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Selling Options on Futures?
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Selling Options on Futures?

  #5341 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
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rsm005 View Post
@ron99

So I put on a smallish position 4 days ago against ES and have noticed some interesting behavior.

Position
ESM6P1620 Price = $8
ESM6P1370 Price = $2.20


Since the position was opened the market has remained fairly flat but what I've seen is the long put decay much faster than the short.

As of today the prices reflect
ESM6P1620 Price = $8
ESM6P1370 Price = $1.90


Margin hold is about the same at OX.

It's unnerving to watch the longs decay that since i'm counting on them to protect me from a market shock. I'm using position sizing to mitigate the loss against a long grind down. Just thought I'd share.

Thanks,
/rsm005/

The longs settled and have only traded at 1.95. The short settled at 7.50. So the net is 3.60 for when you entered the trade and 3.60 for yesterday's settlements.

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  #5342 (permalink)
Elite Member
vancouver BC/Canada
 
Futures Experience: Beginner
Platform: Zaner360, OX
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Getting a better fill.

I wanted to bring this question up for the broader forum to see if anyone can shed some light on some ways to get a better fill when you open or close a position. Are there any tricks, strategies, or times when you open positions or close positions? I'd love to hear people's thoughts on this. Thanks a lot, have a great weekend.

/rsm005/

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  #5343 (permalink)
Market Wizard
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rsm005 View Post
I wanted to bring this question up for the broader forum to see if anyone can shed some light on some ways to get a better fill when you open or close a position. Are there any tricks, strategies, or times when you open positions or close positions? I'd love to hear people's thoughts on this. Thanks a lot, have a great weekend.

/rsm005/

I prefer to sell options during US day trading hours, the former pit hours. Usually the volume is highest after the former pit opening and before its close. ES options and other options with a high volume can be traded during the complete former pit hours. For some options you will receive acceptable fills also during night hours, for some of them (eg. energies) fills during night hours are terrible.

I do not sell very thinly traded options (eg. lumber).

I prefer selling options on Fridays, but of course there are other criteria for the best day.

I always place the order in the middle between bid and ask. Often there will be a fill, if not I will move the order tick by tick. Fills in the ES are easier to get than in coffee options.

It is preferable to enter a spread as a spread order. There are traders claiming there excellent experience legging into spreads (and making some additional money). I am not among them.

Best regards, Myrrdin

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  #5344 (permalink)
Market Wizard
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A few other points.

I have sometimes found that if you have an ES open order, a few ticks from bid, right near the close, 4pm ET, that it will get hit.

I like to sell late Thursday. I find that weekend time erosion of the premium starts happening on Friday.

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  #5345 (permalink)
Membership Temporarily Revoked
Springfield USA
 
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ron99 View Post
A few other points.

I have sometimes found that if you have an ES open order, a few ticks from bid, right near the close, 4pm ET, that it will get hit.

I like to sell late Thursday. I find that weekend time erosion of the premium starts happening on Friday.

Yes, I remember an interview a few years ago from a MM on the floor and he said they price in the weekend decay early-mid friday because of the people who were coming in late friday hoping to snag the weekend decay and get out Monday.


Lately I have been doing spreads on both ES and SPX just depending on which broker I am using. Last week I put a spread on ES for $3.45 and I immediately get an Ask for $3.30 which is decent and then it filled 60 min later. I put the same spread on SPX and the Ask is $1.20 it sat all day and didn't budge from $1.20 till 3:45 pm then got filled.
(I did 2x on ES to make it equal)
I believe this has to do with SPX still being monopolized on one exchange and ES being on multiple exchanges.

Anyone else have similar experience?


