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Selling Options on Futures?
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Selling Options on Futures?

  #6481 (permalink)
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tinaturner View Post
Hi, Ron99. It's my first post I recently discovered this new way of investing selling options and the truth is that I find it very interesting. I've been reading the post on this topic and I wanted to ask you if you consider that the strategy of strangles (selling one put and one call at a time) is a good option in the sale of futures options of the ES. The strangle is a way to sell options described by James Cordier but I think you have not talked about it as a possibility.
Have you done any strangle comparative study versus the strategy of selling 2 puts to 3 deltas and buying 3 puts to 1 delta? (i think this strategy is your favorite right now)
Perhaps it would be interesting to see how a strangle would behave in the face of market declines such as those of 2008 and 2015. Also see how much time elapses on average to get the benefit and the resulting ROI.
I appreciate your generosity for sharing your knowledge and research. Also to the rest of the group members.
regards

In the last years it seems to me you would not have had any luck with strangles, since the bias is up.
Also, Calls are usually much cheaper than Puts, thus you would have made little money on the Call side with quite some risks.
IMO, for ES and other stock indices, Puts make more sense.
For other futures (e.g. energy or grains) strangles can make a lot of sense in the right circumstances.

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  #6482 (permalink)
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tinaturner View Post
Hi, Ron99. It's my first post I recently discovered this new way of investing selling options and the truth is that I find it very interesting. I've been reading the post on this topic and I wanted to ask you if you consider that the strategy of strangles (selling one put and one call at a time) is a good option in the sale of futures options of the ES. The strangle is a way to sell options described by James Cordier but I think you have not talked about it as a possibility.
Have you done any strangle comparative study versus the strategy of selling 2 puts to 3 deltas and buying 3 puts to 1 delta? (i think this strategy is your favorite right now)
Perhaps it would be interesting to see how a strangle would behave in the face of market declines such as those of 2008 and 2015. Also see how much time elapses on average to get the benefit and the resulting ROI.
I appreciate your generosity for sharing your knowledge and research. Also to the rest of the group members.
regards

Whereas Ron's strategy works well if executed for many years under different circumstances, selling calls or strangles permanently yields the following problems:

There are many periods, eg. since the US elections 2016, where the indices move upwards without looking back. Short calls (and strangles) would produce one loss after the other.

Strangles are a good solution when volatility is high. In recent months volatility was very low.

As Manuel and others stated before, premium for calls are much lower for the same delta (for the ES).

I like selling strangles for other commodities, if I expect a sidewards move and if volatility is high. But for the ES only in exceptional cases.

Best regards, Myrrdin

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  #6483 (permalink)
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Given the looming Govt Shutdown and the chances that it may not get resolved I've closed out my open position, for a profit but not much. I'm going to sit out next week and see what happens. I'd like a weekend with no heartburn .

/rsm005/

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  #6484 (permalink)
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myrrdin View Post
Whereas Ron's strategy works well if executed for many years under different circumstances, selling calls or strangles permanently yields the following problems:

There are many periods, eg. since the US elections 2016, where the indices move upwards without looking back. Short calls (and strangles) would produce one loss after the other.

Strangles are a good solution when volatility is high. In recent months volatility was very low.

As Manuel and others stated before, premium for calls are much lower for the same delta (for the ES).

I like selling strangles for other commodities, if I expect a sidewards move and if volatility is high. But for the ES only in exceptional cases.

Best regards, Myrrdin

Hi Myrrdin and Ron,

What do you guys recommend when looking for best margin's (selling options), credit ratio spread's or vertical credit spread's? which do you prefer when you are bullish/bearish on a market. And when you think the price will stay fairly steady, do you usually go for a strangle?

thanks in advance.

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  #6485 (permalink)
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rsm005 View Post
Given the looming Govt Shutdown and the chances that it may not get resolved I've closed out my open position, for a profit but not much. I'm going to sit out next week and see what happens. I'd like a weekend with no heartburn .

/rsm005/

Is today's situation similar to the situation in 2011?

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  #6486 (permalink)
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JokerTrader321 View Post
Hi Myrrdin and Ron,

What do you guys recommend when looking for best margin's (selling options), credit ratio spread's or vertical credit spread's? which do you prefer when you are bullish/bearish on a market. And when you think the price will stay fairly steady, do you usually go for a strangle?

thanks in advance.

Ron has done excellent studies regarding optimum margin. I am sure he will comment on this topic. I do not optimize margin in a sophisticated way as he does.

I prefer trading strangles when volatility is high or in cases when I am able to leg into the strangle. (Sell the puts at a much lower price of the underlying than the calls.)

Best regards, Myrrdin

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  #6487 (permalink)
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myrrdin View Post
I prefer trading strangles when volatility is high or in cases when I am able to leg into the strangle. (Sell the puts at a much lower price of the underlying than the calls.)

I would like to add:

I do not like to enter strangles when the COT data is at an extreme level.

And I do not enter strangles when volatility is high because of a weather market or because of a report to be published. Often it is a good idea to sell a strangle just after such event.

As I evaluate each trade separately there are exceptions. But in these rare cases I trade small lots.

Best regards, Myrrdin

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  #6488 (permalink)
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Excellent, thank you. I will need to add COT to my analysis!

Regards


myrrdin View Post
I would like to add:

I do not like to enter strangles when the COT data is at an extreme level.

And I do not enter strangles when volatility is high because of a weather market or because of a report to be published. Often it is a good idea to sell a strangle just after such event.

As I evaluate each trade separately there are exceptions. But in these rare cases I trade small lots.

Best regards, Myrrdin


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  #6489 (permalink)
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Baffling Silver option closing prices

Has anyone else noticed low premium Silver options seem more prone than other markets to erratic closing prices? On 1/12 I sold some deep OTM July 12.00 puts for $25 and a week later on 1/19 they closed for double that amount at $50 despite the underlying being in approximately the same place. During the same time period the December options with the same strike (but higher premium at $195) didn't change at all.

Any idea why the low premium options are so changeable in that market?

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  #6490 (permalink)
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Calamari88 View Post
Has anyone else noticed low premium Silver options seem more prone than other markets to erratic closing prices? On 1/12 I sold some deep OTM July 12.00 puts for $25 and a week later on 1/19 they closed for double that amount at $50 despite the underlying being in approximately the same place. During the same time period the December options with the same strike (but higher premium at $195) didn't change at all.

Any idea why the low premium options are so changeable in that market?

Generally deep OTM options react much stronger to a rise in volatility than other OTM or ATM options.

Best regards, Myrrdin

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