NexusFi: Find Your Edge


Home Menu

 





Selling Options on Futures?


Discussion in Options

Updated
      Top Posters
    1. looks_one ron99 with 2,221 posts (4,489 thanks)
    2. looks_two SMCJB with 346 posts (733 thanks)
    3. looks_3 kevinkdog with 341 posts (400 thanks)
    4. looks_4 myrrdin with 288 posts (408 thanks)
      Best Posters
    1. looks_one SMCJB with 2.1 thanks per post
    2. looks_two ron99 with 2 thanks per post
    3. looks_3 myrrdin with 1.4 thanks per post
    4. looks_4 kevinkdog with 1.2 thanks per post
    1. trending_up 1,934,752 views
    2. thumb_up 9,259 thanks given
    3. group 458 followers
    1. forum 7,370 posts
    2. attach_file 794 attachments




 
Search this Thread

Selling Options on Futures?

  #5421 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,686
Thanks Received: 2,651


rsm005 View Post
So I just couldn't keep my current position open as is going into next week with the Brexit vote looming.

I currently hold the short ESU P1600.

Why not hedge the risk of Brexit buying the same number of ESU puts, expiring on June 24th or 30th ? They could be closer to the money than the sold puts, and are still cheap.

Of course, protection is only for a couple of days. But if prices fall due to Brexit they will fall immediately.

Anything wrong with this idea ? Any suggestion for suited strike prices ?

Best regards, Myrrdin

Reply With Quote

Can you help answer these questions
from other members on NexusFi?
NexusFi Journal Challenge - April 2024
Feedback and Announcements
Request for MACD with option to use different MAs for fa …
NinjaTrader
ZombieSqueeze
Platforms and Indicators
My NT8 Volume Profile Split by Asian/Euro/Open
NinjaTrader
 
Best Threads (Most Thanked)
in the last 7 days on NexusFi
Retail Trading As An Industry
67 thanks
Battlestations: Show us your trading desks!
48 thanks
NexusFi site changelog and issues/problem reporting
47 thanks
GFIs1 1 DAX trade per day journal
32 thanks
What percentage per day is possible? [Poll]
31 thanks

  #5422 (permalink)
 rsm005 
vancouver BC/Canada
 
Experience: Beginner
Platform: Zaner360, OX
Broker: DeCaley
Trading: options
Posts: 264 since Jan 2015
Thanks Given: 13
Thanks Received: 205


myrrdin View Post
I currently hold the short ESU P1600.

Why not hedge the risk of Brexit buying the same number of ESU puts, expiring on June 24th or 30th ? They could be closer to the money than the sold puts, and are still cheap.

Of course, protection is only for a couple of days. But if prices fall due to Brexit they will fall immediately.

Anything wrong with this idea ? Any suggestion for suited strike prices ?

Best regards, Myrrdin

I thought about this but didn't do the math. It's def worth trying out and seeing how the system behaves...may be a good tool in the bag when known events like fed meetings, etc are coming up. I'll start playing with the numbers and see what happens.

/rsm005/

Reply With Quote
  #5423 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785



ron99 View Post
If you add the max loss (lowest Net P/L) to the Total Margin & Excess (Tot M&E in cell L2) this shows the amount your account could lose if prices were to go below your long options if you are doing covered options.

Or you can look in the ROI% column. For losing trades this shows what percent of your account balance would disappear with a loss at that futures level.

Started this thread Reply With Quote
  #5424 (permalink)
 rsm005 
vancouver BC/Canada
 
Experience: Beginner
Platform: Zaner360, OX
Broker: DeCaley
Trading: options
Posts: 264 since Jan 2015
Thanks Given: 13
Thanks Received: 205


myrrdin View Post
I currently hold the short ESU P1600.

Why not hedge the risk of Brexit buying the same number of ESU puts, expiring on June 24th or 30th ? They could be closer to the money than the sold puts, and are still cheap.

Of course, protection is only for a couple of days. But if prices fall due to Brexit they will fall immediately.

Anything wrong with this idea ? Any suggestion for suited strike prices ?

Best regards, Myrrdin

BTW, are you naked on those puts or do you have a spread?

/rsm005/

Reply With Quote
  #5425 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,686
Thanks Received: 2,651


rsm005 View Post
BTW, are you naked on those puts or do you have a spread?

/rsm005/

I hold naked puts, but get out of the trade when the S&P moves below the 200 dma. This strategy has worked well in August 2015 and January 2016, but once in a while I loose money, as I get out of a trade and the S&P turns upwards immedately.

Best regards, Myrrdin

Reply With Quote
The following 2 users say Thank You to myrrdin for this post:
  #5426 (permalink)
uuu1965
Riga Latvia
 
Posts: 107 since Jan 2013
Thanks Given: 441
Thanks Received: 72

Didier Sornette and his Financial Crisis Observatory:
Financial Crisis Observatory ? Chair of Entrepreneurial Risks | [AUTOLINK]ETH[/AUTOLINK] Zurich

Appearance of Didier Sornette:
Understanding world economics | Playlist | TED.com

I use his research for selling CL put options...

Reply With Quote
The following user says Thank You to uuu1965 for this post:
  #5427 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785

The attached Excel has different ES option strategies that were entered on 8/17/15, the worst day to sell puts before the 8/24/15 crash. Naked options and spreads with one or 2 longs.

You can change the margin factor (IM times this number. 6X would be using 1/6 of account to cover IM and 5/6 for cash excess) in the yellow cell to see how it affects the drawdown, account balance for IM and the ROI.

A higher delta naked short, 7.29 did better than a lower delta 3.27 or 2.93.

If the difference between the long and short is too small then the ROI gets too low to trade.

When I used 2 longs with a short for a net 1.99 delta it stayed off of margin call for the initial drop on 8/24/15 when using a margin factor of 3, but it went on margin call for the 2nd futures drop. Probably because the delta on the longs got too low.

On the drop on 8/24/15, using 3X caused all trades to go on margin call except the one using 2 longs. 6X worked for most except the 3.00 delta naked shorts.

Attached Files
Elite Membership required to download: 82415.xlsx
Started this thread Reply With Quote
The following 5 users say Thank You to ron99 for this post:
  #5428 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785

I had a request to add a short 10 delta and 2 long 2.50 delta spread. It is added on the far right.

Using 3x it rode out the 8/24/15 crash (88% of account used for IM) but went on margin call 9/28/15 with a 61% drawdown. It took 5x to not go on margin call.

Attached Files
Elite Membership required to download: 82415.xlsx
Started this thread Reply With Quote
The following 8 users say Thank You to ron99 for this post:
  #5429 (permalink)
 rsm005 
vancouver BC/Canada
 
Experience: Beginner
Platform: Zaner360, OX
Broker: DeCaley
Trading: options
Posts: 264 since Jan 2015
Thanks Given: 13
Thanks Received: 205


ron99 View Post
I had a request to add a short 10 delta and 2 long 2.50 delta spread. It is added on the far right.

Using 3x it rode out the 8/24/15 crash (88% of account used for IM) but went on margin call 9/28/15 with a 61% drawdown. It took 5x to not go on margin call.

That's the same thing I found. A 5x to 6x multiple is the only way to avoid getting hammered on all accounts. I go 10x-12x now just because I'm extra paranoid. Also, there were announcements like today where margins were doubled because of the UK referendum, that make me cringe. If I had 5x and something like that happened I'd be below the 3x min and sweating bullets.

In all cases what you said early on is the best, find your risk threshold and go with that. The rules you created are awesome but should be used as a guideline. Going forward for example I'm using the following

1. 9x min for margin excess
2. no single position greater than 15 contracts
3. no naked positions
4. roll early if needed but smaller positions help avoid this.
5. take smaller profits, exiting spreads is a pain in the ass and I'll always make less then predicted but that has to be ok.


I'm working on developing a few extra tools to help me and once I get them sorted out I'll share with the group. BTW, what's the general consensus for the upcoming vote? Overall, do you guys think it'll have a massive negative impact on the market like the China devaluation or be more like Greece?

/rsm005/

Reply With Quote
The following 3 users say Thank You to rsm005 for this post:
  #5430 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,686
Thanks Received: 2,651



rsm005 View Post
That's the same thing I found. A 5x to 6x multiple is the only way to avoid getting hammered on all accounts. I go 10x-12x now just because I'm extra paranoid. Also, there were announcements like today where margins were doubled because of the UK referendum, that make me cringe. If I had 5x and something like that happened I'd be below the 3x min and sweating bullets.

In all cases what you said early on is the best, find your risk threshold and go with that. The rules you created are awesome but should be used as a guideline. Going forward for example I'm using the following

1. 9x min for margin excess
2. no single position greater than 15 contracts
3. no naked positions
4. roll early if needed but smaller positions help avoid this.
5. take smaller profits, exiting spreads is a pain in the ass and I'll always make less then predicted but that has to be ok.


I'm working on developing a few extra tools to help me and once I get them sorted out I'll share with the group. BTW, what's the general consensus for the upcoming vote? Overall, do you guys think it'll have a massive negative impact on the market like the China devaluation or be more like Greece?

/rsm005/

In my opinion Brexit, if it occurs, will not have a massive negative impact on the US market in the long run. Exports from the US to Great Britain are limited. But in the short run, the indices could show massive moves, as people panic.

I currently hold a reduced position of ES puts, but intend to sell additional puts after the vote no matter if there will be Brexit or not. In case of Brexit I will wait until the dust has settled.

Only intraday margins requirements were increased to overnight level for the ES future, that should not harm option sellers. Overnight margin was doubled for European Indices and some currencies only.

Best regards, Myrrdin

Reply With Quote
The following 3 users say Thank You to myrrdin for this post:





Last Updated on July 28, 2023


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts