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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,237 / 5,727
Last Reply:December 2nd, 2016 (12:40 PM) Attachments:642

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Selling Options on Futures?

Old July 17th, 2015, 12:22 PM   #4541 (permalink)
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ron99 View Post
More risk protection in the event of a Black Swan day. ROI is about the same as naked option. Slightly less protection for medium drop (150-250) in futures (because of lower IM and thus lower excess).

I'm using them because I am going on 10 day vacation and won't be in front of computer all day.

I'm not sure yet if I will use them all of the time. I might for retirement accounts and use IMx4. Ultra protection on those.


Interesting points, especially about the vacation . Now that I no longer live in the US I realize how seriously the rest of the world takes their time off.

Starting with this trade I'm probably going to run a few experiments to see what happens. I have a good idea base on the theory and math already presented but I'd like to "see it with my own eyes".

1. I'd like to open 2 trades, one at 90+ days and one at 120+ days at the same strike, P1750, and see which expires first and by how much.

2. Open a trade at 90+ days and with a spread and a trade at 120+ days with a spread and see how that affects my blood pressure.

On Monday I'll start exercise one and post it up here.

/rsm005/

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Old July 17th, 2015, 01:02 PM   #4542 (permalink)
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uuu1965 View Post
Would you explain your approach with some example (does it mean that you didn`t trade when volatility is low)?
For my study the faster time decay for OTM options is ~ 90-60 days (for ITM last 30 days).


Trade examples and approach (will post July trades at the end of the month):

https://futures.io/options-cfd-trading/12309-selling-options-futures-443.html#post501828

https://futures.io/options-cfd-trading/12309-selling-options-futures-445.html#post502038
https://futures.io/options-cfd-trading/12309-selling-options-futures-451.html#post504427

I did sell some lower delta just to see how they performed.

With the gap down after Greece, I sold more than usual. Sometimes I will wait to open positions but I'm not a big believer in trying to time the market but if a opportunity arises like the recent greece and china situation, I will sell into weakness. I don't sell the quantity or use the amount of margin (IM*3)

Regarding volatility:

https://futures.io/options-cfd-trading/12309-selling-options-futures-448.html#post503510

https://futures.io/options-cfd-trading/12309-selling-options-futures-447.html#post502139

Volatility is good for the market and trading.

Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
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Old July 17th, 2015, 01:23 PM   #4543 (permalink)
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This was posting in the Spoo thread:

https://futures.io/index-futures-trading/13452-es-s-p-500-futures-contract-sp500-spoo-nalysis-1774.html#post505082

Percentage wise the largest drop but the premiums were much more when the VIX was higher in some of the other years listed

Volatility is good for the market and trading.

Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
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Old July 17th, 2015, 01:38 PM   #4544 (permalink)
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rsm005 View Post
Interesting points, especially about the vacation . Now that I no longer live in the US I realize how seriously the rest of the world takes their time off.

Starting with this trade I'm probably going to run a few experiments to see what happens. I have a good idea base on the theory and math already presented but I'd like to "see it with my own eyes".

1. I'd like to open 2 trades, one at 90+ days and one at 120+ days at the same strike, P1750, and see which expires first and by how much.

2. Open a trade at 90+ days and with a spread and a trade at 120+ days with a spread and see how that affects my blood pressure.

On Monday I'll start exercise one and post it up here.

/rsm005/

I'm almost 60 years old so I am more worried about preserving retirement money than you youngsters here. Younger people don't need to be as risk adverse as I am with some of my money.

1. You should add a third position that is the same delta as the 90+ day for 120+

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Old July 17th, 2015, 01:46 PM   #4545 (permalink)
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rsm005 View Post
Interesting points, especially about the vacation . Now that I no longer live in the US I realize how seriously the rest of the world takes their time off.

Starting with this trade I'm probably going to run a few experiments to see what happens. I have a good idea base on the theory and math already presented but I'd like to "see it with my own eyes".

1. I'd like to open 2 trades, one at 90+ days and one at 120+ days at the same strike, P1750, and see which expires first and by how much.

2. Open a trade at 90+ days and with a spread and a trade at 120+ days with a spread and see how that affects my blood pressure.

On Monday I'll start exercise one and post it up here.

/rsm005/

I made a similar experment some time ago. Sold ES puts of two subsequent months, delta approx. 0.03, approx. 80 and 110 DTE at the same price. They were liquidated at 50 % within a few minutes. (I am aware that one example does not mean it will always happen this way.)

Best regards, Myrrdin

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Old July 17th, 2015, 01:50 PM   #4546 (permalink)
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ron99 View Post
I'm almost 60 years old so I am more worried about preserving retirement money than you youngsters here. Younger people don't need to be as risk adverse as I am with some of my money.

1. You should add a third position that is the same delta as the 90+ day for 120+

You certainly look younger than "almost 60." I had you pegged for early 50s.

Must be all that clean Northeast Ohio living!!!


If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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Old July 17th, 2015, 02:10 PM   #4547 (permalink)
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Anyone who has a position in oil?

It seems as if everyone is trading ES right now. :-)

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Old July 17th, 2015, 02:21 PM   #4548 (permalink)
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jawadde001 View Post
Anyone who has a position in oil?

It seems as if everyone is trading ES right now. :-)

Yes, I hold a short position in the CLZ C70. And further short option positions in CT, HE, LE, NG, and W. (And, of course, ES puts.)

Best regards, Myrrdin

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Old July 17th, 2015, 03:01 PM   #4549 (permalink)
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Cotton!

Hi Myrrdin,

What's your read on Cotton for the medium term? I've found that market to be extraordinarily erratic to say the least for the past couple of months!

If ever an example of why you need to be selling deep out of the money is needed then Cotton for the past 2 months is the exemplar!

I've ended up strangling it with both short puts and calls myself. However I think I may need to lift the calls asap! I've already bled a large chunk of the premium from it so it's all good!

Cordially,
PM!

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Old July 17th, 2015, 03:28 PM   #4550 (permalink)
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Physicsman View Post
Hi Myrrdin,

What's your read on Cotton for the medium term? I've found that market to be extraordinarily erratic to say the least for the past couple of months!

If ever an example of why you need to be selling deep out of the money is needed then Cotton for the past 2 months is the exemplar!

I've ended up strangling it with both short puts and calls myself. However I think I may need to lift the calls asap! I've already bled a large chunk of the premium from it so it's all good!

Cordially,
PM!

Hi Physicsman,

I hold the short CTZ C75 and CTZ P60 for some weeks, after selling and liquidating some other puts and calls profitable since early 2015. I added a small lot of short CTU C68 immediately after the bearish USDA report this week.

There is enough cotton in the world to prevent prices rising to 70 or higher. But still there are situations - eg. adverse weather, US$ getting cheaper - when prices move up significantly, and you get a good price for your calls. On the other hand, there is a lower price band - for some months in the range of 63 US$ - where consumers start buying cotton. A good place to sell puts.

For the coming weeks, prices should come down a bit due to the USDA report and the US$ moving up.

What worries me a little bit is el Nino. This weather phenomenon leads to dryness in parts of Asia, eg. India, where a lot of cotton is produced. Thus, there might come a time when it is better to liquidate the calls.

Best regards, Myrrdin

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