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Selling Options on Futures?
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Selling Options on Futures?

  #6241 (permalink)
Trading Apprentice
Chicago IL/USA
 
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ron99 View Post
On 6/29/17 I sold EW3v7p1940(2)p1720(3) for 4.25. Exited today at 2.00. 20 days held. Used 4xIM. mROI was 6.9%


@ron99

Congratulations on being in a position to be able to buy a RV and see the country. (s)

A short time back I asked if you always exited around 50% and you said yes.
One of the reason I asked was because there will be times when you put on a position and volatility
will be higher, so will your premium then.

This is a good example of why I asked. Your position was 4.25 and exited at 2.00.
The next day you put on a new position for around 2.5. Would you have not been better
to keep the first position longer? You were able to see that your new position would only give you
around 2.5. and the one you exited had to be a lot deeper out of the money.

Does not the decay happen faster the closer you get towards expiration date?
I though maybe because the ones bought would not severe as protection the closer you got
to expiration. After thinking about it that could not be true because there has not been a
loser from the back test starting at 2012.

Thanks,

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  #6242 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
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LordV View Post
@ron99

Congratulations on being in a position to be able to buy a RV and see the country. (s)

A short time back I asked if you always exited around 50% and you said yes.
One of the reason I asked was because there will be times when you put on a position and volatility
will be higher, so will your premium then.

This is a good example of why I asked. Your position was 4.25 and exited at 2.00.
The next day you put on a new position for around 2.5. Would you have not been better
to keep the first position longer? You were able to see that your new position would only give you
around 2.5. and the one you exited had to be a lot deeper out of the money.

I exited short 1940 and entered short 2020.

Does not the decay happen faster the closer you get towards expiration date?

Both shorts were Oct. So no difference except the 1940 would decay a little faster than 2020.

I though maybe because the ones bought would not severe as protection the closer you got
to expiration. After thinking about it that could not be true because there has not been a
loser from the back test starting at 2012.

Thanks,

The premium of the new spread was $27.50 higher than where I exited the old spread. But my cost to roll was $30.60. So yes you are correct that in this case I should have stayed with old spread.

Here you can see that the 1940 spread premium has decreased $25 since 7/20 while the 2020 spread has decreased $12.50.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


Thank you for pointing out how I could have handled this better.

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  #6243 (permalink)
Trading for Fun
Los Angeles, CA
 
Futures Experience: Beginner
Platform: Zaner360
Broker/Data: DeCarley
Favorite Futures: Options on Futures
 
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LordV View Post
@ron99

Congratulations on being in a position to be able to buy a RV and see the country. (s)

A short time back I asked if you always exited around 50% and you said yes.
One of the reason I asked was because there will be times when you put on a position and volatility
will be higher, so will your premium then.

This is a good example of why I asked. Your position was 4.25 and exited at 2.00.
The next day you put on a new position for around 2.5. Would you have not been better
to keep the first position longer? You were able to see that your new position would only give you
around 2.5. and the one you exited had to be a lot deeper out of the money.

Does not the decay happen faster the closer you get towards expiration date?
I though maybe because the ones bought would not severe as protection the closer you got
to expiration. After thinking about it that could not be true because there has not been a
loser from the back test starting at 2012.

Thanks,

There is more risk if you keep options until expiration. For example, using Ron's original strategy of 1 short at -5 delta and 2 long at -1.5 delta; the success rate is 100% from 2013 to 2016 if you exit at 50%. The success rate drops to 98.5% if you hold to maturity, and losses when selling options are never pretty.

You're right that in some circumstances it is more sensible to hold onto what you have instead of exiting; but if you're looking for a methodical approach to trading that has a higher probability of succes, then it seems wiser to take profit early. At some point there was a study on the optimal exit % and it was between 50% and 60% (value drop of 40%).


Last edited by TFOpts; August 7th, 2017 at 01:32 AM. Reason: Clarification
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  #6244 (permalink)
Market Wizard
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Interesting article about trends in the stock market during times of all-time highs.
https://seekingalpha.com/article/4095580-markets-crash-time-highs?ifp=0

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  #6245 (permalink)
Market Wizard
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ron99 View Post
Interesting article about trends in the stock market during times of all-time highs.
https://seekingalpha.com/article/4095580-markets-crash-time-highs?ifp=0

Interesting, thanks. Wonder what it would look like if they used S&P 500. I mention that because I recently read Andreas Clenow's "Stocks on the Move: Beating the Market with Hedge Fund Momentum Strategies" and he completely pans the Dow Jones Industrial and all price weighted index's.

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  #6246 (permalink)
Elite Member
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According to the latest news the North Korean leadership is going to attempt a missile launch towards Guam on August 15th. Donald Trump said if that happens he will launch a strike against North Korea. I'm just wondering how people are reacting to the news. Has anyone changed anything they're doing? I have one position open right now and I'm just curious to see how others are handling these situation.

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  #6247 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
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rsm005 View Post
According to the latest news the North Korean leadership is going to attempt a missile launch towards Guam on August 15th. Donald Trump said if that happens he will launch a strike against North Korea. I'm just wondering how people are reacting to the news. Has anyone changed anything they're doing? I have one position open right now and I'm just curious to see how others are handling these situation.

I have held off on adding new ES put spreads this week. I still have on prior positions. So I am increasing my 4xIM to a higher level.

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  #6248 (permalink)
World'sWorstTrader
Knoxville Tennessee USA
 
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rsm005 View Post
According to the latest news the North Korean leadership is going to attempt a missile launch towards Guam on August 15th. Donald Trump said if that happens he will launch a strike against North Korea. I'm just wondering how people are reacting to the news. Has anyone changed anything they're doing? I have one position open right now and I'm just curious to see how others are handling these situation.


I cleared out some of my risk. Down to a small amount of margin.

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  #6249 (permalink)
Elite Member
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Ya..that's what I'm thinking also. I have a position open now with 10x excess but think I may continue to reduce my exposure slowly as volatility comes back down to earth.

/rsm005/

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  #6250 (permalink)
Market Wizard
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rsm005 View Post
According to the latest news the North Korean leadership is going to attempt a missile launch towards Guam on August 15th. Donald Trump said if that happens he will launch a strike against North Korea. I'm just wondering how people are reacting to the news. Has anyone changed anything they're doing? I have one position open right now and I'm just curious to see how others are handling these situation.

As mentioned earlier, I currently do not hold any ES puts.

Regarding my stocks account, I am fully hedged via ES outright futures. I had sold them when the S&P index moved below 2460. I will hold this hedge until the S&P index moves back above 2460 or shows a clear reversal at a lower level.

Best regards, Myrrdin

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