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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:567,770 / 5,727
Last Reply:5 Hours Ago (12:40 PM) Attachments:642

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Selling Options on Futures?

Old December 2nd, 2015, 12:38 AM   #5131 (permalink)
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ron99 View Post
.... So what I think I will do is just get out around 30 days held because the profit after that will be slow in coming. Also the protection by the longs will be decreasing and might not cover a huge ES drop.

Ron,

I've been studying the last 15 pages or so of this thread over and over. Thanks again for everything you've done so far. In the post above you made a rather interesting point about exiting a trade after 30 days held to help maximize the protection of the 2 longs. What is your strategy if the trade moves against you during those 30 days and you're upside down or have a tiny profit? Do you roll, hold on, or simply eat the loss and move on to the next trade?

Thanks,
/rsm005/

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Old December 2nd, 2015, 03:05 PM   #5132 (permalink)
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rsm005 View Post
I've been studying the last 15 pages or so of this thread over and over. Thanks again for everything you've done so far. In the post above you made a rather interesting point about exiting a trade after 30 days held to help maximize the protection of the 2 longs. What is your strategy if the trade moves against you during those 30 days and you're upside down or have a tiny profit? Do you roll, hold on, or simply eat the loss and move on to the next trade?

eat the loss and move on to the next trade

Other than the fees, moving to the next trade will probably do the same thing as if you held on to the original position. It will give you better protection because the longs won't be as close to expiration.

The ESg6p1650-ESg6p1400(2) spread I entered on 10/29/15 the 1650 delta has dropped from 5.23 to 3.06. 42% drop. The 1400 delta dropped from 1.42 to 0.74. 48% drop.

If you had entered a trade with a short at ~3.00 delta and 2 longs at ~0.75 delta and 60 DTE on 8/17/15 you would have had a 37% drawdown and margin would be 100% of your account on 8/25.

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Old December 11th, 2015, 05:02 PM   #5133 (permalink)
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I don't like how similar this week is compared to the week before 8/24/15.

Be careful.

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Old December 14th, 2015, 03:46 PM   #5134 (permalink)
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I wanted to run a paper trade to see how Ron's modifications to selling worked during a what is a very volatile period. On 12/3 I ran the following

Sell 75 ESH6 P1650
Buy 150 ESH6 P1350

I forgot to capture the IM when the trade opened but since then the market has dropped steadily by 85pts and the position has held up very well. The current margin is $548.75 on the TOS paper trading platform, well below the reserve.

The purpose of this trade was to enter a position near a peak and after some decay see what happens when a jarring event takes place...in this case the potential rise in interest rates this week.

Ron mentioned that he would take a loss if the position was trading lower with 90 days to go so that's what I'm trying to see. How well a trade like this holds up after some time passes then a huge event happens. I'll keep everyone posted.

/rsm005/

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Old December 17th, 2015, 01:43 AM   #5135 (permalink)
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Futures Edge on FIO
So now that interest rates have officially gone up I'm curious as to the thoughts of the people on this thread. The consensus across the intertubes has been increased volatility with a potential sharp move down as the rate hike propagates its way through the market. Thoughts? Are most of you guys taking a wait and see approach for the remainder of the year or putting on tighter, smaller spreads?

/rsm005/

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Old December 17th, 2015, 02:37 AM   #5136 (permalink)
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rsm005 View Post
So now that interest rates have officially gone up I'm curious as to the thoughts of the people on this thread. The consensus across the intertubes has been increased volatility with a potential sharp move down as the rate hike propagates its way through the market. Thoughts? Are most of you guys taking a wait and see approach for the remainder of the year or putting on tighter, smaller spreads?

/rsm005/

I think the .25 rate hike was already priced and was in line with market expectation. So since that is out of the way now the seasonal santa rally can occur. If we have a down day I will be selling puts.


