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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:567,857 / 5,727
Last Reply:11 Hours Ago (12:40 PM) Attachments:642

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Selling Options on Futures?

Old June 29th, 2016, 10:18 AM   #5451 (permalink)
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Here are how various ES put strategies performed starting 6/23/16 using 6x.

1680 was 20% below futures on 6/23/15. The 1st three are 85 DTE. 2nd three are 120 DTE. The 1710-1480 is 5 delta-1.5 delta 2 longs. Same for the 120 DTE 1625-1375.

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The 120 DTE had about the same draw downs as the 85 DTE but their margin increased by a lower percent so less of account balance used to cover margin (IM). The worst for draw down was the 5 delta 2 longs 1.5 delta spread. 16% draw downs.

I do notice the 120 DTE positions didn't recover as fast premium wise on 20160628. I'll check this again next week.

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Old June 30th, 2016, 12:22 PM   #5453 (permalink)
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Excellent Thank you.

Quotes from article

Quoting 
his strategy has produced a compound annual return of 11.52% since 1996 and is up 22.24% year-to-date through July.
...
His risk management tools include strike selection, covered strategies and hard stops. He writes puts on the S&P 500 so they don’t have a concentration in high beta, highly volatile stocks. “We have stop loss orders on every option, which automatically takes us out of the market when prices are moving against us,” he says. “We have a partial hedge, which automatically makes money for us as we lose on the options.”
...
“I eventually settled on writing options on the S&P 500 because of the diversification that comes with that index. Some people have accused me of not being diversified. I ask them how many stocks they think I should be writing on. They say, ‘Well, at least 30 or 40.’ I tell them, ‘That’s too few, how about 500?!’”

He says the largest evolution of the strategy over the years has been his hedging component. Prior to 2007, the strategy was unhedged. Since then he has been constantly tinkering with the correct ratio.
...
“In our strategy, we only have to predict a range in which the market will move — not whether it will go up or down. The second most important thing I learned was to not listen to anybody else’s predictions. As smart as they are and as persuasive as they may sound, they don’t know any more than anybody else. They will always tell you when they’ve been right, and never mention when they’ve been wrong.”

So he only sells S&P 500 puts. He uses covered spreads. He also uses stops and hedges. He is now trading $21 million AUM.


Last edited by ron99; June 30th, 2016 at 04:07 PM.
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Old June 30th, 2016, 12:28 PM   #5454 (permalink)
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ron99 View Post
Excellent Thank you.

Quotes from article
So he only sells S&P 500 puts. He uses covered spreads. He also uses stops and hedges. He is now trading $21 AUM.

And he never listen to anybody else’s predictions...

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Old June 30th, 2016, 03:50 PM   #5455 (permalink)
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Hi ron99 and all traders who are following this post, new member here

Thanks for your wonderful topic about selling options on futures.

Can you share your experience regarding selling options from 2000 - 2002? If you haven't started trading in 2000 - 2002, from your experience, what difficulties you think options sellers would have to deal with .

One thing I realized for the last few days that TOS raised the margin requirements for /ESU6 without noticing. Today, it's back to normal. Have any of you ever experienced that condition? Is it normal?

Thank all of you very much

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Old June 30th, 2016, 04:06 PM   #5456 (permalink)
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huybebe2009 View Post
Hi ron99 and all traders who are following this post, new member here

Thanks for your wonderful topic about selling options on futures.

Can you share your experience regarding selling options from 2000 - 2002? If you haven't started trading in 2000 - 2002, from your experience, what difficulties you think options sellers would have to deal with .

One thing I realized for the last few days that TOS raised the margin requirements for /ESU6 without noticing. Today, it's back to normal. Have any of you ever experienced that condition? Is it normal?

Thank all of you very much

Probably because of the BREXIT, usually only occurs on big events.

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Old June 30th, 2016, 04:06 PM   #5457 (permalink)
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huybebe2009 View Post
Hi ron99 and all traders who are following this post, new member here

Thanks for your wonderful topic about selling options on futures.

Can you share your experience regarding selling options from 2000 - 2002? If you haven't started trading in 2000 - 2002, from your experience, what difficulties you think options sellers would have to deal with .

One thing I realized for the last few days that TOS raised the margin requirements for /ESU6 without noticing. Today, it's back to normal. Have any of you ever experienced that condition? Is it normal?

Thank all of you very much



Why do you want to know about 2000-2002?

Yes some places will jack up margin requirements above exchange minimum with no prior notice. IB, TOS, OptionsXpress to name a few. Run from them as fast as you can. Unpredictable margin requirements, especially when markets are moving against you, is a horrible trading situation.

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Old June 30th, 2016, 05:38 PM   #5458 (permalink)
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ron99 View Post


Why do you want to know about 2000-2002?

Yes some places will jack up margin requirements above exchange minimum with no prior notice. IB, TOS, OptionsXpress to name a few. Run from them as fast as you can. Unpredictable margin requirements, especially when markets are moving against you, is a horrible trading situation.

I just want to know what would happen in 2000 - 2002 to option sellers compared to 2008. Would they experience substantial loss as many option sellers did in 2008?

Regarding the margin requirements problem, what brokers you think are the best for options on futures trading?

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Old June 30th, 2016, 05:40 PM   #5459 (permalink)
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datahogg View Post
Probably because of the BREXIT, usually only occurs on big events.

Thank you datahogg,

During your trading years, can you recall how many times have you experienced this particular situation? Did it in anyway negatively affect your trading strategy and cause you unexpected loss/margin call?

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Old June 30th, 2016, 06:21 PM   #5460 (permalink)
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ron99 View Post
Here are how various ES put strategies performed starting 6/23/16 using 6x.

1680 was 20% below futures on 6/23/15. The 1st three are 85 DTE. 2nd three are 120 DTE. The 1710-1480 is 5 delta-1.5 delta 2 longs. Same for the 120 DTE 1625-1375.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


The 120 DTE had about the same draw downs as the 85 DTE but their margin increased by a lower percent so less of account balance used to cover margin (IM). The worst for draw down was the 5 delta 2 longs 1.5 delta spread. 16% draw downs.

I do notice the 120 DTE positions didn't recover as fast premium wise on 20160628. I'll check this again next week.


The behavior of the spreads is very strange given how things shook out in August. Wonder why the spreads had a larger drawdown than the naked positions.

Based on this and some of the other testing you've done are you thinking of changing your put strategy? I'm considering moving to a 1 and 1 strategy rather than a 1 and 2 simply because exiting is so difficult. I'm doing my own back testing on that.

/rsm005/

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