Selling Options on Futures? - Options on Futures | futures io social day trading
futures io futures trading


Selling Options on Futures?
Updated: Views / Replies:717,460 / 6,377
Created: by ron99 Attachments:737

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 737  
 
Thread Tools Search this Thread
 

Selling Options on Futures?

  #4881 (permalink)
Elite Member
London, United Kingdom
 
Futures Experience: Intermediate
Platform: N/A
Broker/Data: Bloomberg
Favorite Futures: Energies
 
CobblersAwls's Avatar
 
Posts: 283 since Jul 2014
Thanks: 964 given, 362 received

Hi, I have a few Q's regarding your points:


PeakGrowth View Post
Buying an option for black swans is an asymmetric trade where the reward far outstrips the risk. This is the mark of a smart trader.

Wouldn't you lose a lot of money over the last 6/7 years prior to the recent events though? It seems to me that as we have risen out from the 08 crash there have been many traders/professionals making money selling C/P's, or are you suggesting you wouldn't only buy options during low vol but wait for other environmental factors that signal a possible rise in vol to give you an edge?


PeakGrowth View Post
fully cash covered on stocks

How do you go about covering an index with stocks? Do you choose a basket that is closely weighted or do you use an ETF or index futs?

Cheers

Reply With Quote
 
  #4882 (permalink)
Elite Member
Sydney, Australia
 
Futures Experience: Intermediate
Platform: Sierra Chart, IRESS
Broker/Data: IB, IQFeed
Favorite Futures: ES, SPI, ASX stocks, options
 
Posts: 399 since Jun 2015
Thanks: 169 given, 446 received


CobblersAwls View Post
Hi, I have a few Q's regarding your points:



Wouldn't you lose a lot of money over the last 6/7 years prior to the recent events though? It seems to me that as we have risen out from the 08 crash there have been many traders/professionals making money selling C/P's, or are you suggesting you wouldn't only buy options during low vol but wait for other environmental factors that signal a possible rise in vol to give you an edge?



How do you go about covering an index with stocks? Do you choose a basket that is closely weighted or do you use an ETF or index futs?

Cheers

That's right, buying puts all the way up whilst the QE taps were on is not smart. If you buy an option, you are still market timing so you still need factors to be in place to do it. If you have a view that QE would cause the market to move up in a predictable fashion then you would buy calls. OTM puts and sometimes calls are only useful when you have a view the market will move explosively due to an exogenous event.

Low volatility breeds complacency, until it all comes apart and those who sold way too many options get blown out. A new breed of sellers come along after that thinking it's easy money until the next crash and they get blown out too, and so on and so forth. The problem with selling vol is that as vol comes out of the market, the sellers sell more for the same (or more) return, they get bolder and bolder until next thing you know - bang - it's all over. The QE programs have made vol too low.

For Index I use spreads, so bull puts and bear calls. My risk is well defined in this situation regardless of whether the market makers are willing to play ball or if the market goes haywire.

I'm not sure about professionals who sell naked. I see/know a lot of retails who do it (doctors, business owners) and a few of them blew up this week as well. Whenever pro's sell, they lay off the risk by hedging it or it's cash covered because they want to own the stock.

p.s. these retails will sell 50k at a time worth of premium, but when they blow out it's mil+. I've never seen a long term OTM seller that have managed to stay in the game without topping up their accounts, they always give it back when markets blow out.

Reply With Quote
The following 5 users say Thank You to PeakGrowth for this post:
 
  #4883 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,717 since Jul 2011
Thanks: 792 given, 4,759 received
Forum Reputation: Legendary


Corporate profits after taxes, $1.824 trillion, were the highest in history for 2Q 2015. +7.3% YoY.

S&P 500 was 2000 one year ago. Right now the S&P 500 is down 2.4% vs 1 year ago while corporate profits are up 7.3%.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Reply With Quote
The following 3 users say Thank You to ron99 for this post:
 
  #4884 (permalink)
Elite Member
Dallas, TX
 
Futures Experience: Advanced
Platform: T4, Zaner360, TOS
Broker/Data: DeCarley Trading
Favorite Futures: Options
 
Posts: 104 since Sep 2013
Thanks: 133 given, 50 received

I wonder how Karen the Supertrader made out during the recent few days. Anyone heard? In the past, she sold 5 delta puts and risked 50% of her capital (aka IMx2). I know that they have been working on risk protection methods over the past year or 2. It would be interesting to hear if they managed to avoid a big loss.

Reply With Quote
The following 3 users say Thank You to mu2pilot for this post:
 
  #4885 (permalink)
Elite Member
Korea, South
 
Futures Experience: Intermediate
Platform: NinjaTrader
Favorite Futures: FGBL CL 6J NKD
 
Posts: 81 since Jun 2015
Thanks: 164 given, 63 received


mu2pilot View Post
I wonder how Karen the Supertrader made out during the recent few days. Anyone heard? In the past, she sold 5 delta puts and risked 50% of her capital (aka IMx2). I know that they have been working on risk protection methods over the past year or 2. It would be interesting to hear if they managed to avoid a big loss.

I know they also like to wait for big drops and vix pops before putting on massive positions. My guess is they threw on a lot of short puts last week and suffered some on Monday.

