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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,534 / 5,727
Last Reply:December 2nd, 2016 (12:40 PM) Attachments:642

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Selling Options on Futures?

Old December 31st, 2015, 04:22 PM   #5171 (permalink)
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ninjarky View Post
Ron,

Thank you for all your excellent work.

I have been catching up on last couple of months postings, now that I have caught up, I have a follow up with the posting #5101 (page 511) where you have compared naked option selling Vs spread selling. In that posting, the loss with spread option strategy on 08/25/15 is -366 and overall loss is around -101,000 (brings ROI for the year to 47%). I am not sure how this compares to postings #5021 and #5023 (on page 503) where same spread settings (5 delta short and 2, 1.5 deltas long), gives 145 profit and did not cause margin call. With this observation, the recent posting (5101) should be okay with 08/24 and 08/25 massive drops, and should be profitable and not causing margin calls. right?

I just want to make sure I am not missing anything.

Thanks.

No the post #5101 will still have losses.

The difference between the two is that the one in post #5101 was at 52 DTE when 8/24 happened and it lost money.

The ones in posts #5021 & #5023 were 88 DTE when 8/24 happened.

In another post I suggested that you exit the spread if you have held 30 days or more because you will not get the same coverage at 60 DTE as you will when they are 70-120 DTE.

The closer to expiration the longs are the lower amount they will react when there is a large movement and thus lower amount of coverage for the short.

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Old January 1st, 2016, 03:34 PM   #5172 (permalink)
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Welcome to 2016.

I wanted to bring up a topic that hasn't had much focus on this thread, and perhaps rightly so. What is everyone's thought on position sizing? How big, % wise, is any single position that people open relative to portfolio size? How many positions do you have open? Given the extra volatility and real chance of a big downward swoon earlier this year how are the more senior people on this thread working with that?

/rsm005/

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Old January 1st, 2016, 04:28 PM   #5173 (permalink)
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rsm005 View Post
Welcome to 2016.

I wanted to bring up a topic that hasn't had much focus on this thread, and perhaps rightly so. What is everyone's thought on position sizing? How big, % wise, is any single position that people open relative to portfolio size? How many positions do you have open? Given the extra volatility and real chance of a big downward swoon earlier this year how are the more senior people on this thread working with that?

/rsm005/

I risk 3 % of the account value for a regular lot. This determines the account size as a function of the risk in absolute figures.

In my option selling portfolio I usually get out at double the entry price at latest.

There are high risk trades (eg. the current NGH C3), where I enter only half a lot. And there are trades (eg. selling ES puts at times I consider as safe), where I enter 2 lots.

Best regards, Myrrdin

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Old January 1st, 2016, 04:38 PM   #5174 (permalink)
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rsm005 View Post
Welcome to 2016.

I wanted to bring up a topic that hasn't had much focus on this thread, and perhaps rightly so. What is everyone's thought on position sizing? How big, % wise, is any single position that people open relative to portfolio size? How many positions do you have open? Given the extra volatility and real chance of a big downward swoon earlier this year how are the more senior people on this thread working with that?

/rsm005/

Here is a good post by @kevindog on diversification
https://futures.io/options-futures/12309-selling-options-futures-494.html#post517361

@myrrdin has this thread
https://futures.io/options-futures/36932-diversified-option-selling-portfolio.html

I am working on a big dairy trade now, so I have on no short options. Getting short Feb milk either by selling futures or buying puts.

Seasonally ES has had many down Januaries but hasn't had a down Feb since 2009.

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Old January 1st, 2016, 06:46 PM   #5175 (permalink)
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ron99 View Post

...

I am working on a big dairy trade now, so I have on no short options. Getting short Feb milk either by selling futures or buying puts.

Seasonally ES has had many down Januaries but hasn't had a down Feb since 2009.

Ron,

You raise an interesting side point. A while back on this thread there were several seasoned traders that effectively kept "permanent puts" against the S&P. Do you believe that strategy is no longer a viable option?

Thanks,
/rsm005/

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Old January 2nd, 2016, 12:12 AM   #5176 (permalink)
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rsm005 View Post
Ron,

You raise an interesting side point. A while back on this thread there were several seasoned traders that effectively kept "permanent puts" against the S&P. Do you believe that strategy is no longer a viable option?

Thanks,
/rsm005/

Heck no. I just feel that right now I can make far more money in dairy than ES.

When that trade is done if there is nothing else big on the horizon then I will be back selling ES options if the fundamentals are OK.

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Old January 6th, 2016, 09:36 AM   #5177 (permalink)
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ron99, I would like to read this thread of yours to gain some insight into your methodology as I am developing an interest in trading options. The thread unfortunately is more than 500 pages long currently and stated way back in 2011. I am not being lazy or looking for a short-cut, but what I have found many times with very long old threads is that somethings at the the beginning had become modified or discarded as time has gone on, and you realised only too late after spending a huge amount of time reading the thread from the beginning. I would therefore be most grateful if you could give me an idea as to what page to start reading from (or what posts are the gems) for one to quickly grasp what your method is about. Many thanks

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Old January 6th, 2016, 03:40 PM   #5178 (permalink)
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danjuma View Post
ron99, I would like to read this thread of yours to gain some insight into your methodology as I am developing an interest in trading options. The thread unfortunately is more than 500 pages long currently and stated way back in 2011. I am not being lazy or looking for a short-cut, but what I have found many times with very long old threads is that somethings at the the beginning had become modified or discarded as time has gone on, and you realised only too late after spending a huge amount of time reading the thread from the beginning. I would therefore be most grateful if you could give me an idea as to what page to start reading from (or what posts are the gems) for one to quickly grasp what your method is about. Many thanks

In post #2 are some summaries of the info in the thread.

Also in that post is "A summary of the first 204 pages of the thread in a Word doc by Iridium."

If you don't want to read the full thread I suggest you start reading from page 411. That is when I started using earlier exits. Later I get into using spreads to cover risk.

But I would say that most of the stuff early in the thread is still applicable and worth reading.

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Old January 6th, 2016, 03:46 PM   #5179 (permalink)
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ron99 View Post
In post #2 are some summaries of the info in the thread.

Also in that post is "A summary of the first 204 pages of the thread in a Word doc by Iridium."

If you don't want to read the full thread I suggest you start reading from page 411. That is when I started using earlier exits. Later I get into using spreads to cover risk.

But I would say that most of the stuff early in the thread is still applicable and worth reading.

Thank you sir.

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Old January 6th, 2016, 08:29 PM   #5180 (permalink)
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Very thin Open Interest 90+ days out


Looking at the Open Interest in March/April I don't see much of anything at the .6 and .15 deltas. To get anything decent you'd have to get down to 85 days out and that gets risky. Wonder what's going on. Thoughts?
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Last edited by rsm005; January 6th, 2016 at 08:30 PM. Reason: spacing in the image
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