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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,890 / 5,728
Last Reply:11 Hours Ago (05:26 PM) Attachments:642

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Selling Options on Futures?

Old September 10th, 2016, 08:24 AM   #5601 (permalink)
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Sorry to hijack the thread but unable to see intraday data for aug 23/24

If someone would be kind enough to post a chart of Sunday night to Monday - what happened on NQ say a 5 min chart that would be helpful to see where the movement happened in the past

i ask in this thread to guage whether to get out of my short options if there was a bounce

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Old September 10th, 2016, 08:24 AM   #5602 (permalink)
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For Aug 23/24 2015

i mean for the big drop in 2015

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Old September 10th, 2016, 09:04 AM   #5603 (permalink)
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jokertrader View Post
If someone would be kind enough to post a chart of Sunday night to Monday - what happened on NQ say a 5 min chart that would be helpful to see where the movement happened in the past

i ask in this thread to guage whether to get out of my short options if there was a bounce

Sorry I can't help. I can only get the prior 40 days on a 60 minute chart.

I would like to get that data too.

The low trade on 8/24/15 was 1831.00. It settled at 1871.25. So low trade was 40.25 lower than settlement.

We aren't quite at what happened in Aug 2015. It dropped 21.25 on Wed. 47.25 on Thu. 54.00 on Fri. 100.25 on Mon.

Then it was +1.50 on Tue. +65.25 on Wed. +51.25 on Thu.

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Old September 10th, 2016, 11:08 AM   #5604 (permalink)
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One time I mentioned about selling higher DTE options. Don't do it.

Here is an example why.

I entered positions on 20160801. Same strikes but one position was 109 DTE (Nov) on entry date. The other was 137 (Dec). The third one on the right was Nov 1750-1525 but it had same delta as Dec.

After 32 days held the Nov 1700-1450 position went below 50% of initial premium. The Dec was only at 69%. The Nov 1750-1525 was at 53%.

The Nov 1700-1450 monthly ROI was 3.1% on that date. It was only 1.9% for Dec. The Nov 1750-1525 position was at 2.7%.

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The Dec position also reacted worse to Friday's ES price drop.

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Old September 11th, 2016, 07:22 AM   #5605 (permalink)
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Fed 5th to 9th 0 similiar Fri/Monday move including weekend

Futures Edge on FIO

ron99 View Post
Sorry I can't help. I can only get the prior 40 days on a 60 minute chart.

I would like to get that data too.

The low trade on 8/24/15 was 1831.00. It settled at 1871.25. So low trade was 40.25 lower than settlement.

We aren't quite at what happened in Aug 2015. It dropped 21.25 on Wed. 47.25 on Thu. 54.00 on Fri. 100.25 on Mon.

Then it was +1.50 on Tue. +65.25 on Wed. +51.25 on Thu.

Here is a 30 min chart (i had to make it continuous and can get until beginning of the year but not for Aug 2015)
But difference is on Feb 5th, market started inching up on Friday afternoon.. continued into Sunday and then was sold around London open


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Old September 12th, 2016, 01:28 AM   #5606 (permalink)
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From tastytrade research 1/14/2016 they make a case that implied volatility is most overstated in the ETFs due to people hedging and protecting their positions, which is good for option sellers. I'm not sure how this transfers to /ES but I do not think it would be as good as the SPY.

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Put prices are inflated in the SPY (and QQQ, DIA, and IWM) which makes them good instruments for put sellers but bad for put buyers. I'm not sure how the /ES is in relation to them, I'm sure it gets some hedging. Anyway here is an article that finds it is actually cheaper to buy calls on the VIX in case of a black swan event than it is to buy puts in the SPY, again because so many people do this for protection which inflates the prices.

Buying VIX Calls As A Portfolio Hedge | Seeking Alpha

The articles also states"Studies have shown that market crashes are extremely unlikely when the price level of VIX futures is below 15 or above 50 and are most likely when VIX futures are between 15 and 30." In fact the VXTH fund does not buy as many calls when the VIX is below 15 or above 50.

