U (the RT cost is in cell V1. I used 6.00.) showing the Monthly ROI if you exit at 50% on that day. The selected cell in that column is the first day the option settled at or below 50%.

For all of the options with a delta under 19.00 the ROI was in a narrow range of 3.0-3.3. The days held was lowest for the lowest delta option.

So then it makes sense to trade the lower delta options because your ROI is about the same and your days held is less which should increase yearly profit.

I think a more important consideration is the fact that the drawdown % was 41% trading the high delta options vs 24% trading 3 Delta options. This is an example of the market coming back. We all know that in our future is a market that exceeds the 3xIM threshold and I'm not interested in risking > 40% of my account.

Nonetheless, thank you uuu1965 for doing this study.

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Old June 20th, 2015, 03:10 PM   #4378 (permalink)
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ron99 View Post
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.

ES was pretty much on seasonal pattern this week.

It was up from 2114.75 on Thu close to 2116.50 at 8:34 am ET on Friday.

It was down from 2116.50 at 8:34 am ET Friday to 2097.75 on Friday close.

The price at the close on Friday 6/12 was 2085.00 (ESu5). The price rose from there to 2116.50 at 8:30 am ET on Friday 6/19. That's +31.50 in 6 1/2 days.

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Old June 21st, 2015, 11:42 PM   #4379 (permalink)
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Do you guys usually find that pricing yourself at the midpoint between the bid and ask gets taken or do you have to move it a few points and throw a bone to those blood suckers?

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Old June 22nd, 2015, 10:38 AM   #4380 (permalink)
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Chubbly View Post
Do you guys usually find that pricing yourself at the midpoint between the bid and ask gets taken or do you have to move it a few points and throw a bone to those blood suckers?

Most of the time I get filled at 0.05 higher than the bid.

Sometimes I have found that if you have an order on at 3:55-4:05pm ET, that a lot of times it gets traded near the mid point. But not always.

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