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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:570,062 / 5,734
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Selling Options on Futures?

Old August 13th, 2015, 02:57 AM   #4731 (permalink)
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ron99 View Post
For my short option positions I execute a GTC order for all of them at 50% drop so I don't even have to be there to exit profitable position.

I have been surprised that sometimes I traded while I was sleeping. If I didn't have that order on, I would have missed getting out then because futures' prices dropped later.

How do you manage GTC order for spread position (if you have any)?

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Old August 13th, 2015, 08:30 AM   #4732 (permalink)
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uuu1965 View Post
How do you manage GTC order for spread position (if you have any)?

Yes that is a problem. Right now I am manually exiting longs when short side exits via GTC. Not the most efficient way of doing things.

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Old August 13th, 2015, 08:31 PM   #4733 (permalink)
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Chubbly View Post
So how far in the red did things go at the worst point?

I can't remember how far it went down exactly but I was approx. $6000 in the red at one point. I know that doesn't say much but at that point I just wasn't paying too much attention to the margin numbers, I was still above 2.5x in cash reserves.

I can say that I'm going to leave this position on longer than I normally would. I'm not going to make a trade in Sept, waiting to see what happens about interest rates. At first I wasn't going to pay too much attention to but the last few articles said something along the lines of 50% of traders/investors still don't think the fed will raise rates. That tells me an interest rate hike is probably not priced into the market yet.

/rsm005/

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Old August 13th, 2015, 09:46 PM   #4734 (permalink)
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Chubbly View Post
So how far in the red did things go at the worst point?

rsm005's Nov contract he sold for 9.75 and it was 13.40 on the worst day. 7/27/15
9.75-13.40=-3.65*50=-$182.50
-$182.50*40 (contracts)=-$7,300
He only used 47.6% of his IMx3 on that day for this option.

His Oct contract was sold for 4.55 and it was 6.70 on the worst day.
4.55-6.70=-2.15*50=-$107.50
-$107.50*80=-$8,600.
He only used 49% of his IMx3 on that day for this option.

So he was down in account balance by $15,900 for the 120 positions. That's a 4.2% draw down on account balance..

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Old August 14th, 2015, 04:09 AM   #4735 (permalink)
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ron99 View Post
Here is my study comparing 50% exit to 40% exit. Study was 1/2/13 to 8/3/15. IMx3. Delta 3.00. Started with $100,000 balance.

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Attached is spreadsheet with each trade.

I'm not seeing a lot of difference. $8,971 difference in balance over 31 months.

This is very interesting. Would you say that, although there is not much difference in profitability, the fact you were able to hold trades for around 6 days less using the 40% rate makes it less risky?

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Old August 14th, 2015, 09:06 AM   #4736 (permalink)
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CobblersAwls View Post
This is very interesting. Would you say that, although there is not much difference in profitability, the fact you were able to hold trades for around 6 days less using the 40% rate makes it less risky?

No because you still have positions on everyday.

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Old August 14th, 2015, 11:27 AM   #4737 (permalink)
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I don't know how long this has been available but the CME has really nice Disaggregated Commitments of Traders (DCOT) charts. I just found them.

http://www.cmegroup.com/tools-information/quikstrike/commitment-of-traders-agricultural.html

Only problem is that it is only CME contracts. So no ICE softs.

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Old August 14th, 2015, 05:57 PM   #4738 (permalink)
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All,

So I wanted to post a quick update regarding my last trade and give you an idea about how the experiment turned out.

A very special thank you to Ron for giving me a little bit more insight into when to exit and reapply my money.

As many of you now know I had two positions open at different times but at the same strike price to see how things would decay over time.


rsm005 View Post

Contract: OESV5 P1750
Quantity: 80
Premium: $4.55
Days to Expiration at Open: 93
Initial Margin: $978
Days Open: 8
Current IM: $872
Margin as of 8/12/2015: $810

Contract: OEWX5 P1750
Quantity: 40
Premium: $9.75
Days to Expiration at Open: 132
Initial Margin: $978
Days Open: 3
Current IM: $1,315 (ouch)
Margin as of 8/12/2015: $1,251


/rsm005/

I ended up closing out both positions today before they reach their 50% exit point. The reason for doing this on OESV5 was because the trade was approaching 63 days before expiration, below that exposed me to a higher amount of risk. I also ended up closing OEWX5 because the delta was substantially higher and would've led to a much higher drawdown in the event of a sudden market drop. There seem to be a lot of those happening lately .

Here are the results of how things ended up.
OESV5
Total ROI: 3.23%
Days open: 29
$ made: $7,400
$ at 50%: $8,752.00
% difference: 15.4%

OEWX5
Total ROI: 3.78%
Days open: 24
$ made: $3,500
$ at 50%: $9,576.00
% difference: 63.4%

Based on these results the best way of going forward is exactly what's been written on this thread for I don't know how many years. I just had to see it for myself.

3 delta
3x additional cash on hand

No matter how good premium looks at higher deltas it just takes too long for the position to decay preventing you from reinvesting. Also, the volume gets pretty thin at the further prices making fills really difficult, especially as you start scaling. As many of you know Ron exited his position almost 10 days ago giving him an ROI that was twice as high.

I'll keep posting my trades for a bit longer on here to help others as much as I can.
/rsm005/

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Old August 14th, 2015, 09:46 PM   #4739 (permalink)
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rsm005 View Post
Based on these results the best way of going forward is exactly what's been written on this thread for I don't know how many years. I just had to see it for myself.

3 delta
3x additional cash on hand

No matter how good premium looks at higher deltas it just takes too long for the position to decay preventing you from reinvesting. Also, the volume gets pretty thin at the further prices making fills really difficult, especially as you start scaling. As many of you know Ron exited his position almost 10 days ago giving him an ROI that was twice as high.

I'll keep posting my trades for a bit longer on here to help others as much as I can.
/rsm005/

Thanks for sharing and in an honest manner rsm, often it isn't the best trades that teach people the most but the most difficult ones. There are many beginners in options here including myself who may find this extremely useful going forward.

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Old August 16th, 2015, 07:43 PM   #4740 (permalink)
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