Here's a recap of my most recent trade:

Sold 50% of my position ESG6 P1675 on 09 Nov for 6.75 with a hedge using the 2x ESG6 P1450 for 2.25.
Sold 20% of my position ESG6 P1675 on 16 Nov for 9.50 with a hedge using the 2x ESG6 P1450 for 2.95.
Sold 30% of my position ESG6 P1675 on 11 Dec for 10.0 with a hedge using the 2x ESG6 P1450 for 3.75.

The position closed today at 50% of the premium at 4.00 of the ESG6 P1675.

Lessons learned:

- Timing the put selling to down days makes a big difference on premium.
- Don't try and get smart with the hedge. For example the hedge for 11dec started running away from me and go them for a really expensive price of 3.75. There is no better price for a hedge than now.
- Scaling in the selling has helped with my dollar cost and I'm able to profit sooner. Which means I can get back out there and sell more sooner. After the first sells on 09nov my 50% profit target was at 3.50. After scaling in more my 50% profit target went to 4.00.
- The hedge are more out of the money and will decay faster than the sold puts. If you sold a put for 4 and your hedge you buy is 2; by the time your put hits 2 our hedge will be like .75ish. I'm wondering if selling a 5 delta and buying a 3delta hedge will provide slightly better profits than selling a 5 delta and buying 2x1.5 delta.

Nothing in life is to be feared, it is only to be understood. Now is the time that we understand more, so that we may fear less. - Marie Curie
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Old December 17th, 2015, 03:10 AM   #5137 (permalink)
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- The hedge are more out of the money and will decay faster than the sold puts. If you sold a put for 4 and your hedge you buy is 2; by the time your put hits 2 our hedge will be like .75ish. I'm wondering if selling a 5 delta and buying a 3delta hedge will provide slightly better profits than selling a 5 delta and buying 2x1.5 delta.

I've been wondering about this myself but Ron mentioned that he would exit after approx. 30 days to stay protected by the longs and then re-open a new position to minimize the loss..

/rsm005/

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Old December 17th, 2015, 03:54 AM   #5138 (permalink)
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rsm005 View Post
So now that interest rates have officially gone up I'm curious as to the thoughts of the people on this thread. The consensus across the intertubes has been increased volatility with a potential sharp move down as the rate hike propagates its way through the market. Thoughts? Are most of you guys taking a wait and see approach for the remainder of the year or putting on tighter, smaller spreads?

/rsm005/

I sold two lots of ESH P1650 and ESH P1675 after the pressconference. Maximum number of lots is four, thus, I am 50 % invested currently.

Best regards, Myrrdin

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Old December 17th, 2015, 10:51 AM   #5139 (permalink)
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fminus View Post
- Don't try and get smart with the hedge. For example the hedge for 11dec started running away from me and go them for a really expensive price of 3.75. There is no better price for a hedge than now.

Why not execute them as a single Strategy, less bid/ask, less slippage, less risk. Pretty sure there was a post in this thread within the last few months on using CME Strategy's to execute multi-leg option trades.

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Old December 17th, 2015, 11:33 AM   #5140 (permalink)
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rsm005 View Post
I wanted to run a paper trade to see how Ron's modifications to selling worked during a what is a very volatile period. On 12/3 I ran the following

Sell 75 ESH6 P1650
Buy 150 ESH6 P1350

I forgot to capture the IM when the trade opened but since then the market has dropped steadily by 85pts and the position has held up very well. The current margin is $548.75 on the TOS paper trading platform, well below the reserve.

The purpose of this trade was to enter a position near a peak and after some decay see what happens when a jarring event takes place...in this case the potential rise in interest rates this week.

Ron mentioned that he would take a loss if the position was trading lower with 90 days to go so that's what I'm trying to see. How well a trade like this holds up after some time passes then a huge event happens. I'll keep everyone posted.

/rsm005/

Here is how it has done so far.

If you added this position on 12/3 you would have been using the IM from 12/2. That is why I have 12/2 on the table.

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It is exiting after holding 30-40 days not at 90 DTE.

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