Selling Options on Futures? - Options on Futures | futures io social day trading
futures io futures trading


Selling Options on Futures?
Updated: Views / Replies:766,547 / 6,616
Created: by ron99 Attachments:753

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 753  
 
Thread Tools Search this Thread
 

Selling Options on Futures?

  #5721 (permalink)
Trading Apprentice
Barcelona
 
Futures Experience: Advanced
Platform: NinjaTrader
Broker/Data: TS
Favorite Futures: Future options
 
Posts: 14 since Mar 2015
Thanks: 7 given, 7 received

VIX/VXV

There is a way to use Ron's strategy safer.

In the chart attached we can see every time the ratio VIX/VXV crosses below 1 in a bull market, ES seems to find a bottom. That means we can use this filter to enter the market using Ron's strategy knowing the odds of being right to be very high. Notice that the SMA200 has to be in uptrend.

We can increase the IM from 6 to 2. In this case when using the strategy the yield is higher.

The bad news is that since mid 2012 the filter could only be used 14 times.

Imagine we can use this filter 4 times a year. Every time the filter activates, we sell ES PUTS delta 3 DTE 100. If IMx2, then we make 6% of the account more or less. 4 times a year x 6% is a good yield.

I have tried to backtest the strategy using the filter but I don't know why SPAN spreedsheet has some issues in several periods of time. For instance I can't download 20160816 so it is impossible for me to backtest all the signals since 2012

The chart is here:

$SPX - SharpCharts Workbench - StockCharts.com

If someone can backtest this strategy I would really appreciate to share the results here

Attached Thumbnails
Selling Options on Futures?-vix-vxv.pdf  
Reply With Quote
The following 2 users say Thank You to Hills for this post:
 
  #5722 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,811 since Jul 2011
Thanks: 829 given, 4,949 received
Forum Reputation: Legendary


Hills View Post
There is a way to use Ron's strategy safer.

In the chart attached we can see every time the ratio VIX/VXV crosses below 1 in a bull market, ES seems to find a bottom. That means we can use this filter to enter the market using Ron's strategy knowing the odds of being right to be very high. Notice that the SMA200 has to be in uptrend.

We can increase the IM from 6 to 2. In this case when using the strategy the yield is higher.

The bad news is that since mid 2012 the filter could only be used 14 times.

Imagine we can use this filter 4 times a year. Every time the filter activates, we sell ES PUTS delta 3 DTE 100. If IMx2, then we make 6% of the account more or less. 4 times a year x 6% is a good yield.

I have tried to backtest the strategy using the filter but I don't know why SPAN spreedsheet has some issues in several periods of time. For instance I can't download 20160816 so it is impossible for me to backtest all the signals since 2012

The chart is here:

$SPX - SharpCharts Workbench - StockCharts.com

If someone can backtest this strategy I would really appreciate to share the results here

I'm not sure why you can't get 20160816. I have it. Make sure there aren't any files dated 20160816 in the C:\Span4\Data folder, including both cme and nyb files, and try again.

One problem I see with your strategy is that you have no protection from an unexpected flash crash.

My current strategy is selling a 5.00 delta ES put buying two 1.50 delta longs at 90+ DTE. Use 6X IM. Exit at 50% drop in net premium.

It is making 26.6% per year. During the backtest it has never has a losing trade for the entire backtest which started 1/1/2013. 48 trades. Largest daily drawdown is 25.6%. Up 33.9% so far this year.

In 47 months it is up 156.1%. That is a yearly compounded 39.9% ROI over the 47 months.

I have attached a spreadsheet with the backtest.

Attached Files
Register to download File Type: xlsx Option ES Study 5 Delta Short 2 Longs.xlsx (189.4 KB, 48 views)
Reply With Quote
The following 5 users say Thank You to ron99 for this post:
 
  #5723 (permalink)
Elite Member
Philadelphia, PA
 
Futures Experience: Intermediate
Platform: Matlab, TradeStation
Favorite Futures: Stocks
 
GoldenRatio's Avatar
 
Posts: 181 since Aug 2012
Thanks: 4,605 given, 233 received

How to get started?



ron99 View Post
... My current strategy is selling a 5.00 delta ES put buying two 1.50 delta longs at 90+ DTE. Use 6X IM. Exit at 50% drop in net premium. ...