Here the VXTH explains its strategy as "the forward rate of the VIX."

CBOE VIX Tail Hedge Index (VXTH) Micro Site

This doesn't make sense to me but perhaps someone can clarify it. The best scenario is that it leads to a way to more effectively hedge one's put selling. I think it entails looking at the back month /VX futures contract. Anyway the VIX is at 15-30 a lot so it will not help much in not hedging at times. The most helpful would be if it is actually cheapest to hedge using VIX calls.

I looked at two trades. The VIX rose and closed at 15.25 on 8/9/15. If one bought a 25% otm call, that is Sept (27DTE) $18 strike at $1.05. The max profit at 9/1/15 is $1075, a 10 bagger. I then looked at buying some SPY puts on the same day (Sept 30 DTE). The 179 strike with a delta of -.021 for $0.125 rose to $135.50, which is 1084% gain. It could be just because the SPY was nearing that level that they did great, but I don't see from this how the VIX is cheaper per say.

However going further out on the VIX one does see outperformance with the SPY. For instance if buying a $30 strike one made over 1200% (from $27.50 to $347.50).

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Last edited by Fx93; September 12th, 2016 at 02:16 AM.
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Old September 12th, 2016, 02:42 AM   #5607 (permalink)
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I wanted to shoot over a quick note to the people on this thread. Given the market move on Friday the 9th I decided to add a few additional puts to my position to shore up my margins. All things considered I have to believe that the market will continue Friday's movements. I'm using the method Ron pointed out earlier and it provided a huge cut in margin requirements. I currently have 3 positions open and purchased 2 additional puts, that's it. The first looks like this..

OEW3X6 P1805 -10
OEW3X6 P1500 -20

added OWEW3X6 P1600 1

This reduced the margin hold from maint: $558.00 risk: $613.80
to
maint: $298.00 risk: $327.80

total cost of this trade, assuming I lose the entire value of the put was $192 less taxes and fees, and this won't be the case. I'll get something back so that means for about $200 I was able to almost half the margin hold. Not bad.

The other position was to take this position

OEWX6 P1800 -14
OWEX6 P1525 -28

and add one extra put to make it

OEWX6 P1800 -14
OEWX6 P1525 -29

This one change reduced the margin holds from
maint: $492 risk: $541.20

to

maint: $296.00 risk: $325.60

The total cost of that 1 change was $162 so again, very little from a profit loss POV. This took my margin hold from ~8x to ~14x going into a week where I'm assuming there's going to be much more volatility. The challenge here is that I could be dead wrong and that would reduce my total profit from this trade. However, given the potential downside it's a no brainer for me.

/rsm005/

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Old September 12th, 2016, 10:49 AM   #5608 (permalink)
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Since ES is moving up this morning I took off my extra long puts. Made 1.00 profit.

I will probably add them back on next week for Fed announcement.


Last edited by ron99; September 12th, 2016 at 01:03 PM.
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Old September 12th, 2016, 12:45 PM   #5609 (permalink)
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jokertrader View Post
If someone would be kind enough to post a chart of Sunday night to Monday - what happened on NQ say a 5 min chart that would be helpful to see where the movement happened in the past

i ask in this thread to guage whether to get out of my short options if there was a bounce


jokertrader View Post
i mean for the big drop in 2015

This is what Tradestation gives me for NQU15 5min chart for 8/23-8/24.
The low of 3908.25 before 9am and the high of 4196.25 at 1130 both match the data I have for that day.
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Old September 12th, 2016, 12:48 PM   #5610 (permalink)
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ron99 View Post
Sorry I can't help. I can only get the prior 40 days on a 60 minute chart.

I would like to get that data too.

The low trade on 8/24/15 was 1831.00. It settled at 1871.25. So low trade was 40.25 lower than settlement.

We aren't quite at what happened in Aug 2015. It dropped 21.25 on Wed. 47.25 on Thu. 54.00 on Fri. 100.25 on Mon.

Then it was +1.50 on Tue. +65.25 on Wed. +51.25 on Thu.

And the Tradestation chart for ESU15 on 8/23-8/24/15

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