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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:570,062 / 5,734
Last Reply:Yesterday (01:01 AM) Attachments:642

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Selling Options on Futures?

Old November 27th, 2015, 01:23 AM   #5121 (permalink)
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ron99 View Post
Here is a long term study using one short 5.00 delta and two long 1.50 delta options same month as the short and exiting at 50% drop.

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It just missed hitting the 50% drop and exiting on 8/17/15 by 0.05. So 8/24/15 happened when the options were down to 52 DTE. They just went on margin call by 6%.

But even with that losing day the spreads are up 83.8% for the 2 1/2 year study. They are only down 6.7% for 2015. That is far better than the naked options.

Ron,

Awesome work and thank you for the continued effort. Quick question, does it make sense here to go out further in time from 95 days to say 130? I seem to recall a post by you saying you'd need to go further out in time than 95 days to offer the best protection but can't recall.

Thanks,
/rsm005/

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Old November 27th, 2015, 11:59 AM   #5122 (permalink)
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rsm005 View Post
Ron,

Awesome work and thank you for the continued effort. Quick question, does it make sense here to go out further in time from 95 days to say 130? I seem to recall a post by you saying you'd need to go further out in time than 95 days to offer the best protection but can't recall.

Thanks,
/rsm005/

You're welcome.

The problem with going out to 130 DTE is that sometimes that contract isn't available. The non-quarterly months (Serial Months) have 3 months trading at all times. Right now they are Jan, Feb and Apr. May won't start trading until the Tuesday (Monday is a holiday) after the Jan contract goes off on 1/15/16. So that contract would start trading at 123 DTE.

I tried finding a post that I mention being even further out but I couldn't find it.

Here is a post of yours mentioning 130 DTE.
https://futures.io/options-cfd-trading/12309-selling-options-futures-472.html#post511630

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Old November 29th, 2015, 02:05 AM   #5123 (permalink)
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Ron's post #5115


Thanks, Ron for your post #5115 of KC trade. I refer to your comment in this post given below:

"Since I put on this spread I found out through further research that the longs need to be less DTE, around 40-70 DTE, to get better coverage during a flash move. Like a 30 point move up in 10 days."

Are you referring to KC only or ES as well? Your latest study on ES is:nselling 1 short and 2 longs at about 95DTE. Are you saying the longs have to be 40-70 DTE. If so, how will you decide between 40 to 70 DTE as your credit will also go down?

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Dilip

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Old November 29th, 2015, 08:59 AM   #5124 (permalink)
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dvbattul View Post
Thanks, Ron for your post #5115 of KC trade. I refer to your comment in this post given below:

"Since I put on this spread I found out through further research that the longs need to be less DTE, around 40-70 DTE, to get better coverage during a flash move. Like a 30 point move up in 10 days."

Are you referring to KC only or ES as well? Your latest study on ES is:nselling 1 short and 2 longs at about 95DTE. Are you saying the longs have to be 40-70 DTE. If so, how will you decide between 40 to 70 DTE as your credit will also go down?

Regards,
Dilip

That is for KC trades. For ES trades the longs should be the same month as the short.

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Old November 30th, 2015, 02:26 AM   #5125 (permalink)
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Ron,

Do you deliberately diversify your positions now or are you still heavily favored to ES?

/rsm005/

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Old November 30th, 2015, 10:42 AM   #5126 (permalink)
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rsm005 View Post
Ron,

Do you deliberately diversify your positions now or are you still heavily favored to ES?

/rsm005/

Right now I am in a milk trade so not many short options. But I will still heavily favor ES but have some other commodities as fundamentals, seasonals, and ability to protect against flash movements dictate. I will not enter a naked short option anymore.

Right now I have on ESg6p1650-ESg6p1400 (2 longs) that I entered on 10/29/15 at 2.75. 32 days held. Current price is 72% of starting price. It's not going to be very good ROI because of the amount of days held. But it was able to ride out the dip in Nov easily.

I'm thinking of closing it out before Fed mtg on Dec 16th and entering lightly some new positions right before mtg. If it flash crashes then I will make money.

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Old November 30th, 2015, 07:13 PM   #5127 (permalink)
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Ron,

Can you share what your IM went to during the drop in Nov? How high did the premium rise?

Thanks,
/rsm005/

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Old November 30th, 2015, 07:34 PM   #5128 (permalink)
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rsm005 View Post
Ron,

Can you share what your IM went to during the drop in Nov? How high did the premium rise?

Thanks,
/rsm005/

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Old November 30th, 2015, 07:52 PM   #5129 (permalink)
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Thanks. It's so strange to see the IM balance and drawdowns higher for the spread vs the naked position.

/rsm005/

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Old December 1st, 2015, 11:26 AM   #5130 (permalink)
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rsm005 View Post
Thanks. It's so strange to see the IM balance and drawdowns higher for the spread vs the naked position.

/rsm005/

The spread has a much lower IM and thus less excess. But the differences aren't that great.

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