@ron99 and others - Thank you for this great thread!

I have a question about your backtested statistics and how to get started applying this strategy. For a newbie, how/when do you decide to initiate a trade? For example, can you enter at any time, do you wait for a particular calendar date each month or wait for a predetermined net premium?

I assume the backtested statistics for this strategy requires one to be investing each month and not allow for discretionary trades? Looking for some guidance on how one might get started applying your strategy. Basically, my question is "When do you put on each trade?" Thank you in advance.

Reply With Quote
The following 2 users say Thank You to GoldenRatio for this post:
 
  #5724 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,811 since Jul 2011
Thanks: 829 given, 4,949 received
Forum Reputation: Legendary


GoldenRatio View Post
@ron99 and others - Thank you for this great thread!

I have a question about your backtested statistics and how to get started applying this strategy. For a newbie, how/when do you decide to initiate a trade? For example, can you enter at any time, do you wait for a particular calendar date each month or wait for a predetermined net premium?

I assume the backtested statistics for this strategy requires one to be investing each month and not allow for discretionary trades? Looking for some guidance on how one might get started applying your strategy. Basically, my question is "When do you put on each trade?" Thank you in advance.

The back test had you enter a trade the same day you exited the prior trade.

I have found that trying to predict a better entry point rarely works. Just think about it. What will ES be on Wednesday? Next Monday? In two weeks? You can't say with any certainty. For every trade you enter on a better day there is probably another that you entered on the wrong day.

So I just enter new positions the day I exit prior positions or the next day. It's better to enter on Thu than Friday because the time erosion for the weekend drops the premiums on Friday.

There is a tendency of ES being up from the 2nd Friday to the 3rd Friday (option expiration) during the quarterly months Mar, Jun, Sep and Dec. But this tendency is slight for the other months. So you would sell the 2nd Friday.

Now if you are just starting out I would suggest maybe waiting until after the Dec fed meeting. Things will be very volatile until the announcement sinks in. Last year it dropped, 71.75, the couple of days after the raise in interest rates then went higher. But it feels like everybody is expecting the increase so maybe this year it won't have much effect. So even this suggestion could be wrong.

Reply With Quote
The following 2 users say Thank You to ron99 for this post:
 
  #5725 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,811 since Jul 2011
Thanks: 829 given, 4,949 received
Forum Reputation: Legendary

On 11/10/16 I sold ESg7p1750p1500(2) for 2.30. Exited today at 1.10. Days held was 18. Using 6X IM the monthly ROI was 3.7%.

I replaced them today with ESh7p1790p1550(2) for 2.25.

Reply With Quote
The following 4 users say Thank You to ron99 for this post:
 
  #5726 (permalink)
Elite Member
Philadelphia, PA
 
Futures Experience: Intermediate
Platform: Matlab, TradeStation
Favorite Futures: Stocks
 
GoldenRatio's Avatar
 
Posts: 181 since Aug 2012
Thanks: 4,605 given, 233 received

Hi @ron99,

Thanks for the replies! I am looking at your spreadsheet and trying to understand the risk:reward ratio of selling options on futures. Let's ignore the "closing at 50% strategy" for the moment and simply look at the risk of the trade.

Let's use trade #48 as an example (9/27/16.) The number of contracts traded was 182 and the difference between the strikes was 270 points. If a full point is worth $50 and assuming a worst case scenario (cannot close early and index settles at 1500 on day of expiration - therefore 2 longs don't help), was the risk really (270*50*182) $2,457,000 vs. a best case scenario reward of ~$20,318? Is the R:R profile for this trade really 100:1? I must be missing something?

Thanks for helping this novice!


Last edited by GoldenRatio; December 1st, 2016 at 05:52 PM. Reason: add @ron99
Reply With Quote
 
  #5727 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,811 since Jul 2011
Thanks: 829 given, 4,949 received
Forum Reputation: Legendary


GoldenRatio View Post
Hi @ron99,

Thanks for the replies! I am looking at your spreadsheet and trying to understand the risk:reward ratio of selling options on futures. Let's ignore the "closing at 50% strategy" for the moment and simply look at the risk of the trade.

