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Selling Options on Futures?
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Selling Options on Futures?

  #5981 (permalink)
Market Wizard
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I think TT has done numerous studies that conclude you should manage at 50% and just let the losers go.

Let them do that if they want. I am trying this.

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  #5982 (permalink)
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ron99 View Post
ES margin is dropping 8% on Monday

Did CME send that out in one of their emails? I'm subscribed to the CME notices but didn't see that

Frightening to think I'm somehow missing margin change notices

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  #5983 (permalink)
Market Wizard
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ron99 View Post
I would like to see a study on this rather than hearsay.

I did an ES study using getting out at 20% loss. It performed worse than other strategies.

The reason why I exit somewhere around 200 % (= loss of 100 %) is simply that my sleep gets worse when a large position has increased in value by several hundred percent. And we have such events, eg. in August 2015 or in early 2016.

I do not think it is a good idea to exit at exactly 200 %. I prefer defining a stop in the chart. Currently my exit point for the ES puts is on a close below 2320 (March low). And I prefer to include fundamentals in my considerations regarding exiting - more for other commodities than for the indices. Once in a while I get out with a small profit or loss, because fundamentals were not the same as when I had entered the trade.

But I admit that it is not possible to backtest such concept.

Best regards, Myrrdin

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  #5984 (permalink)
Market Wizard
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Captain135 View Post
Did CME send that out in one of their emails? I'm subscribed to the CME notices but didn't see that

Frightening to think I'm somehow missing margin change notices

Yes I received email about 5pm ET Thursday.

Agriculture, Crude, Coal, Electricity, Equity Index, FX, Interest Rate, NGL, Refined Product Margins - Effective May 12, 2017 - CME Group

Here is page with all types of notices. Margin changes are under the category Clearing, Performance Bond-Margins

Notices

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  #5985 (permalink)
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Ron, how do you exit the 2 long - 1 short spread? Currently my position

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
is at, respective to the premium at time of entry, 47% loss ($85) on 2 longs, 32% gain ($80) on the one short. Do you exit once the short-put position has lost 50% of premium, regardless of how the 2 longs are faring?

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  #5986 (permalink)
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Eric B View Post
Ron, how do you exit the 2 long - 1 short spread? Currently my position

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
is at, respective to the premium at time of entry, 47% loss ($85) on 2 longs, 32% gain ($80) on the one short. Do you exit once the short-put position has lost 50% of premium, regardless of how the 2 longs are faring?

Never. Doing that could easily turn a winner into a loser.

You just have to be patient.

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  #5987 (permalink)
Market Wizard
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Interesting VIX level vs ES future returns anaylsis

Investment Idiocy Blog :- People are worried about the VIX

Investment Idiocy: People are worried about the VIX

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  #5988 (permalink)
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myrrdin View Post
Yes, although this set of rules is not as specific as the rules for the ES puts. For commodities, eg. grains & beans, meats, softs, and energies (I rarely trade metals or currencies), I think about getting out of the trade, buying back part of the position, or hedging via short futures or long puts in the following situations:
  • Before each important report (eg. USDA reports on grains, beans, and cotton; cattle on feed reports),
  • in case of a major change in fundamentals (eg. unexpected OPEC decision for CL, cold blast in winter for NG),
  • when a chart technical signal - preferably in the area where the option will have doubled its value - chosen before entering the trade has been reached by the underlying (eg. new contract high in the case of selling calls).

As I am a discretionary trader I decide from case to case if I take measure and which action I take.

Best regards, Myrrdin

Is there anyplace where there is information of the dates of release of each important report. Or do you have to monitor it asset by asset. How far in advance are these information released?

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  #5989 (permalink)
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myrrdin View Post
I am following a similar strategy, exiting at approximately double the original value when selling options. I choose the stop loss in the underlying in a way that it should be reached when the value of the option has doubled. Usually I only exit end of day.

Another issue to consider: Many option sellers roll a loosing trade out to more DTE in a way that the new position has the same size than the loosing position (eg. double the normal position). Thus, in case you roll out several times you get huge positions. I prefer to roll out at the original size of the trade. That means, that if I roll at 200 %, the best I can achieve is a break even for the complete trade.

This procedure definitely has improved my performance (and my sleep).

Best regards, Myrrdin

Hi Myrrdin,

Thanks much for sharing your trading philosophy. I have a few questions.

1. What about your profitable trades? Do you have a exit strategy for profitable trades, say at 10% or 20%?

2. On your strategy of rolling out at the original size of the trade, as you pointed out, that means if you roll at 200%, the best is likely a break-even or more likely a small loss. That would increase the loss rate.

Using this strategy of rolling at the original size, what % of winning trades do you have as a % of total trades?

Thanks so much for your sharing!

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  #5990 (permalink)
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SMCJB View Post
Interesting VIX level vs ES future returns anaylsis

Investment Idiocy Blog :- People are worried about the VIX

Investment Idiocy: People are worried about the VIX



Most of the people writing these stories about the VIX fail to make a distinction between VIXMO and the new VIX. There is 0.8 of difference between these.

VIXMO bottomed at 10.48 not in the 9-handle.

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