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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,065 / 5,727
Last Reply:Yesterday (12:40 PM) Attachments:642

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Selling Options on Futures?

Old September 29th, 2015, 09:35 PM   #5041 (permalink)
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ron99 View Post
I haven't. Someone who is more familiar with VIX options would have to do the research.

I did find this which concerns me.

If anyone is interested in VIX hedging the CBOE has a ticker VXTH which is a hypothetical portfolio that buys VIX calls when it reaches certain levels. I know some people like to buy Calls in VIX when it is cheap as insurance
You can also buy Puts in SVXY which is an ETF that is the inverse of VXX as protection. I am also playing around backtesting these but so far I have found that buying Puts in /ES was easiest when looking for protection from a crash. (I could be totally wrong though)

CBOE VIX Tail Hedge Index (VXTH) Micro Site

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Old September 29th, 2015, 11:40 PM   #5042 (permalink)
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After hours of research and asking Carley Garner I have come to the conclusion that you can't protect yourself from a major move by futures against your short option with spreads for all commodities except ES.

Long(s) will somewhat protect you if your position goes ITM but that is about it for the other commodities. I tried for CL, NG and KC. No combination of longs to shorts, deltas, months worked. The drawdowns and percent of the account used for IM was similar to a naked option.

Since the other commodities have far larger moves more often, I was hoping to be able to have the protection. But not able to do.

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Old September 30th, 2015, 02:17 AM   #5043 (permalink)
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ron99 View Post
After hours of research and asking Carley Garner I have come to the conclusion that you can't protect yourself from a major move by futures against your short option with spreads for all commodities except ES.

Long(s) will somewhat protect you if your position goes ITM but that is about it for the other commodities. I tried for CL, NG and KC. No combination of longs to shorts, deltas, months worked. The drawdowns and percent of the account used for IM was similar to a naked option.

Since the other commodities have far larger moves more often, I was hoping to be able to have the protection. But not able to do.

Maybe the reason is periodically S&P upadates ( index components are replaced by other component) and thus partially artificial growth of ES is maintained?

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Old September 30th, 2015, 02:49 PM   #5044 (permalink)
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uuu1965 View Post
Maybe the reason is periodically S&P upadates ( index components are replaced by other component) and thus partially artificial growth of ES is maintained?

Someone once said the S&P 500 over a long horizon is anything but a passive investment. Firms that don't have the right products, technology, business models, exposure to foreign sales, etc eventually get booted and replaced with those who do.

This positive drift, coupled with the volatility skew, can make put selling attractive. However, this is not "edge" (nor is selling options in general) because everyone knows it and everyone can benefit from it. Selling ES puts can increase the probability of success, but for the long haul, you still have to have a mostly right opinion on volatility and price direction.


Last edited by CafeGrande; September 30th, 2015 at 03:05 PM.
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Old October 2nd, 2015, 11:05 AM   #5045 (permalink)
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Futures Edge on FIO

Are you a NinjaTrader user?

 
This table shows how ES put options are affected by the large drop in ES futures today.

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The Percent Change column shows change from yesterday's settlement to the bid when I took that screenshot. The SPAN delta column shows the delta at the start of the day.

These are 14 DTE, Oct, and they have a Percent Change as I type of peaking at 68. The puts at 49 DTE, Nov, have a Percent Change as I type of peaking at 36. The 77 DTE puts, Dec, peaking at 29. The 105 puts, Jan, peaking at 25. The front month has almost double Percent Change over the 2nd month.

The strikes with the highest Percent Change for all months is around a 5.00-12.00 delta at the start of trading.

Notice also that the options that were <1.00 delta to start the day have a much lower Percent Change.


Last edited by ron99; October 2nd, 2015 at 12:22 PM.
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Old October 2nd, 2015, 12:20 PM   #5046 (permalink)
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Here is the same table but with the drop in ES futures about half of the prior table.

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The highest Percent Change moved to higher strikes on the smaller drop.

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Old October 8th, 2015, 02:11 PM   #5047 (permalink)
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Cattle futures margins, LC, are increasing by 29% on Friday 10/9.

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Old October 16th, 2015, 06:22 AM   #5048 (permalink)
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Trade

Today I close a long trade witch I open on 08/14 (right before a huge drop).
Right away I need to remark: this positions 4x was slightly under Margin Call (I encircle in PDF), but I had load not full account power and balance of account covered Margin Call.

ESX5 1850 (sell)/1750 (buy)
Init Value = 325$
IM = 653$
Init M ROI = 5.3%
_____________

Close Value = 170$
DH = 62!!
M ROI = 3.5%

Conclusions:
*Ron`s strategy (selling options on ES) works! (Thanks @ron99 once more for advice)
* The spreads are the right choice (now I use 3 leg calendar spread)
* Position margin increase over time (importance of calculation of right cushion)
*Minus: long trade period (62 days) and Draw down of account (-60%)

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Selling Options on Futures?-trade-2015.pdf  
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Old October 16th, 2015, 07:30 AM   #5049 (permalink)
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Yes it does this thread has slowed down

I used to read this thread almost every day ...Thanks Ron..

I also sold spreads when the spike down happened on Friday and then Monday and came out on top in about a week.. probably could have held it but I am more of a daytrader so it is tough for me... anyway point is method works.. and works even better when Vol spikes up huge

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Old October 16th, 2015, 02:21 PM   #5050 (permalink)
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jokertrader View Post
Yes it does this thread has slowed down

Your last post in this thread was August 22 -- don't let @ron99 bear all the responsibility for the entire thread, everyone that values this thread needs to take the time to share contributions and participate.

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