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Selling Options on Futures?
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Selling Options on Futures?

  #5951 (permalink)
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ron99 View Post
I want the net delta to be about 2.00.







The problem was that they stopped offering protection sooner.



You would need to roll the longs to a higher strike or higher DTE



Have you examined simply selling lesser number of naked puts at the same delta (5?) without the put protection? I assume you could take in significantly larger net credit with a large excess margin cushion, effectively allowing you to ride out more high volatility scenarios?


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  #5952 (permalink)
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bill20 View Post
Have you examined simply selling lesser number of naked puts at the same delta (5?) without the put protection? I assume you could take in significantly larger net credit with a large excess margin cushion, effectively allowing you to ride out more high volatility scenarios?


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I wondering what kind of account person should have to sell 100 points spread ? It is $50.000 on 10 contact ,plus margin $60-70k, around $120k . ALL for $1.5 net x10x50= $750 /month, Ron correct me if I am wrong on math and other assumptions, 25-30 contracts make sense ,but with that kindcapital to have, buying some value stocks with dividends could yeild 25% /year as well

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  #5953 (permalink)
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isold View Post
I wondering what kind of account person should have to sell 100 points spread ? It is $50.000 on 10 contact ,plus margin $60-70k, around $120k . ALL for $1.5 net x10x50= $750 /month, Ron correct me if I am wrong on math and other assumptions, 25-30 contracts make sense ,but with that kindcapital to have, buying some value stocks with dividends could yeild 25% /year as well

Please let me know with which value stocks I can make 25 % per year in the long run. The nice thing of selling puts is that it is profitable in years when the indices move more or less sideways or even lower.

Best regards, Myrrdin

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  #5954 (permalink)
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myrrdin View Post
Please let me know with which value stocks I can make 25 % per year in the long run. The nice thing of selling puts is that it is profitable in years when the indices move more or less sideways or even lower.

Best regards, Myrrdin

I got assigned on Googl 822,few month ago ,I transfered mone day before ,I knew it will be up 850 in a week
,and it was. 30 points up on 100 shares,big to my account ,but feasible to make 3% bi-weekly. Sorry for my 5 cents opinion,could be wrong ,knowing that you explore that field quite well.
My poin is to sell puts on popular high volume stocks ,if you get assigned you own tangible assets, which was bought at the bottom or quite low ,so sit on your hands and dont worry about tetha ,you have a winner


Last edited by isold; April 30th, 2017 at 05:52 PM.
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  #5955 (permalink)
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isold View Post
I got assigned on Googl 822,few month ago ,I transfered mone day before ,I knew it will be up 850 in a week
,and it was. 30 points up on 100 shares,big to my account ,but feasible to make 3% bi-weekly. Sorry for my 5 cents opinion,could be wrong ,knowing that you explore that field quite well.
My poin is to sell puts on popular high volume stocks ,if you get assigned you own tangible assets, which was bought at the bottom or quite low ,so sit on your hands and dont worry about tetha ,you have a winner

Hello,

I Think the point is, we don't want to be assigned a particular stock or be exposed to margin call at the worst case scenario. Being assigned a stock and having to fork out more cash outside of the current account is a nono. At this point, this is putting more than 100% in one basket and you are exposed to that stock specific risk instead of the market as a whole.

Theres a reason why Warrent Buffet averages 20 something percent in the longterm and is considered one of the greatest investors. Plus if you knew something like that is going to happen you can make more simply by leveraging call options right?

That being said, there are definitely people who do well doing exactly what you mentioned. Sell puts, get assigned once inawhile, sell covered calls until it gets back up or have calls assigned the stocks you own, etc.

One more thing, not sure how you are doing the math. With 120k, my guess would be around 40 positions not 10. We are trying to take advantage of span margin when it comes to futures. I think you are confusing this with stocks.

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  #5956 (permalink)
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isold View Post
I got assigned on Googl 822,few month ago ,I transfered mone day before ,I knew it will be up 850 in a week

You never know that for sure.

Point is that by selling options on futures you don't need to know the direction to profit. You can be off and still profit.

You sell puts and futures move up you make a profit.

You sell puts and futures are flat you make a profit.

You sell puts and the market moves slowly lower you make a profit.

You sell puts and futures crash quickly you might lose money.

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  #5957 (permalink)
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bill20 View Post
Have you examined simply selling lesser number of naked puts at the same delta (5?) without the put protection? I assume you could take in significantly larger net credit with a large excess margin cushion, effectively allowing you to ride out more high volatility scenarios?

Yes I looked at it.

I did a 4 year backtest of naked ES puts (3 delta). To not have a losing option you needed to have 6xIM. The average yearly ROI for the 4 years was 25.3% per year (compounded). Results (Excel) are in this thread. Do a search (Thread Tools, Find Attachment) to find it.

Another study was if you entered a naked 5 delta option on 20150817 (the worst day to enter before the 20150824 crash) you needed 6xIM to ride out that crash. But it had a far higher drawdown, 47% than a option spread with 2 longs (22%).

A naked 3 delta put sold on 20150817 would have needed 7xIM to ride out the 20150824 crash while having a 45% drawdown.

On both of these naked options they were very close to being on margin call. A safer excess would be 7xIM if you are selling naked options. But that takes the 4 year study down to 21.7% yearly ROI.

For the 20150824 study the possible MROI on a naked 3.27 delta ES put using 7xIM exiting at 50% drop in 30 days was 1.9%. For the same short with two 1440 longs using 6xIM the possible MROI was 2.0%. About the same but with half the drawdown (22%).

6xIM means if margin required is $300 then you keep $1,800 in your account for each option/spread until you exit the position.

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  #5958 (permalink)
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ron99 View Post
Yes I looked at it.



I did a 4 year backtest of naked ES puts (3 delta). To not have a losing option you needed to have 6xIM. The average yearly ROI for the 4 years was 25.3% per year (compounded). Results (Excel) are in this thread. Do a search (Thread Tools, Find Attachment) to find it.



Another study was if you entered a naked 5 delta option on 20150817 (the worst day to enter before the 20150824 crash) you needed 6xIM to ride out that crash. But it had a far higher drawdown, 47% than a option spread with 2 longs (22%).



A naked 3 delta put sold on 20150817 would have needed 7xIM to ride out the 20150824 crash while having a 45% drawdown.



On both of these naked options they were very close to being on margin call. A safer excess would be 7xIM if you are selling naked options. But that takes the 4 year study down to 21.7% yearly ROI.



For the 20150824 study the possible MROI on a naked 3.27 delta ES put using 7xIM exiting at 50% drop in 30 days was 1.9%. For the same short with two 1440 longs using 6xIM the possible MROI was 2.0%. About the same but with half the drawdown (22%).



6xIM means if margin required is $300 then you keep $1,800 in your account for each option/spread until you exit the position.



Regardless of trade structure do you find profit taking at 50% rinse and repeat to be advantageous? If so, is there a optimal DTE for initiation as you may often be swapping one low IV position for another while incurring slippage and commission?


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  #5959 (permalink)
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bill20 View Post
Regardless of trade structure do you find profit taking at 50% rinse and repeat to be advantageous? If so, is there a optimal DTE for initiation as you may often be swapping one low IV position for another while incurring slippage and commission?

I have found that 90+DTE is best for my strategy because you are at lower strikes and higher possible MROI.

The possible MROI on a new position is always higher than waiting for the last 50% of net premium.

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  #5960 (permalink)
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Eric B View Post
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

ron, I've been monitoring this trade in the background and have noticed the long puts are losing more value than the short puts are gaining over the last few days, where the ES hasn't been doing much, sideways trading. Currently I'm -$35 on two longs, +$10 on one short.

Question: How does the one short-put position make more money than a position that's double it & facing the other direction? Is it via the difference in delta? And does this occur once more time has passed than thus far? As always, thanks for your knowledge sharing.

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