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Selling Options on Futures?
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Selling Options on Futures?

  #6081 (permalink)
Trading for Fun
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rsm005 View Post
@ron99 and @TFTOps

So I have been trying to put together a interesting simulation to find out is it provides additional protection automatically. Based on Ron's recent post it looks like the PC-SPAN spreadsheet will be able to do this you might have the tools that can. Specifically what I'm trying to do is the following

1. Add a put automatically when the margin reaches 50 to 60%, start with something arbitrary and modify.
2. The time of expiration and the Delta are still unknown and it's something I wanted to experiment with as part of the simulation.

I did something very similar when the Brexit vote was looming. I ended up buying a put that expired a week after the vote for pennies and ended up with a massive gain when the market reacted to the "yes" vote. The thought is to use margin excess as a barometer to add a put with the time and expiration being something TBD.

/rsm005/

rsm005, I like the idea but it will be difficult to test. The tool I have currently chooses options on a given date and under a given strategy and rides those options out until the exit point is reached. Testing different exit points and option parameters is easy enough to do, but adding options mid-stream will be a challenge.

However, I think your idea is very good and I will do my best to implement something so we can test it out, I'll get back to you with a progress update.

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  #6082 (permalink)
Trading for Fun
Los Angeles, CA
 
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Best Days of the Week

Based on data from 2013-2016, the best days of the week to sell ES options using Ron's strategy are Monday and Thursday. It is generally understood that the value of selling on Thursday is the additional time decay that occurs over the weekend. I'm not sure why there is good value on Monday as well. Maybe because volatility is higher on Monday due to news that emerged over the previous weekend?

Here's a table of mROIs by day of the week where 1 is Monday, 2 is Tuesday, etc.
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Median is highest but average is lowest on Thursday, showing less volatility but more consistent gains (in line with time decay being the source), while the average is highest on Monday (in line with higher volatility being the source).

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  #6083 (permalink)
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TFOpts View Post
rsm005, I like the idea but it will be difficult to test. The tool I have currently chooses options on a given date and under a given strategy and rides those options out until the exit point is reached. Testing different exit points and option parameters is easy enough to do, but adding options mid-stream will be a challenge.

However, I think your idea is very good and I will do my best to implement something so we can test it out, I'll get back to you with a progress update.

One other piece of information if you do figure out a way to try this. I break up my trades into lots of 20-30 contracts at a time rather than 1 massive put position, something I learned the hard way given that different prices/times move at different rates as the underlying moves.

For example, right now I have 3 positions open

1. EWQ7P2025 -30 and EWQ7P1790 +60
2. ESU7P2000 -30 and ESU7P1760 + 60

I'm not sure if buying 1 put close enough to the money but expiring sooner will protect both positions or if each position needs a put. I love the entry timer you posted earlier....confirms Thursdays but Monday was really eye opening. I'm probably going to put another position on this Thursday for 20 contracts.

/rsm005/

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  #6084 (permalink)
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westhills california US
 
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rsm005 View Post
One other piece of information if you do figure out a way to try this. I break up my trades into lots of 20-30 contracts at a time rather than 1 massive put position, something I learned the hard way given that different prices/times move at different rates as the underlying moves.

For example, right now I have 3 positions open

1. EWQ7P2025 -30 and EWQ7P1790 +60
2. ESU7P2000 -30 and ESU7P1760 + 60

I'm not sure if buying 1 put close enough to the money but expiring sooner will protect both positions or if each position needs a put. I love the entry timer you posted earlier....confirms Thursdays but Monday was really eye opening. I'm probably going to put another position on this Thursday for 20 contracts.

/rsm005/

Interesting
I know part of Ron's strategy is to be invested at all times (or at least most of the time) and not to time the market. I wonder if one was to divide up the contracts like rsm005 and enter every monday( if IM allows)the win rate would be higher as oppose to try to wait and time the market ( if possible) and enter with one big contract. I don't even know if this can be tested or looked at objectively.

Thanks

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  #6085 (permalink)
Market Wizard
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TFOpts View Post
Based on data from 2013-2016, the best days of the week to sell ES options using Ron's strategy are Monday and Thursday. It is generally understood that the value of selling on Thursday is the additional time decay that occurs over the weekend. I'm not sure why there is good value on Monday as well. Maybe because volatility is higher on Monday due to news that emerged over the previous weekend?

Here's a table of mROIs by day of the week where 1 is Monday, 2 is Tuesday, etc.
Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Median is highest but average is lowest on Thursday, showing less volatility but more consistent gains (in line with time decay being the source), while the average is highest on Monday (in line with higher volatility being the source).

Thanks for study.

Do the results look different if you only look at 2016 & 2017?

Do you have the EW3 contracts included? Or is 2016 only the quarterly options?

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  #6086 (permalink)
Market Wizard
Cleveland, OH
 
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rajab View Post
Interesting
I know part of Ron's strategy is to be invested at all times (or at least most of the time) and not to time the market. I wonder if one was to divide up the contracts like rsm005 and enter every monday( if IM allows)the win rate would be higher as oppose to try to wait and time the market ( if possible) and enter with one big contract. I don't even know if this can be tested or looked at objectively.

Thanks

The win rate is 100%. Can't be higher. ROI could be higher.

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  #6087 (permalink)
Market Wizard
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ES margin is dropping 4.3% on Friday June 2nd.

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  #6088 (permalink)
Trading for Fun
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ron99 View Post
Thanks for study.

Do the results look different if you only look at 2016 & 2017?

Do you have the EW3 contracts included? Or is 2016 only the quarterly options?

The data I'm currently using is only for contracts started in 2013 through 2016. The contracts started in 2016 continue into 2017 but no new trades are made in 2017. At the end of Q2 I'll consider adding contracts started in Q1 of 2017 since there should be a sufficient number of days for all of them to reach the exit point.

EW3 contracts are included. Here are results for 2016. Results are somewhat consistent with the 13-16 period with Monday clearly standing out. Overall 2016 was a good year for this trading strategy with a median return of 4.04%.
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In your experience, how's the volume with EW3 contracts? How about the other EW contracts?

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  #6089 (permalink)
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Shoham Israel
 
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ron99 View Post
ES margin is dropping 4.3% on Friday June 2nd.

Do you know if and how this will change the required margin for short ES options?

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  #6090 (permalink)
Market Wizard
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volramp View Post
Do you know if and how this will change the required margin for short ES options?

They will drop 4.3% from what they would have been without the change

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