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Selling Options on Futures?


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Selling Options on Futures?

  #5921 (permalink)
 myrrdin 
Linz Austria
 
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manuel999 View Post
Do you think this is specific to ES?
Or could one use the same approach to other liquid markets, such as CL?

Ron and myself checked a lot of other commodities. But we did not find even one that allows for being short options (calls or puts) more or less permanently.

I sell a lot of options, but I consider all other trades with the exception of selling ES puts being directional trades. I have to have an opinion on the next large move of the price of the underlying.

Best regards, Myrrdin

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  #5922 (permalink)
 ron99 
Cleveland, OH
 
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bill20 View Post
Would it make more sense to simply trade a smaller number of contracts (and hence more excess IM) without purchasing the two long puts?


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As you can see in the table, the drawdown on the naked option was double vs buying 2 longs. I like this protection in case the is even larger huge crash.

Also with the 2 longs you have a Black Swan trade on too. If there is a huge crash this strategy actually makes a profit.

In this example on 20150824 the spread is profitable $145 before fees while a naked 1740 is -$2,635.


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  #5923 (permalink)
 ron99 
Cleveland, OH
 
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manuel999 View Post
Do you think this is specific to ES?
Or could one use the same approach to other liquid markets, such as CL?

Here is a table from 2015 showing that you can be 2 STD away from futures on ES puts and have decent premium but not really for the others.



If you sold a CLq option for $100 now the call would be 63.50, the put would be 37.50. CL has moved up by more than 14 or down by more than 12 a lot of times.

ESn 1840 put is $100 now. ES has moved 539 down only in 2008 (551). Never since.

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  #5924 (permalink)
Eric B
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ron99 View Post
I manage by exiting when my 6X is used up. For example when entering a position that requires $300 margin I hold $1,800 for that position until I exit it.

If the increase in margin and premium uses the $1,800 up, I exit.

Does this mean you only sell puts now? Previously I read in this thread something about you buy 2 puts for each put you short - is that no longer necessary?

And aren't the risks on the trade far greater than the profits?

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  #5925 (permalink)
 ron99 
Cleveland, OH
 
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Eric B View Post
Does this mean you only sell puts now? Previously I read in this thread something about you buy 2 puts for each put you short - is that no longer necessary?

And aren't the risks on the trade far greater than the profits?

I still buy 2 puts when doing my ES strategy.

I posted the table to show all scenarios.

Risk is always greater than possible profits when selling options.

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  #5926 (permalink)
Eric B
Fort Worth, Texas
 
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gotcha.

So, a new position on the sim acct now:
short one ES July EOM put, strike 2025. Entry 5.00
and, to manage risk:
long two ES July EOM puts, strike 1790. Entry 1.8

According to that pdf on the CME site linked to earlier in the thread, the short position is delta 5, while the long position is delta 1.5

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  #5927 (permalink)
 isold 
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ron99 View Post
I still buy 2 puts when doing my ES strategy.

I posted the table to show all scenarios.

Risk is always greater than possible profits when selling options.

Ron99, I want to ask you,do you sell to close 2 puts to realise some profit ,additonal to buy back lower cot 1 put ?And why not to sell pread with with some 40-50 points diffs,which will tight less capital ?

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  #5928 (permalink)
 ron99 
Cleveland, OH
 
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isold View Post
Ron99, I want to ask you,do you sell to close 2 puts to realise some profit ,additonal to buy back lower cot 1 put ?And why not to sell pread with with some 40-50 points diffs,which will tight less capital ?

The 2 longs are for risk protection.

One long does not give risk protection like 2 longs do.

This table shows larger drawdowns for 1 long vs 2 while the spread with 2 longs have the same or better ROI.



If there is a Black Swan drop in ES 2 longs could turn a big loss into a profit.

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  #5929 (permalink)
 isold 
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ron99 View Post
The 2 longs are for risk protection.

One long does not give risk protection like 2 longs do.

This table shows larger drawdowns for 1 long vs 2 while the spread with 2 longs have the same or better ROI.



If there is a Black Swan drop in ES 2 longs could turn a big loss into a profit.

So you let 2 longs to expire worthless ,just closing short one ? ( I trading SPX b/c in Canada we cannot trade futures on TOS )

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  #5930 (permalink)
 ron99 
Cleveland, OH
 
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isold View Post
So you let 2 longs to expire worthless ,just closing short one ? ( I trading SPX b/c in Canada we cannot trade futures on TOS )

No, I exit shorts and longs at same time. About 50% drop in net premium.

I would give away too much profit letting longs go to expiration.

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Last Updated on July 28, 2023


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