Thank you for posting the black swan protection idea
would you kind to enlight me on several items below ... thanks in advance ...
@ron99 , i see that some of the strategy being posted by you using protection by Buy 2 Put contract 60DTE to cover Sell 1 Put contract 90DTE (just like strategy #2 post by Dudetooth below)... i just curious is it possible that after 60 day the Premium hasn't reduce 50% yet (i.e due to the ES price is fall moderate but faster than the time decay) ? ... (So we still have the Sell Put contract but no more Buy Put contract after 60 days) ... if that is possible, is that mean that we don't have a protection if the flash crash is happen after 60 days ...
@Dudetooth ... i am interested in finding more on the strategy #3 normal credit spread 90 DTE with ratio 1 : 3 (1 sell, 3 buy). I think it can be strong candidate for protection mechanism. To make it mechanical can you share what is the original delta for the put contract that we buy on strategy #3 ? (in your example : ESX5 P1400 on 17 Aug)
I am hoping later on we can create the mechanical of the strategy i.e :
* Sell 1 Put contract ES 0.0300 deltas at 90-110 DTE
* Buy 3 Put contract ES 0.0100 deltas with the same expiry
thanks for the enlighment ... Ron99 hope you get speedy recovery ...
Last edited by Zulutrade76; August 31st, 2015 at 08:21 AM.
First, thanks for starting this thread and doing the webinar. I think it is great on both accounts.
Please forgive me if this is a naive question. I did not want to bother unless I had something
to contribute, unfortunately I do not yet. With that said, your post requires me to ask a question however.
When you say we are to volatile for equities is that because of the danger of a margin call?
Using today as an example. If you sold 1620 puts expiring in 17 days when we were falling for $4.10,
is the danger more about the margin then ending in the money?
Please only answer if you are in the mood and have the time.
PS I did take a draw-down as well as others. I could of minimized it more if I would have exercised
discipline and took my stop when I should have. I will next time...
The following user says Thank You to LordV for this post:
After exiting my CL position on Monday I have not sold anymore Options until the premium price reflects the risk that I am taking on. I looked at CL option chain yesterday and I felt it was still 2 low after such large moves in CL (biggest 3 consecutive days up in 25 years)
The following user says Thank You to Chubbly for this post:
Yes the main concern when selling far OTM options is being forced out of a position because of a margin call. If you are far enough out your strike rarely will go ITM.
Here is what that option has done lately.
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The option went from $35 to $905 in two trading days. IM went from 331 to 1462 in two days.
Of course as the option gets closer to expiration the less it will move in both premium and IM because there are less days for the option to become ITM. I haven't studied it enough to know the sweet spot.
The following 4 users say Thank You to ron99 for this post:
I was trying to find a combination of short and long calls that wouldn't blow up your account when Dec Corn went from 3.6875 on 6/19/15 to 4.5175 on 7/13/15. A 22.5% increase. (the 10.9% decrease in ES last month wasn't even half of that)
Well I can't find any. I tried short dec long dec. I tried short dec long sep. I tried short sep long sep. I tried short sep long aug. (oct wasn't trading on 6/19). I tried different quantities of longs.
Next I will try this for CL.
EDIT Same thing for CL. I tried to cover the 6/30/15 to 8/24/15 drop from 59.47 to 38.24. Not happening. But I was able to cover the 7.82 drop, 13.1%, in first 5 trading days. 76% was highest percent of balance used for IM in those 5 days but it did have a 52% draw down.
So the lesson is we can protect against a flash crash (V shaped) but you still need to be correct about long term moves.
Last edited by ron99; September 2nd, 2015 at 05:25 PM.
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