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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:570,153 / 5,734
Last Reply:December 9th, 2016 (01:01 AM) Attachments:642

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Selling Options on Futures?

Old January 24th, 2016, 02:33 PM   #5241 (permalink)
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Long Island, NY
 
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k20a View Post
What is high volatility though ? People think volatility is high end of 2007, mid to high 20's VIX. Then came the 30's and it must be very high ? From 20's all the way upto 80's I'm sure people were selling "high volatility", and most got murdered. We're only in the 20's range at the moment. If Soros is correct in predicting a 08 crash, then we are actually at low end of volatility at the moment.

If you use TOS, or watch tastytrade, high implied volatility would be based on the Implied Volatility Rank or Percentile being at a very high level, say over 75 or 80. This compares Implied Volatility level for an underlying against itself, say over the last 12 months, or some other period.

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Old January 24th, 2016, 03:01 PM   #5242 (permalink)
Market Wizard
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rsm005 View Post
@ron99

Hey Ron I hope you're doing well. I wanted to put together a quick test to see how your two trading methods Would hold up during this latest market downturn.

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As you can see, the naked position actually held up a whole lot better than the spread. But neither one of them would have forced an exit although the spread came precariously close a few days ago.

The spread is the column on the right. So this raises a rather interesting question. Over the past six months there have been two market moves that have put both methods of trading to the test. In one scenario, the naked put fails and in the other scenario the spread fails..... for the sake of this argument let's just assume that's what happened instead of hitting 97% initial margin.

Is there any scenario where you would consider using the naked puts as opposed to the spread going forward?

/rsm005/

The delta for the spread is about 0.5 lower then the naked option. If you use 1625 and 1350 that brings the delta of the spread to 3.15 which is closer to the 3.21 of the naked option.

The higher delta spread does better than the lower delta spread but still worse than the naked option. I think part of the reason the spreads are doing worse is that the drop this time is less. We haven't dropped 228 in 7 days.

Here is a study I did using 12/29/15 for the date of entering positions. That would have been the worst day to add positions. A 220 drop in 22 days (1/20/15).

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The ES 6.00 delta short and two 1.50 delta long spreads give you black swan coverage and a higher ROI under normal times. For the last 3 weeks they would have given you worse coverage and ROI but you didn't hit margin call.

The spreads cover a black swan event but don't do better in smaller, slower drops.

I will probably never sell options naked. The markets right now have too great a chance of having black swan events. If you can exit the positions at 50% drop in 30 days held, the spreads have a far better ROI.

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Old January 24th, 2016, 03:04 PM   #5243 (permalink)
World'sWorstTrader
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Warren534 View Post
I think so, but only temporarily. My cycle analysis timed the bottom perfectly, and indicates a 2 week rally to Friday Feb. 5th, then a resumption of the decline.

Can you share your cycle analysis??

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Old January 25th, 2016, 08:13 AM   #5244 (permalink)
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Options tracking futures - any consolidated list


ron99 View Post
The futures month is ESZ5 for the Nov option contract. I have made that same mistake too.

Is there somewhere that presents this well? for different futures contracts.. like Crude oil or Nat Gas May options tracks which futures contract etc

thanks

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Old January 25th, 2016, 08:33 AM   #5245 (permalink)
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This might help

Futures Edge on FIO

Are you a NinjaTrader user?

 
Future Symbol & Month Codes | Nadex Binary Option Trading Forex Trading Futures Trading ? Apex Investing Institutute

If Crude oil trades and Nat Gas trade all 12 months, then futures and options are same contract month?

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Old January 25th, 2016, 08:44 AM   #5246 (permalink)
Market Wizard
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jokertrader View Post
Future Symbol & Month Codes | Nadex Binary Option Trading Forex Trading Futures Trading ? Apex Investing Institutute

If Crude oil trades and Nat Gas trade all 12 months, then futures and options are same contract month?

Yes.

That table is incorrect. The metals do not trade all 12 months.

This table is better.
Futures Contract Symbols

The futures contract for the option is the next futures contract past the option month. So if the option is May gold then the future is June.

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Old January 25th, 2016, 09:41 AM   #5247 (permalink)
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ron99 View Post
Yes.

That table is incorrect. The metals do not trade all 12 months.

As far as I know metals trade all 12 months. But open interest and volume for the F, H, K ...contracts is very small, and they only trade for a short period of time.

See Gold Futures Quotes - CME Group

I assume that volume for options for these months is close to non-existing.

Best regards, Myrrdin

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Old January 25th, 2016, 02:24 PM   #5248 (permalink)
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@ron99 and others,

We can all see that the stock market hasn't been behaving well over the past few weeks. Given that

1. It's impossible to predict the bottom of any market
2. It's very difficult to predict if this is going to be a long-term trend or just some short-term pain

Are there any particular signs, signals, or particular bits of news that you all look for before you believe that it's a good time to begin pursuing options again? Are you looking at volatility? Overall trends? What particular pieces of fundamental data make of your list that would get you to say

"hey, this particular market move is nearing its end and it's now time to explore small positions again."

The reason I ask this is that there's just so much noise out there, so many people saying the "end is nigh" and others saying "stay the course" that it makes it nearly impossible for someone to get a grip on what really is happening.

Thanks,
/rsm005/

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Old January 25th, 2016, 03:02 PM   #5249 (permalink)
Market Wizard
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rsm005 View Post
@ron99 and others,

We can all see that the stock market hasn't been behaving well over the past few weeks. Given that

1. It's impossible to predict the bottom of any market
2. It's very difficult to predict if this is going to be a long-term trend or just some short-term pain

Are there any particular signs, signals, or particular bits of news that you all look for before you believe that it's a good time to begin pursuing options again? Are you looking at volatility? Overall trends? What particular pieces of fundamental data make of your list that would get you to say

"hey, this particular market move is nearing its end and it's now time to explore small positions again."

The reason I ask this is that there's just so much noise out there, so many people saying the "end is nigh" and others saying "stay the course" that it makes it nearly impossible for someone to get a grip on what really is happening.

Thanks,
/rsm005/

ES is a very hard one to predict because is has so many variables in it. And now there is a 96% correlation between oil and ES.

NG has far less things to look at, US temp vs normal forecasts, inventory, production, cost of coal. etc.

So many times over the years I found a trade that worked well and I then say to myself I can do this for years and do well. But usually after a couple of years it no longer works and you have to find something else.

So I am saying I don't have a clue which way ES is moving this year.

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Old January 25th, 2016, 04:12 PM   #5250 (permalink)
World'sWorstTrader
Knoxville Tennessee USA
 
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ron99 View Post
ES is a very hard one to predict because is has so many variables in it. And now there is a 96% correlation between oil and ES.

NG has far less things to look at, US temp vs normal forecasts, inventory, production, cost of coal. etc.

So many times over the years I found a trade that worked well and I then say to myself I can do this for years and do well. But usually after a couple of years it no longer works and you have to find something else.

So I am saying I don't have a clue which way ES is moving this year.

That is why I have been trading futures spreads lately.

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