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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:567,812 / 5,727
Last Reply:7 Hours Ago (12:40 PM) Attachments:642

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Selling Options on Futures?

Old August 29th, 2015, 07:49 PM   #4941 (permalink)
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ron99 View Post
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This strategy makes money when selling puts if futures:
1. Rise
2. fall slowly
3. fall moderately over long time
4. Black Swan (yes a huge drop in price makes money)

It loses money if there is a medium speed drop in price that falls a good amount. Long term down. The question is how many of those will happen and is there a way to avoid 28% losses on them. Here is the drop from 9/19/14. 3X premium happened on 10/13/14.

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Here are same contracts and time frame but using IMx4. It did not hit margin call but did pass 3X premium. Possible ROI drops from 3.3% to 2.5% when switching to IMx4.

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I am liking this strategy enough that I feel I can use it in other commodities that I was avoiding because of their volatility. You will still need to be somewhat right on direction of futures.

It still needs more research. This is very preliminary.

So effectively it works outside of a bear market? Interesting. I also like the idea of diversification even if it's across 2 or 3 commodities rather than 5 or 6. I know I'm getting ahead of myself but a slightly more conservative exit point and diversification is perhaps all we need? Regarding "other commodities" are you thinking energies; NG and CL?

/rsm005/


Last edited by rsm005; August 29th, 2015 at 07:54 PM.
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Old August 30th, 2015, 09:07 AM   #4942 (permalink)
World'sWorstTrader
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IV

Does anyone have a value for the increase (percentage wise) of the implied volatility of far out of the money puts
before the big sell off and the implied volatility at the peak of the sell off.

To a small extent I had tried to prepare for the event. I was using ratio credit spreads, but still had losses
( approximately 20%).

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Old August 30th, 2015, 09:18 AM   #4943 (permalink)
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datahogg View Post
Does anyone have a value for the increase (percentage wise) of the implied volatility of far out of the money puts
before the big sell off and the implied volatility at the peak of the sell off.

To a small extent I had tried to prepare for the event. I was using ratio credit spreads, but still had losses
( approximately 20%).

This is ESx5p1650. Are the IV or HV the numbers you want?

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Old August 30th, 2015, 09:51 AM   #4944 (permalink)
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rsm005 View Post
So effectively it works outside of a bear market? Interesting. I also like the idea of diversification even if it's across 2 or 3 commodities rather than 5 or 6. I know I'm getting ahead of myself but a slightly more conservative exit point and diversification is perhaps all we need? Regarding "other commodities" are you thinking energies; NG and CL?

/rsm005/

I'm thinking everything else. If I don't have to worry about Black Swan events, which I think happen more often in other commodities than ES, then why not trade other things.

With other commodities you have to be closer to make money. There isn't much premium out 2 STD. That is why I went heavily to ES.

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Old August 30th, 2015, 10:25 AM   #4945 (permalink)
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Futures Edge on FIO

Are you a NinjaTrader user?

 
Interesting thought. How far out would you go given the added protection and the lack of premium 2 std dev out? I've been looking across the board at commodities to diversify as well.

Also....does the same 50% decay idea work across all commodities?

/rsm005/

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Old August 30th, 2015, 11:15 AM   #4946 (permalink)
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datahogg View Post
Does anyone have a value for the increase (percentage wise) of the implied volatility of far out of the money puts
before the big sell off and the implied volatility at the peak of the sell off.

To a small extent I had tried to prepare for the event. I was using ratio credit spreads, but still had losses
( approximately 20%).

IV for some of ESX5 OTM puts.
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Old August 30th, 2015, 11:29 AM   #4947 (permalink)
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CafeGrande View Post
FWIW, Futures magazine has profiled Fitznagel and he wrote a book called "The Dao of Capital."

From what I've read, Taleb had a mixed record as a fund manager.

NYTimes:- The Myth of Black Swan Market Events
By MARK SPITZNAGEL FEBRUARY 13, 2015 9:13 AM


http://dealbook.nytimes.com/2015/02/13/the-myth-of-black-swan-market-events/?_r=1

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Old August 30th, 2015, 01:54 PM   #4948 (permalink)
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I've been trying to compare using a vertical spread vs naked during periods of high volatility. During normal periods of ups and down they both perform similar, but on periods of very high volatility spikes the vertical spread performs better. Unfortunately thinkorswim thinkBack does not go beyond 2013 and the values get inaccurate the farther out of the money. Can someone test this to see if these values are correct. It is using SPX but should be similar to /ES (which thinkBack does not support). Selling a Nov 1800 put on Aug. 5 vs a Nov 1800/1760 vertical then comparing the P/L from 8/20 to 8/28. They perform very similar up to the volatility spike where the spread performs better for the same max profit. I did other examples using the thinkorswim platform but have been without electricity since yesterday and up to now due to a recent tropical storm so cannot access them in my computer; just re did this one on my laptop to verify if these numbers are way off.

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Old August 30th, 2015, 03:39 PM   #4949 (permalink)
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rmejia View Post
I've been trying to compare using a vertical spread vs naked during periods of high volatility ... Can someone test this to see if these values are correct.

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Old August 30th, 2015, 06:47 PM   #4950 (permalink)
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rsm005 View Post
Also....does the same 50% decay idea work across all commodities?

/rsm005/

Yes

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