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Selling Options on Futures?
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Selling Options on Futures?

  #5881 (permalink)
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ron99 View Post
I use 6 times initial margin and keep the position on until all of this is used up by rising margin and premium.



You can backtest. Go to PC-SPAN thread and download XLS-SPAN.



Would it make sense to sell higher delta premium with the same 6 times initial margin? This would involve selling a smaller number of contracts to take in a larger premium.

Wouldn't this provide more rapid theta, meaning less holding time (market exposure) to achieve 50-70% of maximum profit, with the added bonus lesser black swan risk due to selling less overall contracts?

In short, I wonder if there is an optimal delta and DTE?


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  #5882 (permalink)
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Bloomberg: Fear Is Creeping Back Into Markets
https://www.bloomberg.com/news/articles/2017-04-13/five-charts-that-show-fear-is-rearing-its-head-in-global-markets?

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  #5883 (permalink)
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If you look at the VVIX (the volatility of the VIX) We are extremely high, we are at 2008 levels.
All this talk of war with N.Korea from Trump has people nervous as one misstep could lead to 1 side dropping a nuke.

http://finance.yahoo.com/chart/%5EVVIX#eyJtdWx0aUNvbG9yTGluZSI6ZmFsc2UsImJvbGxpb...ZmYiLCJyYW5nZSI6Im1heCJ9

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  #5884 (permalink)
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Exited the position- Sold Ew3n17p1950p1680(2) for 3.8 on March 23/2017.

Thinking of re entering, but I think I should wait till Monday. French election? Option expiration? Would July ES be long enough?

Any thoughts?

Thanks Babak

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  #5885 (permalink)
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rajab View Post
Exited the position- Sold Ew3n17p1950p1680(2) for 3.8 on March 23/2017.

Thinking of re entering, but I think I should wait till Monday. French election? Option expiration? Would July ES be long enough?

Any thoughts?

Thanks Babak

Don't miss out on weekend time erosion by waiting till Monday. July OK. Sep too far out. Aug just starts trading on Monday.

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  #5886 (permalink)
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rajab View Post
French election?

Or French Terrorist Attack. Two Policemen just killed in Paris.

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  #5887 (permalink)
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rajab View Post

French election?

Do not forget: This weekend is only the first round of French election. The final and decisive round will be later.

And there are a lot of other political issues around in Europe (eg. second round of French election, British election, German election, terrorist attacks).

The general decision you have to make is to either trade as normally or to reduce positions due to the political situation or to stop selling ES puts for a while, and trade other commodities. But I do not think it does make sense to wait until next Monday.

Best regards, Myrrdin

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  #5888 (permalink)
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myrrdin View Post
The general decision you have to make is to either trade as normally or to reduce positions due to the political situation...

That's a great point, and probably worth it's own discussion. If you trade/have automated systems for USD:EUR what do you do ahead of the French Election? Do you switch of your ES & GE systems before Fed meetings. Or NG & WTI ahead of EIA storage releases?

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  #5889 (permalink)
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What do the FIO option traders think of this general idea:

Quoting 
Selling currently out of the money puts/calls I believe will expire worthless. These options will only have time value; no intrinsic. Position timeframes will be short, 2 weeks until expiry at most, holding the option until it expires. Idea is that while premium is reduced due to lower time to expiry, risk is also reduced due to carefully selecting the strike prices.

Risk mgmt:
To manage risk, offset the option positions w/ an equal outright position in the futures whenever the option goes ITM, should that occur. Most likely will place GTC stop orders in the futures market at the option strike price when I sell-to-open. Strike prices will be at the extremes of the mkt, where a change in market state is likely to occur, meaning the mkt is less likely to balance sideways at the price (see attached). Should the option expire ITM, I'll have offset most of the loss (created by the option now having intrinsic value in place of theta) via the outright futures position & won't be facing a potentially unlimited-loss situation.

Currently executing this strategy on sim.


Attached Thumbnails
Selling Options on Futures?-optionstrikes.png  

Last edited by Eric B; April 21st, 2017 at 08:51 AM.
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  #5890 (permalink)
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Eric B View Post
What do the FIO option traders think of this general idea:

time value for 2 week options is not much, so you will collect little premium with a possible high risk.
Unless I misunderstand what you do, it seems to me you are doing high risk/low reward trades.

If you did these trades already, what is your experience?

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