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Selling Options on Futures?
Started:July 19th, 2011 (06:16 PM) by ron99 Views / Replies:568,134 / 5,727
Last Reply:December 2nd, 2016 (12:40 PM) Attachments:642

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Selling Options on Futures?

Old October 14th, 2016, 06:51 PM   #5661 (permalink)
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datahogg View Post
Seems reasonable. But the Cordier/Gross number of 50% seems like an invitation to disaster.
Since 24/8/2015 I have used ratio spreads, and my span margin is rarely over 20% of account.

50% of margin used/credit collected in options selling is definitely not a viable strategy in the long term.

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Old October 15th, 2016, 11:54 AM   #5662 (permalink)
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datahogg View Post
Seems reasonable. But the Cordier/Gross number of 50% seems like an invitation to disaster.
Since 24/8/2015 I have used ratio spreads, and my span margin is rarely over 20% of account.

I fulls agree for traders who only hold one position, eg. ES puts.

For traders with a diversified portfolio the figure by Cordier / Gross seems reasonable to me.

Best regards, Myrrdin

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Old October 15th, 2016, 12:37 PM   #5663 (permalink)
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Good article on how elections affect the stock market. (Spoiler alert: They don't)


Quoting 
the S&P 500 gained a minuscule 0.15%, on average, during the four Democrat-to-Republican transitions, but lost an average of 1.38% during the four Republican-to-Democrat transitions. However, more than 100% of the average Democratic transition loss came because stock prices were crashing during the Obama transition. Since the economy was collapsing at the time, it is hard to attribute this drop to lack of confidence in Barack Obama.

What happens in the stock market after US elections - Business Insider

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Old October 15th, 2016, 05:43 PM   #5664 (permalink)
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myrrdin View Post
I fulls agree for traders who only hold one position, eg. ES puts.

For traders with a diversified portfolio the figure by Cordier / Gross seems reasonable to me.

Best regards, Myrrdin

What's the correlation of futures/commodities during big market crashes?

I disagree with allocating 50% margin in stocks/indexes because they are almost perfectly correlated when markets are down.

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Old October 16th, 2016, 04:24 AM   #5665 (permalink)
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Pirolyx View Post
What's the correlation of futures/commodities during big market crashes?

I disagree with allocating 50% margin in stocks/indexes because they are almost perfectly correlated when markets are down.

1. A diversified portfolio includes puts and calls for the same / for related commodities. One of them should make profit.

2. The correlation between different commodities during a market crash is weaker than the correlation between
different stocks / indices. Regarding demand: There are "luxury" products, eg. Cocoa or Coffee, which might show a significantly reduced demand during a crash. And there are things you need, eg. Wheat or Rice, where demand should be more stable. Demand for Gold often rises during a market crash. Regarding supply: Supply of the growing commodities depends mainly on the weather, which does not correlate with a market crash. Rain, that is beneficial for one commodity, might be a problem for another one.

3. Some commodities correlate closely with the US$, as they are exported / imported from / to the US (eg. Crude Oil, Wheat), others do not (eg. Natural Gas). In my opinion this is the major problem for the diversification of a portfolio.

Clump risk still is a problem for commoditiy traders, but I consider it to be smaller than for traders of stocks / indices.

During a severe crash, eg. September 2008 until February 2009, it is a good idea to be careful regarding all trading activities.

Best regards, Myrrdin

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Old October 17th, 2016, 02:15 PM   #5666 (permalink)
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ron99 View Post
Good article on how elections affect the stock market. (Spoiler alert: They don't)



What happens in the stock market after US elections - Business Insider

At this point if Trump wins I'm seriously considering going back to Canada .... Electing Hillary means 4 more years of the same..which isn't too terrible. Really I'm more curious about the Fed and earnings. so far the market has been quite resilient to the idea of higher interest rates which is good, means the overall consensus is the economy is healthy. However earnings aren't healthy and that is something to be nervous about.


/rsm005/

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Old October 17th, 2016, 09:12 PM   #5667 (permalink)
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Love Canada.

In my view, this year's Dem (a/k/a the Goldman Sachs candidate) is on the side of the banks, intrinsically. She is with the hedger side. As an American expat, I can only expect the regulatory regime under Hillary to become more onerous and punitive to me. I can just barely hold on to a bank account abroad now as it is.

The other candidate is on the speculator side, my team. I would expect any initiatives coming out of there to strongly favor the side of the speculators, not the hedgers. And if he wins, and they have to call out the National Guard, there is going to be some great theta selling.

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Old October 18th, 2016, 03:09 PM   #5668 (permalink)
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ron99 View Post
20% under for Jan contract is 5 delta.

If you want to do Dec you are going to have to go to a higher strike for the short to do 2 longs or do one long at 100 under short strike but that doesn't give as as good risk coverage. With 6x it would have rode out 8/24/15 but it had a higher draw down.

Hi Ron,

I have short theta/vega systems developed for /ES but primarily using Iron Condors. It seems that in some of the ratio spreads you're trading that you've effectively hedged out a chunk of the short gamma risk, but it seems as though a surge in the VIX / implied vol in /ES options could cause much greater losses than expected if one is only modeling the hit on the directional exposure and not also on the vol. If you are trading the outright short -3 delta puts, how do you protect yourself from an explosion in vega in the event of a rapid sell off?

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Old October 18th, 2016, 03:32 PM   #5669 (permalink)
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Emanuel Wynne View Post
Hi Ron,

I have short theta/vega systems developed for /ES but primarily using Iron Condors. It seems that in some of the ratio spreads you're trading that you've effectively hedged out a chunk of the short gamma risk, but it seems as though a surge in the VIX / implied vol in /ES options could cause much greater losses than expected if one is only modeling the hit on the directional exposure and not also on the vol. If you are trading the outright short -3 delta puts, how do you protect yourself from an explosion in vega in the event of a rapid sell off?

I'm not doing outrights or naked shorts anymore. Read the prior page.

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Old October 19th, 2016, 12:51 AM   #5670 (permalink)
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Emanuel Wynne View Post
Hi Ron,

I have short theta/vega systems developed for /ES but primarily using Iron Condors. It seems that in some of the ratio spreads you're trading that you've effectively hedged out a chunk of the short gamma risk, but it seems as though a surge in the VIX / implied vol in /ES options could cause much greater losses than expected if one is only modeling the hit on the directional exposure and not also on the vol. If you are trading the outright short -3 delta puts, how do you protect yourself from an explosion in vega in the event of a rapid sell off?

That's my biggest concern when I'm selling naked options. Most of the traders tend to worry about directional exposure but they forget about volatility expension.

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