NexusFi: Find Your Edge


Home Menu

 





Selling Options on Futures?


Discussion in Options

Updated
      Top Posters
    1. looks_one ron99 with 2,221 posts (4,489 thanks)
    2. looks_two SMCJB with 346 posts (733 thanks)
    3. looks_3 kevinkdog with 341 posts (400 thanks)
    4. looks_4 myrrdin with 288 posts (408 thanks)
      Best Posters
    1. looks_one SMCJB with 2.1 thanks per post
    2. looks_two ron99 with 2 thanks per post
    3. looks_3 myrrdin with 1.4 thanks per post
    4. looks_4 kevinkdog with 1.2 thanks per post
    1. trending_up 1,934,752 views
    2. thumb_up 9,259 thanks given
    3. group 458 followers
    1. forum 7,370 posts
    2. attach_file 794 attachments




 
Search this Thread

Selling Options on Futures?

  #5831 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785

I have been thinking about what will send the S&P 500 crashing. One thing could be Congress not being able to deliver the big corporate tax cuts everybody thinks is coming.

The GOP was thinking that they could pay for those tax cuts with a 20% border tax. But Goldman Sachs just gave the border tax a 20% chance of passing. There are many things wrong with it.

So if the corporate tax cuts are smaller than hoped for, I suspect that the S&P 500 will crash. Problem will be being able to time it.

My current strategy should make more money on the 2 longs than it loses on the short if the crash is severe and quick and happens not long after spread was entered. Just like Aug 2015. But that is many variables that have to happen correctly.

I'm think about adding a 3rd long that is lower DTE and a higher strike than the longs that are on currently. But priced so that the net spread position is still a credit. Doing that when it looks like market is about to crash. Problem with this is that you have a small window for this to work. If the 3rd long gets below 30 DTE then it doesn't do much.

If the market crashes the 3 longs will make far more than the short will lose. If the market doesn't crash the position will still make money. Just a lot less. But the chances of losing money on the spread are very small.

Just thinking out loud here. Nothing definite as far as strategy.

Started this thread Reply With Quote
The following 3 users say Thank You to ron99 for this post:

Can you help answer these questions
from other members on NexusFi?
ZombieSqueeze
Platforms and Indicators
My NT8 Volume Profile Split by Asian/Euro/Open
NinjaTrader
NexusFi Journal Challenge - April 2024
Feedback and Announcements
Request for MACD with option to use different MAs for fa …
NinjaTrader
 
Best Threads (Most Thanked)
in the last 7 days on NexusFi
Retail Trading As An Industry
67 thanks
NexusFi site changelog and issues/problem reporting
47 thanks
Battlestations: Show us your trading desks!
43 thanks
GFIs1 1 DAX trade per day journal
32 thanks
What percentage per day is possible? [Poll]
31 thanks

  #5832 (permalink)
Flintsone99
Springfield USA
 
Posts: 18 since Jan 2017
Thanks Given: 5
Thanks Received: 19

@ron99 I am thinking the same thing. I think market participants likely are anticipating shifts in fiscal policy that will stimulate growth and perhaps raise earnings which caused the recent run up in the markets. If that doesn't happen the drop could be quick.


I was also thinking of better way to protect my put selling, but I was actually looking at it from the other side. My thoughts were doing a debit spread closer to ATM but much further out in time only because the theta would be lower. The disadvantage is of course is that the protection is limited.
I am not looking to profit if the market crashes. I just want enough protection that I will survive in decent shape that I can keep trading

I think the tough part is determining how much of your portfolio do you want to protect and balancing that with how much you want to pay to do so as any hedging eats into profits. But that is much better than getting wiped out the next black swan.

Reply With Quote
The following 3 users say Thank You to Flintsone99 for this post:
  #5833 (permalink)
uuu1965
Riga Latvia
 
Posts: 107 since Jan 2013
Thanks Given: 441
Thanks Received: 72



ron99 View Post
I have been thinking about what will send the S&P 500 crashing. One thing could be Congress not being able to deliver the big corporate tax cuts everybody thinks is coming.

The GOP was thinking that they could pay for those tax cuts with a 20% border tax. But Goldman Sachs just gave the border tax a 20% chance of passing. There are many things wrong with it.

So if the corporate tax cuts are smaller than hoped for, I suspect that the S&P 500 will crash. Problem will be being able to time it.

My current strategy should make more money on the 2 longs than it loses on the short if the crash is severe and quick and happens not long after spread was entered. Just like Aug 2015. But that is many variables that have to happen correctly.

I'm think about adding a 3rd long that is lower DTE and a higher strike than the longs that are on currently. But priced so that the net spread position is still a credit. Doing that when it looks like market is about to crash. Problem with this is that you have a small window for this to work. If the 3rd long gets below 30 DTE then it doesn't do much.

If the market crashes the 3 longs will make far more than the short will lose. If the market doesn't crash the position will still make money. Just a lot less. But the chances of losing money on the spread are very small.

Just thinking out loud here. Nothing definite as far as strategy.

Do you have a some example? I think the big problem is when you decide to use 1:3 ratio spread and when 1:2 ratio spread

Reply With Quote
  #5834 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,686
Thanks Received: 2,651


ron99 View Post
I have been thinking about what will send the S&P 500 crashing. One thing could be Congress not being able to deliver the big corporate tax cuts everybody thinks is coming.

The GOP was thinking that they could pay for those tax cuts with a 20% border tax. But Goldman Sachs just gave the border tax a 20% chance of passing. There are many things wrong with it.

So if the corporate tax cuts are smaller than hoped for, I suspect that the S&P 500 will crash. Problem will be being able to time it.

My current strategy should make more money on the 2 longs than it loses on the short if the crash is severe and quick and happens not long after spread was entered. Just like Aug 2015. But that is many variables that have to happen correctly.

I'm think about adding a 3rd long that is lower DTE and a higher strike than the longs that are on currently. But priced so that the net spread position is still a credit. Doing that when it looks like market is about to crash. Problem with this is that you have a small window for this to work. If the 3rd long gets below 30 DTE then it doesn't do much.

If the market crashes the 3 longs will make far more than the short will lose. If the market doesn't crash the position will still make money. Just a lot less. But the chances of losing money on the spread are very small.

Just thinking out loud here. Nothing definite as far as strategy.

A thought about treating the tax problem and the unpredictability of Mr. Trump in a different way.

I would assume that a corporate tax cut is more important for the small and medium sized companies, as the large international corporations operate internationally and do not pay a lot of taxes any way. These large companies might profit from the possibility that they may tranfer money back into the US. This step is not as expensive for Mr. Trump
as a tax cut, and Mr. Trump seems to like to help the big companies.

If my thought are correct, it could be more interesting to sell puts for the Dow Jones Index instead of the S&P500.

A different approach would be to sell puts for a European index. There are elections in France soon, but afterwards the European markets might be quieter and more predictable than the US markets. Additionally, funds seem to be invested underproportionally in Europe compared to the US.

Just some thoughts. I did not check the availability of puts suited for option selling.

Best regards, Myrrdin

Reply With Quote
The following 4 users say Thank You to myrrdin for this post:
  #5835 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785


uuu1965 View Post
Do you have a some example? I think the big problem is when you decide to use 1:3 ratio spread and when 1:2 ratio spread

I am just going to use experience and gut feeling. But if US Congress starts debating tax cuts that would be a time to consider the extra long.

Started this thread Reply With Quote
The following user says Thank You to ron99 for this post:
  #5836 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785


ron99 View Post
I have been thinking about what will send the S&P 500 crashing. One thing could be Congress not being able to deliver the big corporate tax cuts everybody thinks is coming.

The GOP was thinking that they could pay for those tax cuts with a 20% border tax. But Goldman Sachs just gave the border tax a 20% chance of passing. There are many things wrong with it.

So if the corporate tax cuts are smaller than hoped for, I suspect that the S&P 500 will crash. Problem will be being able to time it.


Quoting 
Treasury Secretary Steven Mnuchin is promising that the Trump administration will get tax reform passed by August, although he says it will be years before it kicks economic growth into a higher gear.

Mnuchin promises tax reform will pass by August - Feb. 23, 2017

So this is their goal. But forecasts of when things will get done in Congress are always too optimistic.

Started this thread Reply With Quote
The following user says Thank You to ron99 for this post:
  #5837 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,033 since Dec 2013
Thanks Given: 4,359
Thanks Received: 10,172


ron99 View Post
Mnuchin promises tax reform will pass by August - Feb. 23, 2017

So this is their goal. But forecasts of when things will get done in Congress are always too optimistic.

He's also promosed that "Any reductions we have in upper-income taxes will be offset by less deductions so that there will be no absolute tax cut for the upper class” but every plan the senate has proposed to date is a massive absolute tax cut for the upper class.

Reply With Quote
The following user says Thank You to SMCJB for this post:
  #5838 (permalink)
LordV
Chicago IL/USA
 
Posts: 23 since Jan 2012
Thanks Given: 70
Thanks Received: 10

Obamacare is first on the agenda. That won't be easy either. GOP
very widely on opinions/solutions with that one.


Brady would not back off BAT tax.

Rep Brady: Border tax adjustment will happen with tax reform. cnb.cx/2kLp7FO


Ryan struggles to sell tax reform plan to fellow Republicans.
tinyurl.com/jqumojb

Reply With Quote
  #5839 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,033 since Dec 2013
Thanks Given: 4,359
Thanks Received: 10,172

For those of you who don't subscribe to Adam Grimes, he said this, this morning.
I have found a new options book you should read: Managing Expectations: Driving Profitable Option Trading Outcomes Through Knowledge, Discipline, and Risk Management. Tony Saliba, the author, was the only options trader profiled in the first Market Wizards book and is a trader with deep experience. He has traded on the CBOE, CME, and CBOT floors, was the CEO of LiquidPoint and managing director at BNY CovergEX Group, and he's been in these markets for more than four decades.

A book like this is the distillation of a veteran's knowledge, and it's one of the best options books I've ever seen. It's a highly practical perspective on options trading, but it also digs into the details. You'll find concrete advice for managing positions, alongside discussions of second order greeks like gamma and vanna, with thoughts about what volatility and greeks actually mean. I can see this book being a revelation for the new options trader, and adding to the insight of the seasoned trader. If you don't trade options, then the lessons of volatility, pricing, and risk management are still relevant to you.

Reply With Quote
The following 6 users say Thank You to SMCJB for this post:
  #5840 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,686
Thanks Received: 2,651


I think about raising the profitability of my stocks account by selling OTM index call options. The account is a margin account at IB. As for principle reasons I buy stocks only for cash in this account there is enough margin available.

I think about selling ES call spreads with a delta of 6 – 8 % and approx. 100 DTE. Currently the ESM C2650-C2550. I intend to hedge 50 to 100 % of the delta of the stocks. Buy back and sell again, when the calls are at 50 %.

Any thoughts ?
Would it be preferable to sell SPX options ?
Would you use other deltas or DTE ?

Best regards, Myrrdin

Reply With Quote





Last Updated on July 28, 2023


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
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.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts