I put an order in this morning to purchase 20 puts at 1825 that expire in 8 days for extra coverage in the event of a negative outcome for tomorrow. It reduced my overall profit in the trade by $1000 but it's well worth it for me to sleep a bit better tonight. I have 3 spreads open with 15 days of decay on the most exposed position and now these extra puts.
Let's see what happens tomorrow.
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1. Looks like that extra insurance I bought really paid off. Spent $1 and bought 20 contracts, current value $6.25
2. Rolling out and breaking up my 1 50 contract to 3 smaller trades has also helped a lot as seen in the attached image
3. Buying 2 puts for every 1 sold had made a staggering impact on the drawdown vs a naked position, here's what it looks like
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4. 2 black swan events in 11 months? WTF?
5. I'm expecting this to continue down tomorrow so we'll see how the overall drawdown looks. If this mimics anything like what we saw in August then the total loss shouldn't be that bad. I need to sell my 1825 puts soon though.
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I'm going to try and wind down some of my positions tomorrow. Depending on what prices I get I may end up exiting with a profit but it all depends on how much I can get for my longs. If I can get the ask then I'm golden, if I have to pay the bid it'll sting and I may as well wait it out. In between, well who knows there.
Update: Based on this event I am more certain than ever that 9x-12x excess and 1:2 ratio spreads are the only way I will trade going forward.
Last edited by rsm005; June 24th, 2016 at 03:31 AM.
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Just before Brexit I closed short legs of my ESU6 1625/1300 and 1670/1350 ratio spreads with profit but leaved both long legs. Does that mean that I am a very smart guy? Of course, no.
It seemed to me that the British will remain in EU and I wanted to open a new short legs after 23/06...
Running is little research here to see which ES puts are affected the most when futures were -68.50 at 8:29 am ET
biggest percent gain (current bid / previous settlement)
DTE 1 427% 2085 strike 11.00 settlement. High group strikes 2070 to 2115. Settlements of 2.75 to 9.00. +400% to +430%. Obviously narrow group near the ATM.
DTE 8 390% 1975 strike that settled at 3.40. High group was strikes 1850 to 2040. Settlements of 1.25 to 10.50. +350% to +390%
DTE 15 393% 1860 strike that settled at 1.40. High group was strikes 1810 to 2005. Settlements 1.00 to 7.00. +350% to +393%
DTE 22 378% 1860 strike that settled at 2.05. High group was strikes 1770 to 1975. Settlements 1.05 to 6.25. +350% to +378%
DTE 57 279% 1475 strike that settled at 0.95. High group was strikes 1410 to 1910. Settlements 0.75 to 11.00. +250% to +279%
DTE 85 238% 1700 strike that settled at 6.00. High group was strikes 1175 to 2025. Settlements 0.60 to 35.50. +200% to +251%. A lot of them went up in this range. (Note: 1700 seems to be a higher than normal bid. Other high is 1480 that settled at 2.10. +231%)
DTE 99 221% 1460 strike that settled at 2.60. High group was strikes 1250 to 1865. Settlements 1.10 to 17.75. +200% to +221%. A lot of them went up in this range.
DTE 130 203% 1250 strike that settled at 1.60. High group was strikes 1125 to 1820. Settlements 1.00 to 20.00. +200% to +251%. A lot of them went up in this range.
Summary is that biggest reaction to major move is for strikes priced 0.80 to 8.00 on day prior to major move. Higher or lower strikes moved less.
The other major take away is that reaction on options further OTM is lower. Highest gain for DTE <60 was +250% to +390%. Whereas the highest gain for DTE >60 was <250%.
Last edited by ron99; June 24th, 2016 at 09:51 AM.
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I added one more example to my ES 8/24/15 research. I compared using a short 20% OTM (1675) and a long 100 below the short (1575). I did it for both the Nov contract which was 95 DTE on 8/17/15 and the Dec contract which was 123 DTE on 8/17/15.
Two things stand out. One is you can make a higher ROI on the 123 DTE Dec position. Using 5X gives you 3.3% monthly ROI if you had a 50% drop in premium in 30 days vs 2.2% for the Nov contract.
Second is that the Dec position withstood the crash better than the Nov contract. Using 5x margin factor the Nov 95 DTE positions hit 85% of account for IM with a 48% draw down. The Dec 123 DTE position only hit 60% of account balance for IM and 40% draw down.
The only downside difference for the Dec 123 DTE positions was you had to wait 7 days extra for the premium to drop by 50%. But the monthly ROI was still higher than the Nov 95 DTE positions at exit.
Also on the spreadsheet are 3 back tests of various positions starting 1/2/13. The 80% 100 sheet is short 80% of futures and a long 100 below short. The other 2 are naked puts either 300 OTM or a 3.00 delta.
I am going to run a back test of using a short 80% of futures but make it 110+ DTE when entered and see the difference. I will post it later.
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Ron, thanks for the info on options on futures. I have been trading some futures options over the past year, mostly on Crude and NG. I have been looking at your spreadsheet which is impressive. Are those real trades on the /ES, or simulated via back testing? Do you know approx. what page in this thread you discuss the details of how the spreadsheet works? Most is self explanatory, but would like to read what you have to say about the numbers. I looked back a number of pages but didn't see any detailed discussions. Thanks again.