Selling Options on Futures?

January 29th, 2018, 04:11 AM

mattz

I suggest that those who sell options read this https://www.epsilontheory.com/wp-content/uploads/epsilon-theory-things-that-go-bump-in-the-night.pdf

"Today though � if that talismanic put-buying behavior is going away � and I think it is � then systematic volatility selling strategies won�t work as well going forward as they have in the past. That�s not a bold market call. It�s just a mechanistic fact of markets: sellers don�t get as high of a price for what they�re selling if you have fewer buyers. Volumes go down and margins are squeezed for traders, too."

I totally believe his statements considering that many (sadly) nowadays consider OTM (out of the money) options selling as safe.

Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

I don't think people on this thread think that selling OTM options is safe, but understand that you get money for taking on risk.
This thread is more about minimizing and dealing with said risk, not about ignoring it.

January 29th, 2018, 06:50 AM

mattz

I suggest that those who sell options read this https://www.epsilontheory.com/wp-content/uploads/epsilon-theory-things-that-go-bump-in-the-night.pdf

"Today though � if that talismanic put-buying behavior is going away � and I think it is � then systematic volatility selling strategies won�t work as well going forward as they have in the past. That�s not a bold market call. It�s just a mechanistic fact of markets: sellers don�t get as high of a price for what they�re selling if you have fewer buyers. Volumes go down and margins are squeezed for traders, too."

I totally believe his statements considering that many (sadly) nowadays consider OTM (out of the money) options selling as safe.

Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

It is incorrect to say that put buying is going away. Here is a chart of the ES and EW3 option open interest combined. It is increasing. I suspect that the other options like EOM and EW1, EW2, EW4 are increasing in OI too.

January 29th, 2018, 11:58 AM

ron99

ES margin is increasing effective Monday Jan 29 by 5.2%

Hmm.. How will this effectively affect the current strategies?

January 29th, 2018, 01:49 PM

sapiens

Hmm.. How will this effectively affect the current strategies?

The nice thing about selling OTM ES puts is that you do not have to worry about such minor issues.

Best regards, Myrrdin

February 1st, 2018, 01:42 PM

Closed today:
EW3 J8 2150 Put(2)/ EW3 J8 1900 Put(3)
Sold for 3,45 on Jan 3, closed at 1,10

I am planning to sell a new 2-3 Spread tomorrow.
Unless there are good reasons against it?

I have to say the stock market looks somewhat fragile, but it looked that way to me for the past year or more.

February 1st, 2018, 03:37 PM

When selling options, time is an important factor. A larger return in a smaller amount of time will give
a better return on investment. The following ratio might give some insight into the efficiency of a short
option position:

(% DTE used)/ (% Net Gain)

% DTE used = (the # of days position is active .... start date to close date)/DTE

(% Net Gain) = (net gain)/( max net gain possible at expiration).

The smaller (positive) the ratio the better. The largest value for the ratio would be 1.

February 1st, 2018, 06:50 PM

datahogg

When selling options, time is an important factor. A larger return in a smaller amount of time will give
a better return on investment. The following ratio might give some insight into the efficiency of a short
option position:

(% DTE used)/ (% Net Gain)

% DTE used = (the # of days position is active .... start date to close date)/DTE

(% Net Gain) = (net gain)/( max net gain possible at expiration).

The smaller (positive) the ratio the better. The largest value for the ratio would be 1.

A larger return in a smaller timeframe means an ever increasing gamma risk, eventually turning the trade into a binary gamble. Longer timeframe and managing a winner early (not holding to expiration) will provide for a much smoother and less volatile returns graph.

February 2nd, 2018, 09:47 AM

Fiu Cher

A larger return in a smaller timeframe means an ever increasing gamma risk, eventually turning the trade into a binary gamble. Longer timeframe and managing a winner early (not holding to expiration) will provide for a much smoother and less volatile returns graph.

You are 100% correct. This was just an idea. I have never used it.

February 2nd, 2018, 10:37 AM

502/5000
Hello everyone. As I said before I am trying to learn everything about this type of operation. Maybe it will seem absurd but I have a cash account with Tradestation and doing a little research I see that they ask me for $ 1000 for the verical 1ES MAY 2018 (W) 2600 PUT -1ES MAY 2018 (W) 2350 PUT. I wonder if these high margin are due to the current volatility increase (VIX 14.5) or due to the type of account. Do you have a margin account to get less margin?

Thanks for your help

February 2nd, 2018, 11:05 AM

tinaturner

502/5000
Hello everyone. As I said before I am trying to learn everything about this type of operation. Maybe it will seem absurd but I have a cash account with Tradestation and doing a little research I see that they ask me for $ 1000 for the verical 1ES MAY 2018 (W) 2600 PUT -1ES MAY 2018 (W) 2350 PUT. I wonder if these high margin are due to the current volatility increase (VIX 14.5) or due to the type of account. Do you have a margin account to get less margin?

Thanks for your help

You want to be long the 2600?

SPAN Margin on your spread is $715.

Selling Options on Futures?

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Selling Options on Futures?