Let's use trade #48 as an example (9/27/16.) The number of contracts traded was 182 and the difference between the strikes was 270 points. If a full point is worth $50 and assuming a worst case scenario (cannot close early and index settles at 1500 on day of expiration - therefore 2 longs don't help), was the risk really (270*50*182) $2,457,000 vs. a best case scenario reward of ~$20,318? Is the R:R profile for this trade really 100:1? I must be missing something?

Thanks for helping this novice!

That's about correct if you ride the options to expiration and futures dropped 650 and you didn't exit early.

For example, if you went into a coma, your next of kin didn't know about the account, your broker totally ignored your account and the world markets were crashing far greater than any time in history yes that could happen. Extremely unlikely but not impossible.

But before expiration if futures had dropped 500+ then the 2 longs would have made a ton of money. Probably more than the short lost. The trick is to take the profit before the value of the longs disappears. That is one reason I suggest that you don't keep the longs when their DTE gets below 40. They will offer not much protection. Either roll the longs higher or just move the whole trade to a new position.

I have numerous examples of this trade if done on 8/17/15 before 8/24/15 that made more money than than the initial net premium because the two longs gained more value than the short lost.

Reply With Quote
The following 7 users say Thank You to ron99 for this post:
 
  #5728 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,811 since Jul 2011
Thanks: 829 given, 4,949 received
Forum Reputation: Legendary

I don't know if this will happen again but 4 of last 5 years ES has had significant drops from 7th to 14th.

With the probable rise in interest rates on Dec 16th I could see this happening again this year.

This chart shows change in ESh futures from 7th to 14th.

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


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


https://public.tableau.com/profile/ron.h8870#!/

Reply With Quote
The following 4 users say Thank You to ron99 for this post:
 
  #5729 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,811 since Jul 2011
Thanks: 829 given, 4,949 received
Forum Reputation: Legendary

On 11/16/16 I sold ESg7p1800p1575(2) for 2.10. Exited today at 1.10. Days held was 20. Using 6X IM the monthly ROI was 2.5%.

I'm going to hold off adding new positions because of the post above showing drops right now 4 of last 5 years. I am keeping on my March put spreads.

Reply With Quote
The following 2 users say Thank You to ron99 for this post:
 
  #5730 (permalink)
Elite Member
Santa Barbara, CA USA
 
Futures Experience: Intermediate
Platform: TOS
Favorite Futures: Futures Options
 
Posts: 18 since Oct 2016
Thanks: 11 given, 4 received


Has anyone noticed unusually high margin requirements pertaining to selling options on ES recently? I utilize Thinkorswim and regularly sell ES options, however, the margin requirements the past few days has made initiating new positions impractical.

I am not sure if this is an exchange issue or specific to Thinkorswim (although they deny increasing requirements above SPAN minimum).

Any input would be greatly appreciated.


Sent from my iPad using futures.io mobile app

Reply With Quote

Reply



futures io > > > > Selling Options on Futures?

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)
 

Ryan Curran CPA: Traders Tax Education

Elite only
 

Brett Steenbarger: Current Best Practices of Best Traders

Elite only

CME Group: Futures & Bitcoin

Elite only

Ran Aroussi: TBA [special time 11AM ET]

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Trading Futures with options as protection Gooffy2010 Commodities Futures Trading 7 November 7th, 2017 12:06 PM
Crude Oil (CL) futures inverse pairing options Big Mike Commodities Futures Trading 8 December 12th, 2013 12:00 PM
Recommend futures, options Broker? sam1197 Reviews of Brokers and Data Feeds 17 March 27th, 2013 01:42 AM
Selling Njniatrader sam1197 NinjaTrader 22 June 28th, 2012 01:40 PM
Zen-Fire Futures options tici88 Reviews of Brokers and Data Feeds 1 July 30th, 2011 10:16 AM


All times are GMT -4. The time now is 05:58 AM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2018-02-20 in 0.10 seconds with 19 queries on phoenix via your IP 54.227.48.147