Last edited by chubbly2; March 20th, 2016 at 11:46 PM.
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  #5346 (permalink)
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As I mentioned in an earlier post I am still working on finding optimal hedging for selling puts. Part of the problem is figuring out how much of a market decline are you looking to protect against and what % of your portfolio are you looking to protect. Unfortunately a hedge really bites into profits if you miscalculate it. In a semi-slow grind down like we had in Jan a hedge as @ron99 suggested does offer some protection but it works much better in a sudden Aug 24 type drop. Also the longer and slower the grind downward takes the less effective it becomes

This link has an interesting graphic I just found. Basically there have been 11 Bear markets since 1956. This document a bull (bear) market is defined as a positive (negative) move greater than 15% that lasts at least 3 months.

https://www.mackenzieinvestments.com/en/assets/documents/marketingmaterials/mm-bull-bear-markets-sp500-en.pdf

This link also has a few interesting points about bull/bear markets

8 things you need to know about bear markets


Of course the problem is you never know when it will happen and you don't know a bear market till you are firmly in it and our issue is put spreads take 25-45 days to work.

Finally here is a good link on biggest up and down days in SP500

https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_S%26P_500_Index

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  #5347 (permalink)
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chubbly2 View Post
As I mentioned in an earlier post I am still working on finding optimal hedging for selling puts. Part of the problem is figuring out how much of a market decline are you looking to protect against and what % of your portfolio are you looking to protect. Unfortunately a hedge really bites into profits if you miscalculate it. In a semi-slow grind down like we had in Jan a hedge as @ron99 suggested does offer some protection but it works much better in a sudden Aug 24 type drop. Also the longer and slower the grind downward takes the less effective it becomes

This link has an interesting graphic I just found. Basically there have been 11 Bear markets since 1956. This document a bull (bear) market is defined as a positive (negative) move greater than 15% that lasts at least 3 months.

https://www.mackenzieinvestments.com/en/assets/documents/marketingmaterials/mm-bull-bear-markets-sp500-en.pdf

This link also has a few interesting points about bull/bear markets

8 things you need to know about bear markets


Of course the problem is you never know when it will happen and you don't know a bear market till you are firmly in it and our issue is put spreads take 25-45 days to work.

Finally here is a good link on biggest up and down days in SP500

https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_S%26P_500_Index

I'm experimenting with position sizing as well. It makes a big impact on draw down especially when the market grinds down. I usually keep between 6x and 9x as a reserve now. The upside is smaller but I sleep so much better at night.

/rsm005/

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  #5348 (permalink)
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rsm005 View Post
I'm experimenting with position sizing as well. It makes a big impact on draw down especially when the market grinds down. I usually keep between 6x and 9x as a reserve now. The upside is smaller but I sleep so much better at night.

/rsm005/

Yes, I am using more margin as well. The thing you must decide is how far will you let a position go against you and what % of damage will that do to your account if it happens.

We have had 4 swings of 10+% up/down in the past 7 months and I don't think option prices have gone up that much to compensate us for taking the risk of writing. Maybe I am wrong?

I am also looking at strategies trading VIX as well since it has top and bottom limits and always is mean reverting. @ron99 if you would like me to start a new thread on vix just let me know so I don't pollute your thread

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  #5349 (permalink)
Silver bullet
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chubbly2 View Post
Of course the problem is you never know when it will happen and you don't know a bear market till you are firmly in it and our issue is put spreads take 25-45 days to work.
...
Finally here is a good link on biggest up and down days in SP500

Good post!

knowing statistics from the past for bigger drawdowns on a daily and a longer base can be helpful. Doing option selling plus other kind of trades can help a lot to diversify and reduce risk. But also one has to find a good balance between subsequent regularly selling options and using the market conditions to sell even more options for a better premium. At least that's the way I do it.

Regularly short and longer term options and keeping lots of reserve for times VIX is going up. If it does and I think the momentum is slowing down I sell another portion and one more after 1-2 days if possible ... The higher premium and greater likelyhood of premium to drop after a few days pays out. Combined with regularly selling I feel quite comfortable with this.

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  #5350 (permalink)
Market Wizard
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chubbly2 View Post
Yes, I am using more margin as well. The thing you must decide is how far will you let a position go against you and what % of damage will that do to your account if it happens.

We have had 4 swings of 10+% up/down in the past 7 months and I don't think option prices have gone up that much to compensate us for taking the risk of writing. Maybe I am wrong?

I am also looking at strategies trading VIX as well since it has top and bottom limits and always is mean reverting. @ron99 if you would like me to start a new thread on vix just let me know so I don't pollute your thread

Yeah you probably should start a new thread if you are going to discuss trading VIX.

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