I opened an account with Zaner / Gain, and to my surprise I am paying $ 25,00 per option sold an bought?
Is that normal?
On IB I am paying 3,50, and even that is quite expensive.

Ron

Thanks for your contributions to the forum. I really enjoyed reading through it.
I'm also an options premium seller. Some stocks but mainly index options.

Was there a study you did (perhaps I missed it ) on only selling the call side ? At what delta and what's the annual return ??
Thanks

The combination of the volatility skew in ES options (calls have lower IV than puts) and the directional bias of equity index's means the returns for call selling are significantly lower than put selling.

I am going to use TFOpts's strategy for my new positions. I will sell two ESu7p1960 and buy three ESu7p1750. IM is $419. Friday's settlement was $160. I will use 4xIM. This could give me a 3.0% ROI if I exit at 50% drop in 30 days.

Edit. I sold them at 3.00 or $150 on June 5th. This makes possible ROI 2.7%.

I will also track how my old strategy of selling one ESu7p2050 and buying two ESu7p1830 performs vs new startegy. IM is $249. Friday's settlement was $90. With 6xIM the possible ROI at 50% drop and 30 days is 1.8%.

Is this a trial or are you planning this strategy going forward?
Thanks.

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You're welcome.



I did not do a formal study on selling ES calls. But there is a post in this thread where I talked about this.



What I found was that ES calls were way to low ROI and far more risky because you couldn't get far enough OTM on the strike to be higher than past moves in ES. Largest gain in ES futures in 90 days since 2009 is 282.50 on the June 2016 contract.



A 5 delta call right now is ESu7c2630 which is 180 OTM. Premium is $90. This call IM is $1,576 which will give you a 0.4% ROI if you can exit at 50% drop in 30 days.



The -5.00 delta put is ESu7p2050 which is 385 OTM. Premium is $290. This put IM is $755 which will give you a 3.2% ROI if you can exit at 50% drop in 30 days.



Largest drop in ES since 2009 is 268.50 on the Mar 2016 contract.

Ok fair enough . So then what's the strategy ?
Let's say my account is $100,000

Assuming you keep approx 6x IM, we are placing this trade once per month , covering it around 30 days once there's 50% decay.

So that is approx 12 times per year that we can put this trade on ?

In my backtest 2013-2016 it made 53 trades in 4 years.

Also what size are you putting on ?? It's one thing to sell 10-20 contracts , fine. But with a $100-$500k account, what is the strategy??

I sold 345 two by three ES spreads today. 1,725 options. In ES week 3 options there is plenty of size to bids and asks.

If you are doing this in size (kind of like Karen the super trader), one flash crash scenario and your account can be toast .

The backtest shows it works for what happened the last 4 years including a 268.50 drop on the Mar 2016 contract. This will not work during a recession like 2008 but it will work all other times.

This is why I've always only sold the call side on the indices and am having trouble understanding the rationale behind the put selling side. There has to be a better reason than "the premium is higher."

It's not the premium is higher. It's the margin is far lower and you are further OTM.

I gave the reason here.

Quoting 

What I found was that ES calls were way to low ROI and far more risky because you couldn't get far enough OTM on the strike to be higher than past moves in ES. Largest gain in ES futures in 90 days since 2009 is 282.50 on the June 2016 contract. A 5 delta call right now is ESu7c2630 which is 180 OTM. Premium is $90. This call IM is $1,576 which will give you a 0.4% ROI if you can exit at 50% drop in 30 days.

You say you feel safer selling calls but you could have lost money last year with that 282.50 rise in futures because you would not have been that far OTM on your short calls.

On the call side , in way more comfortable because you rarely have a melt up

Nine ES futures contracts out of 28 rose by 200+ in a 90 day time frame since 2009. That's not rare. Meanwhile only six times did a ES futures contract drop by 200+ in 90 day time frame since 2009. More large increases than large drops.

and always have time to basically adjust or roll. But even on the call side , I'm very cautious with the number of contracts.

Just because the backtesting shows that with 6xIMyou will be ok, that doesn't mean there won't come a day when you'll need to have 8 or 9xIM , and since you don't , you will likely get blown out.

So because once in 10 years a strategy might lose money you should never trade it even though it never has a losing trade the rest of the years?

It was very obvious during 2008 that things might take a drop and that you shouldn't be selling ES puts that year. We backtested the strategy early that year and it was OK. Just during Sep to Dec it wouldn't have worked.

I do think it's prudent to acknowledge that we are in an unprecedented market environment where the last 8 years has been up and the market has greatly been supported by the Fed....

So you missed out on a lot of money by not trading the puts the last 7 years?

Appreciate the great discussion. Thanks.

What is your strategy and ROI for selling calls?



You seem to be a pessimist. You are fearful of crashes, so you avoid puts. If that is what you are comfortable with, then that is how you should trade.