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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:567,857 / 5,727
Last Reply:11 Hours Ago (12:40 PM) Attachments:642

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Selling Options on Futures?

Old August 7th, 2015, 05:34 PM   #4691 (permalink)
Market Wizard
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leinster View Post
That's a very high quality post @ron99 based on the study would u consider selling higher delta options?

Depends on your taste for risk. See prior post.

Also @ron99 u probably mentioned his already but where do u get the data?

Sent from my A0001 using Tapatalk

I get the data from the excellent SPAN spreadsheet from @Dudetooth.

See this thread.

https://futures.io/options-cfd-trading/29125-pc-span.html

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Old August 8th, 2015, 09:43 AM   #4692 (permalink)
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Thank you i am sure lots here are grateful

Ron: I am still reading through this thread diligently and cover every page. Could you please upload the spreadsheet with the spread analysis.. I think that will be a very useful study for me
thanks again.. excellent work

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Old August 8th, 2015, 09:57 AM   #4693 (permalink)
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jokertrader View Post
Ron: I am still reading through this thread diligently and cover every page. Could you please upload the spreadsheet with the spread analysis.. I think that will be a very useful study for me
thanks again.. excellent work

The data is here in this post.

https://futures.io/options-cfd-trading/12309-selling-options-futures-468.html#post509732

and here

https://futures.io/options-cfd-trading/12309-selling-options-futures-468.html#post509732

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Old August 10th, 2015, 11:15 AM   #4694 (permalink)
World'sWorstTrader
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Direction

IV---> Implied Volatility
DOMP ------> Deep out of the money puts.

Using the ES as an example, consider a position where DOMP have been sold.
If ES moves down, delta and vega (assuming IV increases) will hurt the position
resulting in an unrealized loss. This is not necessarily bad if it is not near the
exit point, but this will result in more time needed to reach the profit target (say
50%). This can increase the time in the position.

If ES moves up delta and vega (assuming IV decreases) will help the position
with an unrealized gain. This will shorten the time required in the position to
reach the profit goal (50%) .

There are always exceptions, but you would expect that DOMP ES sellers would
do better in a market trending up than a market trending down.

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Old August 10th, 2015, 02:06 PM   #4695 (permalink)
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Futures Edge on FIO
Hi Ron, I've read your thread, a lot but honestly not entirely, your performances are impressive. I joined the option sellers club only few months ago and I mainly do short strangle with future in defense. What I haven't found very clear in your strategy, and I think it's my fault because I haven't read all your thread, is how you manage a position that goes in the money(so in loss).
Thanks in advance!

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Old August 10th, 2015, 02:27 PM   #4696 (permalink)
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montanajtt View Post
Hi Ron, I've read your thread, a lot but honestly not entirely, your performances are impressive. I joined the option sellers club only few months ago and I mainly do short strangle with future in defense. What I haven't found very clear in your strategy, and I think it's my fault because I haven't read all your thread, is how you manage a position that goes in the money(so in loss).
Thanks in advance!

The ES selling put strategy starts on page 411. The summary in post#2 has good info.

First of all with my strategy you will never hold your position till it goes ITM. The point where futures are below your short put strike or above your short call strike. You will be forced out sooner than that.

When I hit the exit point I get out of the position. I evaluate why the market has moved as far as it has and decide if I think it will continue moving that way or not. Sometimes I may go a several days before I can figure that out.

I then reenter using the same parameters I always use. So it is rolling to new positions. But make sure you still use the original parameters and don't try to "revenge" trade and get back all of what you lost in one trade.

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Old August 10th, 2015, 03:07 PM   #4697 (permalink)
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Thank you! So you have an exit point where you start evaluating if keeping the position or rolling. I don't ask you where this exit point is because I think it is different according to the instrument and market volatility anyway I will follow your thread more actively from now on. Thank you

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Old August 10th, 2015, 03:49 PM   #4698 (permalink)
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montanajtt View Post
Thank you! So you have an exit point where you start evaluating if keeping the position or rolling. I don't ask you where this exit point is because I think it is different according to the instrument and market volatility anyway I will follow your thread more actively from now on. Thank you

Exit point is the same all of the time. See post#2.

When your (CURRENT IM + (CURRENT PREMIUM$ - OPENING PREMIUM$)) > (3 * OPENING IM), you exit your trade.

For example, if I sell an option for $100 and the margin required is $500, I will have $1000 excess. IMx3 is $1500.

If the margin increases to $1200 and the premium is higher than $400 then the cash excess is gone and it is time to exit.

(CURRENT IM =1200 + (CURRENT PREMIUM$=410 - OPENING PREMIUM$=100)) > (3 * OPENING IM=500)

(1200 + (410 - 100)) > (3 * 500)

1510 > 1500 so exit point hit.


Last edited by ron99; August 11th, 2015 at 01:40 PM.
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Old August 11th, 2015, 01:10 PM   #4699 (permalink)
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Dear @ron99 and others with experience,

I was wondering, do you ever take a 'directional bias' when writing options? I have been toying with TOS and took the following trades in order to test out things and get a feel of how option trades play out. I took the below with the bias that Shell would outperform Exxon in the near term by selling RDS Puts and XOM Calls. I sold ATM then used the high premium to buy OTM options that were fairly close to the current strike.

Now this is a demo account so I will let them run to expiry, but i was wondering if anyone that uses these techniques could give some pointers on stops. Could the same IMx3 apply here? Also, what are the most obvious dangers with a trade like this?

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Regards,

Awls.

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Old August 11th, 2015, 01:48 PM   #4700 (permalink)
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CobblersAwls View Post
Dear @ron99 and others with experience,

I was wondering, do you ever take a 'directional bias' when writing options? I have been toying with TOS and took the following trades in order to test out things and get a feel of how option trades play out. I took the below with the bias that Shell would outperform Exxon in the near term by selling RDS Puts and XOM Calls. I sold ATM then used the high premium to buy OTM options that were fairly close to the current strike.

Now this is a demo account so I will let them run to expiry, but i was wondering if anyone that uses these techniques could give some pointers on stops. Could the same IMx3 apply here? Also, what are the most obvious dangers with a trade like this?

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Regards,

Awls.

I have never sold stock options so I can't help, I have no clue if IMx3 works for stocks.

Anybody else?

Have you researched the ROI of stock options vs futures options? Backtested strategies? Have you researched the risk on stock options vs futures options? Those things need to be done before you work on strategy of stock options.

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