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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,288 / 5,727
Last Reply:December 2nd, 2016 (12:40 PM) Attachments:642

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Selling Options on Futures?

Old August 24th, 2015, 03:17 PM   #4841 (permalink)
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ron99 View Post
ES up 40 points in last hour. 11:30 to 12:30. Crazy.

And now a 40 point drop 1:15 to 2:15.

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Old August 24th, 2015, 03:49 PM   #4842 (permalink)
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Note to self/all: Sometime in September, look up Performance History | LJM Partners to see how their moderately aggressive and aggressive strategies performed in August.

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Old August 24th, 2015, 05:31 PM   #4843 (permalink)
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PK 1 View Post
in the pre-market (at midnight GMT+1) and a few hours later it was possible (for me though IB) with incredible premiums far OTM even with expiry on the 31st of August worth it. But one has to be very careful (!) entering the market in such an environment. Even though this might be a huge dip in just a few days this isn't over yet and better prepare for a second big wave down the next weeks

I just wanted to trade that options today.
I closed all my positions last Friday morning so I have all my account in cash. I lost all the last 3 months gains. In my opinion it will take a long time for us to be able to use this strategy again in the future.

I follow in Twitter a guy from Venezuela called @acardenasfx that is an expert in Oil. In his opinion in a month or so the Oil will stop dropping to begin a new cycle. All of us could start thinking about a strategy with this asset

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Old August 24th, 2015, 06:08 PM   #4844 (permalink)
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Hills View Post
I just wanted to trade that options today.
I closed all my positions last Friday morning so I have all my account in cash. I lost all the last 3 months gains. In my opinion it will take a long time for us to be able to use this strategy again in the future.

I follow in Twitter a guy from Venezuela called @acardenasfx that is an expert in Oil. In his opinion in a month or so the Oil will stop dropping to begin a new cycle. All of us could start thinking about a strategy with this asset

I understand this is a painful period and many will be reeling from the losses. This is a rare market event but essential why you are able to sell put options for decent premium in the first place. Once the dust is settled I think it is important to reflect and remember that options pricing is extremely efficient and if you use a strategy that has a 95% win rate, then you will eventually take 5 losses in 100 trades, and those 5 losses can erase the gains of the 95%. The skill is in still coming out ahead after taking those losses.

I know this might not be the most helpful post right now, but I don't think it is fair to say a strategy as good as this 'doesn't work' just because we have a large correction in the markets.

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Old August 24th, 2015, 07:03 PM   #4845 (permalink)
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CobblersAwls View Post
I understand this is a painful period and many will be reeling from the losses. This is a rare market event but essential why you are able to sell put options for decent premium in the first place. Once the dust is settled I think it is important to reflect and remember that options pricing is extremely efficient and if you use a strategy that has a 95% win rate, then you will eventually take 5 losses in 100 trades, and those 5 losses can erase the gains of the 95%. The skill is in still coming out ahead after taking those losses.

I know this might not be the most helpful post right now, but I don't think it is fair to say a strategy as good as this 'doesn't work' just because we have a large correction in the markets.

Excellent post.

With the "new" computer traded markets now we need to have much more tighter risk controls on positions. Bigger swings will become more normal than abnormal.

It has become more important to have good exit strategy than to pick what trades to put on.

I want to set a limit of X% draw down then exit but I don't know if that will work. I have seen many trades that hit those levels then rebound and the trade wasn't a loss. If you keep exiting at X% on trades that eventually aren't losers you will have a losing year. There is a fine line between exiting too much and not enough.

More research is needed.

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Old August 24th, 2015, 07:03 PM   #4846 (permalink)
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Hills View Post

I follow in Twitter a guy from Venezuela called @acardenasfx that is an expert in Oil. In his opinion in a month or so the Oil will stop dropping to begin a new cycle. All of us could start thinking about a strategy with this asset

Argumentum ad verecundiam. There is no such thing as an 'expert' in oil, or any other financial market. Want a prediction, look at an option chain, all the probabilities are there.

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Old August 24th, 2015, 07:31 PM   #4847 (permalink)
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gfmatt View Post
Argumentum ad verecundiam. There is no such thing as an 'expert' in oil, or any other financial market. Want a prediction, look at an option chain, all the probabilities are there.

Amen. Biggest trader mistakes are believing anyone can predict the future and trusting the advice of "experts". A true "expert" would make infinitely more money actually trading the market than selling his opinion on it.

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Old August 24th, 2015, 07:40 PM   #4848 (permalink)
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gfmatt View Post
Argumentum ad verecundiam. There is no such thing as an 'expert' in oil, or any other financial market. Want a prediction, look at an option chain, all the probabilities are there.


Yep, I agree with you. The only edge you have is the option chain for predicting the probabilities. I am assuming that expert in oil was wasn't calling for $30 oil just six weeks ago when it was in the $60 area.

The drop in oil isn't because a drop in demand, it is an over supply issue while the Saudi want "market share"

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Old August 24th, 2015, 07:41 PM   #4849 (permalink)
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This strategy is more tradeable than ever, high vol is great for this, just hedge. Diagonal bull puts would have a good payoff

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Old August 24th, 2015, 08:00 PM   #4850 (permalink)
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ron99 View Post
It has become more important to have good exit strategy than to pick what trades to put on.

I want to set a limit of X% draw down then exit but I don't know if that will work. I have seen many trades that hit those levels then rebound and the trade wasn't a loss. If you keep exiting at X% on trades that eventually aren't losers you will have a losing year. There is a fine line between exiting too much and not enough.

More research is needed.

I've been wondering about the same again after this event. I wish I had the data to test different exit percentages. I remember seeing some tastytrade market measures talk about mechanical exits. I don't know where tastytrade gets their data from; Sosnoff has mentioned releasing it for free to everyone in the future to crowd test strategies. Found this market measure on "Exiting Losing Trades" which is for a 1SD daily strangle on the SPY from 2009-2014 which might produce similar results, but no way of knowing without testing the different parameters. The results from this study showed a 2x loss from the credit received as the optimal exit point.

https://www.tastytrade.com/tt/shows/market-measures/episodes/exiting-losing-trades-12-16-2014#

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