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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,836 / 5,734
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Selling Options on Futures?

Old August 24th, 2015, 01:37 PM   #4831 (permalink)
Market Wizard
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ES up 40 points in last hour. 11:30 to 12:30. Crazy.

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Old August 24th, 2015, 01:50 PM   #4832 (permalink)
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And vol has puked back down almost to Friday levels

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Old August 24th, 2015, 01:52 PM   #4833 (permalink)
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ron99 View Post
ES up 40 points in last hour. 11:30 to 12:30. Crazy.

This counter trend rally may not last very long (from a day to a few days) and will very likely be sold by traders. A V-shape recovery like in past few years has a low probability of repeating considering we are just entering the worst season of the year (August, September, and October). We will at least re-test the low of today's historic plunge in coming days or weeks and see where we go from there. I'm going to sell some FOTM ES calls when my technical analysis gives a green light.

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Old August 24th, 2015, 01:52 PM   #4834 (permalink)
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rsm005 View Post
3. The person that started me in options trading sat me down and repeated smacked me in the head after hearing what happened. He got slammed last week also but isn't sweating it as badly as me for a completely different set of reasons. This is the original trading method we used...and what he still does.

After the winter NG debacle of 2013/2014 I had a similar experience and similar epiphany. Keep the size small. The strategy (including the ES) works but I was way too large at IM X 3.

This is why we've been discussing in recent months what would happen if you woke up to a 10% ES drop in this thread. Which is pretty close to what we saw intraday today.

Most of us are happy to make 50% per annum but not happy to take a 50% haircut, myself included. Right now I'm trading about 1/3rd the size IM X 9 and will gladly make 16% per year and only suffer 16% haircuts on days like today.

Also, it certainly helps to have strategy diversification and not rely on any one strategy.

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Old August 24th, 2015, 01:55 PM   #4835 (permalink)
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hain241 View Post
This counter trend rally may not last very long (from a day to a few days) and will very likely be sold by traders. A V-shape recovery like in past few years has a low probability of repeating considering we are just entering the worst season of the year (August, September, and October). We will at least re-test the low of today's historic plunge in coming days or weeks and see where we go from there. I'm going to sell some FOTM ES calls when my technical analysis gives a green light.

I wish you the best, but the future is a whole lot less certain than your posts make it sound.

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 August 24th, 2015, 02:02 PM   #4836 (permalink)
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eudamonia View Post
After the winter NG debacle of 2013/2014 I had a similar experience and similar epiphany. Keep the size small. The strategy (including the ES) works but I was way too large at IM X 3.

Ironically, natural gas has been a decent option selling candidate since late winter/early spring. About 35-40% at the money implied volatility (so you're getting paid for the risk) and a broad trading range suitable for short strangles or ratio sales. All bets are off if it looks like we're going to run out of storage space (increasingly unlikely) or we have a super cold winter (who knows), but on a day like today, it's showing, via a very narrow range, that it is a DOMESTIC commodity, at least for a few more quarters when LNG exports begin.

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Old August 24th, 2015, 02:03 PM   #4837 (permalink)
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kevinkdog View Post
I wish you the best, but the future is a whole lot less certain than your posts make it sound.

I agreed to a certain extent. However, human nature never changes, at least that's the cornerstone of technical analysis. We all understand that this is a probability game. No one knows anything for sure, but based on careful analysis and sound risk management, we can still make educated guesses and earn decent $$$ for our work. Again, I'm selling FOTM calls to take advantage of a fragile rebound in coming days. It's not safe to sell a ton of ES puts right now. Fear for the most part is irrational.


Last edited by hain241; August 24th, 2015 at 02:13 PM.
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Old August 24th, 2015, 02:18 PM   #4838 (permalink)
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eudamonia View Post
After the winter NG debacle of 2013/2014 I had a similar experience and similar epiphany. Keep the size small. The strategy (including the ES) works but I was way too large at IM X 3.

This is why we've been discussing in recent months what would happen if you woke up to a 10% ES drop in this thread. Which is pretty close to what we saw intraday today.

It was down as much as 7% for about 10mins most of the time is was down only 5%. Premiums were through the roof, more because of the vol spike (VIX traded 53 vs 28 close) than the price move though. Obviously they come hand in hand though.
V1400P Friday night, 1963.1 underlying, Vol ~ 46% = 3.45.
V1400P Monday, 1870 underlying (Down 4.8%) , Vol unchanged= 5.72
V1400P Monday, underlying unchanged , Vol +17 = 14.00
V1400P Monday, 1870 underlying (Down 4.8%) & Vol +17 = 21

eudamonia View Post
Most of us are happy to make 50% per annum but not happy to take a 50% haircut, myself included. Right now I'm trading about 1/3rd the size IM X 9 and will gladly make 16% per year and only suffer 16% haircuts on days like today.

Also, it certainly helps to have strategy diversification and not rely on any one strategy.

Name of the game is always to survive to fight another day. If your conservative like that you also give yourself lots of room to add positions when something unexpected happens like this AM.

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Old August 24th, 2015, 02:21 PM   #4839 (permalink)
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kevinkdog View Post
I wish you the best, but the future is a whole lot less certain than your posts make it sound.


hain241 View Post
I agreed to a certain extent. However, human nature never changes, at least that's the cornerstone of technical analysis. We all understand that this is a probability game. No one knows anything for sure, but based on careful analysis and sound risk management, we can still make educated guesses and earn decent $$$ for our work. Again, I'm selling FOTM calls to take advantage of a fragile rebound in coming days. It's not safe to sell a ton of ES puts right now. Fear for the most part is irrational.

Historical statistics mostly seem to say we rally from here - at least in the short/medium term.

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Old August 24th, 2015, 02:36 PM   #4840 (permalink)
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ron99 View Post
/rsm005/ sounds like you need to start a trading journal at Big Mike's. I'd prefer you not post stock trades here. The thread is too long and overwhelming to people new to the thread.

You could post a link to it here when you start it.

Timing is everything. Unfortunately you hit the big loss right after you started. I'm still profitable ES selling options.

Ditto. to rsm005 and ron99. I'll post a link here in the coming days to a new journal to share my experiences selling options on futures, a trade plan which is based on ron's approach. Like you rsm005, I have had my first losing trade today after several successful months, rather than years, a large enough loss to erase profits to date. Timing is (almost) everything and this has been one of the most difficult aspects for me....when not to re-initiate a trade. I did exit intraday today rather than waiting for overnight settlement, against my plan.... I believe I did the right thing, having not experienced this situation before, markets locked limit down, there was no reasonable probability of me knowing what might happen next, what I did know is market context confirmed as changed (according to my plan) and fear was in the air - in short, number one rule today for me was Capital Preservation.

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