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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:569,146 / 5,728
Last Reply:December 6th, 2016 (05:26 PM) Attachments:642

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Selling Options on Futures?

Old October 6th, 2016, 12:33 PM   #5641 (permalink)
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rsm005 View Post
@ron99

Are you reducing your position size or changing anything in your trading style coming into the election? I've had to liquidate everything because the Mrs. and I have decided to buy house and will probably look to start again in January or Feb. depending on seasonals. For now it's just sit, wait, and see what comes.

Also, I've started experimenting with spreads again to see what happens with different expiration dates given that all my spreads were taking over 50 days to reach 50%. Maybe a strike 60 days out would work better because it will decay faster? I'll do some tests and post the results.

/rsm005/

No change coming into elections. Everybody already knows who will win so it is built in.

Strikes with lower DTE will be riskier and require more margin because you will be doing higher strikes on puts.

On 8/17/15 a 5 delta at 60 DTE is the 1820 ES put (13% below futures). At 95 DTE the 5 delta is 1740. At 123 DTE the 5 delta is 1680.

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Old October 6th, 2016, 01:32 PM   #5642 (permalink)
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ron99 View Post
No change coming into elections. Everybody already knows who will win so it is built in.

Strikes with lower DTE will be riskier and require more margin because you will be doing higher strikes on puts.

On 8/17/15 a 5 delta at 60 DTE is the 1820 ES put (13% below futures). At 95 DTE the 5 delta is 1740. At 123 DTE the 5 delta is 1680.

While I actually agree with you @ron99, I heard something last week, that could be interesting if it is true. The argument was that the flaw in the current polls is that they all assume who the "likely voters" are, which is all based upon previous years. This year though the Trump campaign thinks the "likely voters" are very different and that the polls are completely missing that. That leads me to the following article, which actually discusses 'likely voters' among other things and explains why 1+1 doesn't equal 2 in political polls...

We Gave Four Good Pollsters the Same Raw Data. They Had Four Different Results. - The New York Times

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Old October 6th, 2016, 02:21 PM   #5643 (permalink)
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SMCJB View Post
While I actually agree with you @ron99, I heard something last week, that could be interesting if it is true. The argument was that the flaw in the current polls is that they all assume who the "likely voters" are, which is all based upon previous years. This year though the Trump campaign thinks the "likely voters" are very different and that the polls are completely missing that. That leads me to the following article, which actually discusses 'likely voters' among other things and explains why 1+1 doesn't equal 2 in political polls...

We Gave Four Good Pollsters the Same Raw Data. They Had Four Different Results. - The New York Times

This is why I use Fivethirtyeight.com because they use several polls and average them based on a weighed average based on their accuracy in the past. Plus other adjustments.

Nobody that works for the Trump campaign is smart enough for me to trust their judgment.


Last edited by ron99; October 6th, 2016 at 02:31 PM.
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Old October 6th, 2016, 02:40 PM   #5644 (permalink)
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ron99 View Post
This is why I use Fivethirtyeight.com because they use several polls and average them based on a weighed average based on their accuracy in the past. Plus other adjustments.

Love Fivethirtyeight.com and Nate Silver. Have his book on my desk but haven't gotten around to reading it yet. The point was though that all this analysis is based upon historical relationships, and that maybe this year, those relationships aren't valid.

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Old October 7th, 2016, 01:38 AM   #5645 (permalink)
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ron99 View Post
No change coming into elections. Everybody already knows who will win so it is built in.

Strikes with lower DTE will be riskier and require more margin because you will be doing higher strikes on puts.

On 8/17/15 a 5 delta at 60 DTE is the 1820 ES put (13% below futures). At 95 DTE the 5 delta is 1740. At 123 DTE the 5 delta is 1680.

Ya..figured as much. BTW, are you trading at 6x margin or more?

/rsm005/

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Old October 7th, 2016, 09:18 AM   #5646 (permalink)
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rsm005 View Post
Ya..figured as much. BTW, are you trading at 6x margin or more?

/rsm005/

6X

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Old October 7th, 2016, 09:00 PM   #5647 (permalink)
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ron99 View Post
No change coming into elections. Everybody already knows who will win so it is built in.

Strikes with lower DTE will be riskier and require more margin because you will be doing higher strikes on puts.

On 8/17/15 a 5 delta at 60 DTE is the 1820 ES put (13% below futures). At 95 DTE the 5 delta is 1740. At 123 DTE the 5 delta is 1680.

That's interesting. How did they react to that huge move? Did they have the same drawdown?

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Old October 8th, 2016, 02:56 PM   #5648 (permalink)
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Pirolyx View Post
That's interesting. How did they react to that huge move? Did they have the same drawdown?

The price changes from 8/17/15 to 8/24/15. Draw downs (DD) are using 6X IM naked puts. They were all 5.18 delta on 8/17/15.

Oct 1820 3.85 to 69.20 +65.35 50% DD 98% account balance for IM
Nov 1740 2.70 to 29.30 +26.60 47% DD 92% account balance for IM
Dec 1690 6.40 to 54.60 +48.20 42% DD 76% account balance for IM

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Old October 9th, 2016, 04:48 AM   #5649 (permalink)
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ron99 View Post
The price changes from 8/17/15 to 8/24/15. Draw downs (DD) are using 6X IM naked puts. They were all 5.18 delta on 8/17/15.

Oct 1820 3.85 to 69.20 +65.35 50% DD 98% account balance for IM
Nov 1740 2.70 to 29.30 +26.60 47% DD 92% account balance for IM
Dec 1690 6.40 to 54.60 +48.20 42% DD 76% account balance for IM

Holy shit. How could you protect yourself in that case?

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Old October 10th, 2016, 01:41 PM   #5650 (permalink)
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ron99 View Post
The price changes from 8/17/15 to 8/24/15. Draw downs (DD) are using 6X IM naked puts. They were all 5.18 delta on 8/17/15.

Oct 1820 3.85 to 69.20 +65.35 50% DD 98% account balance for IM
Nov 1740 2.70 to 29.30 +26.60 47% DD 92% account balance for IM
Dec 1690 6.40 to 54.60 +48.20 42% DD 76% account balance for IM

If you add two long 1.50 delta puts to these shorts you get on 8/24/15 (DD is max from entry to 8/24/15),

Oct 1820-1680 1.55 (60 DTE) to -3.20 (longs made $237.50 more than short lost) 8% max DD, 20% account balance for IM
Nov 1740-1570 2.10 (95 DTE) to -0.80 (longs made $145.00 more than short lost) 10% max DD, 24% account balance for IM
Dec 1690-1490 2.60 (123 DTE) to 3.20 +0.60 10% max DD, 28% account balance for IM

While the 60 DTE looks good above that is only because the futures drop happened immediately after entering the position. If the drop happened 15-30 days later the longs would not have given much coverage. In fact if you didn't exit on 8/24/15 that spread went on margin call 9/28/15.

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