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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,080 / 5,727
Last Reply:Yesterday (12:40 PM) Attachments:642

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Selling Options on Futures?

Old August 15th, 2016, 09:40 AM   #5531 (permalink)
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myrrdin View Post
When you sell the puts you have 6 times the initial margin as a "safety belt". With progressing time the options lose value, and the necessary margin is reduced - the "safety belt" gets bigger and bigger.

Did you consider to sell further puts, until the "safety belt" is again 6 times the initial margin ?

Best regards, Myrrdin

No because in my research if a large drop in prices happens, I need all of that excess. If I use that extra excess on other positions it won't be there when a large crash happens.

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Old August 15th, 2016, 09:44 AM   #5532 (permalink)
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rsm005 View Post
Is there a way to modify your spreadsheet and switch the stop to 100% the profit rather than 50% the profit?

Thanks.
/rsm005/

Yes you can switch the stop but then you need to redo the positions after that because exit dates could be changed. So it is not as simple as changing the stop number.

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Old August 15th, 2016, 09:57 AM   #5533 (permalink)
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ron99 View Post
No because in my research if a large drop in prices happens, I need all of that excess. If I use that extra excess on other positions it won't be there when a large crash happens.

Just a thought:

I assume that in your system a crash just after you sold the puts is more harmful than a crash just before you intend to buy them back.

I further assume that we are unable to predict the time of a crash.

Thus, the risk of a loss is unevenly distributed over time. There are times with larger risk (just after selling) and times with less risk.

Holding (more or less) constantly x times the initial margin as a "safety belt" would result in constant risk over time. And to achieve the same profit, x could be larger than 6. Maximum risk just after selling would be reduced.

Best regards, Myrrdin

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Old August 15th, 2016, 10:26 AM   #5534 (permalink)
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myrrdin View Post
Just a thought:

I assume that in your system a crash just after you sold the puts is more harmful than a crash just before you intend to buy them back.

Actually it is the opposite if you are doing spreads. A crash long after you did the spread is more harmful because the delta on the longs is lower and thus the margin is higher than right after you entered the spread.

This table uses 4X.

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The futures price and drawdown on 20150825 & 120150928 is about the same. But Acct Bal for IM is 51.5% on 20150825 and 103.8% on 20150928.

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Old August 15th, 2016, 10:35 AM   #5535 (permalink)
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myrrdin View Post
Just a thought:

I assume that in your system a crash just after you sold the puts is more harmful than a crash just before you intend to buy them back.

You are correct for naked options.

This table is using 8X.

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Acct Bal for IM on 20150825 is 74.5% but only 42.3% on 20150928. Draw down is also less.

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Old August 15th, 2016, 10:40 AM   #5536 (permalink)
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ron99 View Post
Actually it is the opposite if you are doing spreads.

Yes, of course. I overlooked that you are selling spreads.

I agree that here it does not make sense to add to the number of positions.

Best regards, Myrrdin

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Old August 15th, 2016, 12:23 PM   #5537 (permalink)
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Ron,

Does the 30 day limit on the spreads affect the number of profitable trades you have? I seem to remember a previous post saying up to 45 days but has your testing proved otherwise?

Thanks,
/rsm005/

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Old August 15th, 2016, 02:15 PM   #5538 (permalink)
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rsm005 View Post
Ron,

Does the 30 day limit on the spreads affect the number of profitable trades you have? I seem to remember a previous post saying up to 45 days but has your testing proved otherwise?

Thanks,
/rsm005/

I don't have any time limit on positions.

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Old August 18th, 2016, 08:52 AM   #5539 (permalink)
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Your new strategy with stop?


ron99 View Post
A naked option could have rode out the crash on 8/24/15 if the margin factor was 6X-7X IM. But if there was a larger crash you would have been forced out at a large loss. That is why I added longs to cover larger crashes.

My new strategy is sell one at about 90+ DTE and 20% OTM (largest drop since 2008 in 90 days was 19%) and pick 2 longs that make the net delta around 2.00. Close when premium drops by 50% no matter how long it takes. Use 6 times the initial margin to cover margin and excess and hold that the entire time you have that position. So if initial margin (IM) is $300 then you hold $1,800 for each of those positions until exit.

Hi Ron,
What do you think about having stop of 50% profit as suggested by UUU1965? It just needs 2XIM cash.
Regards,
Dilip

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Old August 19th, 2016, 11:43 AM   #5540 (permalink)
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@ron99

Ron,


I checked out the reports on your tableau site to confirm the seasonal trend for Sept. The trend looks to be flat to slightly up, is that what you see. I want to make sure I'm looking at it correctly.

Thanks,
/rsm005/

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