Reply With Quote
 
  #4886 (permalink)
Trading for Fun
Ottawa
 
Futures Experience: Advanced
Platform: Many
Favorite Futures: Options
 
Posts: 87 since May 2015
Thanks: 67 given, 88 received


mu2pilot View Post
I wonder how Karen the Supertrader made out during the recent few days. Anyone heard? In the past, she sold 5 delta puts and risked 50% of her capital (aka IMx2). I know that they have been working on risk protection methods over the past year or 2. It would be interesting to hear if they managed to avoid a big loss.

I know she has said they only go out a max of 52 days from expiry. I had 10 delta IC's on expiring Sept, Oct, Nov and Dec in my paper accounts and I was watching them during the crash. The Sept, Oct positions went extreme red. The further out in time did much better.

Also should here results be public at year end if she runs a fund that is registered with the SEC?

Reply With Quote
The following user says Thank You to Chubbly for this post:
 
  #4887 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,717 since Jul 2011
Thanks: 792 given, 4,759 received
Forum Reputation: Legendary


Chubbly View Post
I know she has said they only go out a max of 52 days from expiry. I had 10 delta IC's on expiring Sept, Oct, Nov and Dec in my paper accounts and I was watching them during the crash. The Sept, Oct positions went extreme red. The further out in time did much better.

Also should here results be public at year end if she runs a fund that is registered with the SEC?

As far as I know there isn't a rule that requires results to be made public.

Reply With Quote
 
  #4888 (permalink)
Elite Member
Korea, South
 
Futures Experience: Intermediate
Platform: NinjaTrader
Favorite Futures: FGBL CL 6J NKD
 
Posts: 81 since Jun 2015
Thanks: 164 given, 63 received


Chubbly View Post
I know she has said they only go out a max of 52 days from expiry. I had 10 delta IC's on expiring Sept, Oct, Nov and Dec in my paper accounts and I was watching them during the crash. The Sept, Oct positions went extreme red. The further out in time did much better.

Also should here results be public at year end if she runs a fund that is registered with the SEC?

There is no rule for private equity and hedge funds to state their returns publicly. They aren't allowed to hide it from their investors however.

Reply With Quote
 
  #4889 (permalink)
Trading for Fun
Ottawa
 
Futures Experience: Advanced
Platform: Many
Favorite Futures: Options
 
Posts: 87 since May 2015
Thanks: 67 given, 88 received

Can one of you pretend to be an investor and ask for her track record

Reply With Quote
The following user says Thank You to Chubbly for this post:
 
  #4890 (permalink)
Elite Member
Korea, South
 
Futures Experience: Intermediate
Platform: NinjaTrader
Favorite Futures: FGBL CL 6J NKD
 
Posts: 81 since Jun 2015
Thanks: 164 given, 63 received


I thought I'd share my analysis and opinion here regarding which /es put options behaves in what way.

Below is a screen shot of the current price which I took by the mid between big and ask price of each options with the days to expiration below each expiring month. (I have a DDE running in my excel quoting them real-time).

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).



After that, I took the price difference of each strike from one month (and weekly/EOM) to the next to see how much premium decayed between these dates. You can see below for results between each day.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).




And then I calculated the following premium decay in percentage terms from the beginning for each option in the same period.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).




What I have found and hypothesized is as follows.

In pure percentages terms of premium being decayed, it appears 50-60 DTE options that are FOTM decay the fastest. However, it also appears that these options hit their margin calls and bigger draw downs during times of turbulence.

Please note the above research did not include margin being utilized and I do not have direct access to span margin I can link to my excel to make further analysis at the moment. However, in my humble opinion, the 50-60 DTE options are at a sweet spot for bigger vega risk (per margin utilized) when things get worse quickly while it should offer the fastest decay the other way around.

The reason for this hypothesis is because this morning, I was able to sell a put 50 dte at approximately 3 delta for 3.40 at around 500 initial margin, which would give us a monthly ROI (to expiration) of 6.69% (with $5 round trip cost) according to IM x 3 rule. While a similar delta at 95 DTE gave me the same ROI number of 3-4%. (the DTE is almost 2x while premium received was around 4.2 which is only a 25% increase).

So my conclusion is, 50-60 DTE options carry more risk while the margin increase isn't big enough to reflect this. In order to make up for this difference, we should utilize less margin and vice-versa. However, if you are selling cash secured puts for theta decay, 50-60 dte options should be much more advantageous.

Thanks for reading.

J

Edit - Someone mentioned further out months have bigger vega risk. This is true in the model, but it doesn't take into account that volatility spikes are higher in the front month compared to the back months.


Last edited by Opstar; August 27th, 2015 at 07:14 PM.
Reply With Quote
The following 5 users say Thank You to Opstar for this post:

Reply



futures io > > > > Selling Options on Futures?

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

Adam Grimes: TBA

Elite only

NinjaTrader: TBA

Dec 7

Linda Bradford Raschke: TBA

Elite only

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Trading Futures with options as protection Gooffy2010 Commodities Futures Trading 7 November 7th, 2017 12:06 PM
Crude Oil (CL) futures inverse pairing options Big Mike Commodities Futures Trading 8 December 12th, 2013 12:00 PM
Recommend futures, options Broker? sam1197 Reviews of Brokers and Data Feeds 17 March 27th, 2013 01:42 AM
Selling Njniatrader sam1197 NinjaTrader 22 June 28th, 2012 01:40 PM
Zen-Fire Futures options tici88 Reviews of Brokers and Data Feeds 1 July 30th, 2011 10:16 AM


All times are GMT -4. The time now is 02:10 AM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-11-18 in 0.10 seconds with 20 queries on phoenix via your IP 54.198.246.116