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Selling Options on Futures?
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Selling Options on Futures?

  #6631 (permalink)
Market Wizard
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sapiens View Post
Thanks SMCJB for the prompt reply! Tenure refers to the expiration date? I thought the long and short legs are of the same expiry?

Sorry my apologies you are right. The answer is similar though. The delta of the long lower puts decays faster than the short higher puts as time progress's.

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  #6632 (permalink)
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SMCJB View Post
Sorry my apologies you are right. The answer is similar though. The delta of the long lower puts decays faster than the short higher puts as time progress's.

Oic! So in a sharp drop like the one last week, it's actually better for the strategy? How so?

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  #6633 (permalink)
Market Wizard
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To keep it simple think of it this way. Imagine your sold an ATM put and bought 2 puts 10% out of the money that expire in a months time.

Scenario 1 : Market drops 10% tomorrow.
You short put probably loses about 6% (of the underlying price), while your two long puts both make say 2.5% (again of the underlying price). So all in all your down 1% (of the underlying price).

Scenario 1 : Market slowly drops 10% over the next month.
You short put loses 10% minus starting premium, while your two long puts are both worthless as they expire barely out of the money. So all in all your now down 10% minus the starting premiums.

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  #6634 (permalink)
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Has anyone read or followed Ray Dalio of Bridgewater fame regarding asset allocation? My brother has become very big into Tony Robbins and recently attended a speech by Ray and he re-iterated his previous view that most portfolios are not risk allocated properly. He said that typically any single asset class will have a major sell off every 10 years and that being overly invested in a 1 asset class over another is a recipe for going broke.

Summary

1. Being in cash is bad as most asset classes always outperform cash unless you're in a depression
2. Being 50/50 in stocks/bonds is not a true mitigation of risk because stocks are 3x more volatile than bonds.
3. A true risk balanced portfolio is something like...

30% Stocks
40% Long-Term Bonds
15% Intermediate-Term Bonds
7.5% Gold
7.5% Commodities

Given this, how diverse are some of you across multiple asset classes? Does diversity play into your overall risk/hedge against massive market moves? I'd love to get some of the more seasoned investors/traders to comment on some of these ideas and thoughts.

/rsm005/


Last edited by rsm005; February 24th, 2018 at 02:20 AM.
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  #6635 (permalink)
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rsm005 View Post
Has anyone read or followed Ray Dalio of Bridgewater fame regarding asset allocation? My brother has become very big into Tony Robbins and recently attended a speech by Ray and he re-iterated his previous view that most portfolios are not risk allocated properly. He said that typically any single asset class will have a major sell off every 10 years and that being overly invested in a 1 asset class over another is a recipe for going broke.

Summary

1. Being in cash is bad as most asset classes always outperform cash unless you're in a depression
2. Being 50/50 in stocks/bonds is not a true mitigation of risk because stocks are 3x more volatile than bonds.
3. A true risk balanced portfolio is something like...

30% Stocks
40% Long-Term Bonds
15% Intermediate-Term Bonds
7.5% Gold
7.5% Commodities

Given this, how diverse are some of you across multiple asset classes? Does diversity play into your overall risk/hedge against massive market moves? I'd love to get some of the more seasoned investors/traders to comment on some of these ideas and thoughts.

/rsm005/

My portfolio is similar than the one you mention. With the exception that I do not hold Bonds, but Real Estate. And instead of Commodities I have my trading account, which I use for trading commodities futures.

Best regards, Myrrdin

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  #6636 (permalink)
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High VIX and IM but Low ROI

Hello
I wanted to raise a doubt. In times like the current one with the volatility of the S & P high, the high margin requirements to open the Ron99 strategy (-2 short puts +3 long put) imply a low ROI. How should we act in these cases? Is it better to wait for the VIX to normalize again to open an operation?
Must we wait for a minimum ROI to trading?

Regards


Last edited by tinaturner; February 26th, 2018 at 03:47 PM.
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  #6637 (permalink)
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tinaturner View Post
Hello
I wanted to raise a doubt. In times like the current one with the volatility of the S & P high, the high margin requirements to open the Ron99 strategy (-2 short puts +3 long put) imply a low ROI. How should we act in these cases? Is it better to wait for the VIX to normalize again to open an operation?
Must we wait for a minimum ROI to trading?

Regards

With high volatility comes higher premiums which means ROI is higher now not lower.

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  #6638 (permalink)
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Yesterday, one of those days when you want to sell sugar puts.

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  #6639 (permalink)
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magnificent thread.



i have now read from page 570 onward and the strategies and information shared here are fabulous. the fact that this thread was being reported in real time as financial markets kept getting ever more ridiculous and overextended and then went through a "flash correction" is also very educational. thanks to ron99 and myrrdin for their generosity and hard work. also, to TFOpts and Dudetooth for their technological contributions. if mr. ron99's strategies survived the recent "flash correction" fairly unscathed that is the best testimony to how well designed and researched they are.



i just want to point out a couple of things. this aberrant situation were price levels in financial markets keep being bought parabolically higher can be expected to continue at least in the immediate future but not forever more. 8,000 points in the nasdaq and 3,000 points in the s&p can be considered a certainty to be hit from all the available evidence up to now. the global economy and financial system will indeed blow up in horrendous fashion at some point in the future, but in all probability those days are still months or years away and it will be the unsustainable real economy that implodes first.


one recommendation i would make to those selling puts would be to go at it for the next 6 months or so and then gradually reduce their positions to only 1/20 to 1/15 th of the capital they have available (even with 6xmm buffers in place). for almost a decade, price levels have kept being bought higher, specially after every time the global economy suffered a bad setback, but 25 - 30% annual increases cannot go on forever. for those of us joining the party so late it would be self destructive to want to believe that prices will continue ripping higher for years and trying to allocate 100% of available capital plus profits into any strategy that profited only from uninterrupted uptrends.



the events of the month of february proved that a strategy like selling volatility, that had been wildly profitable for almost a decade, completely imploded when some "gigantic entities" decided to liquidate the short positions they had had on since at least 2012 (some very interesting transcripts from 2012 were released in january 2018). i have read stories of retail traders that transformed 500,000 usd into 12,000,000 usd by mechanically selling volatility for as long as it kept getting smashed lower, but if they never realized that their system would never be sustainable in normal conditions and scaled down their positions massively after having multiplied their money several times over, they would have lost it all in a matter of hours weeks ago. i agree in general with adam82's comments about sustainability and unsustainability of strategies that depend on severely dysfunctional financial conditions like those of the last decade. therefore, get ready for significant turbulence in price levels going forward and the uptrend to continue for the time being, and make sure to reduce your positions going forward.



finally, i just want to share a chart of the nq futures overnight sessions (18:00 to 9:30) for the last 12 months which shows very transparently at what point did janet hand the baton over to jay. around that same time some "very large market actors" decided to liquidate the largest anti volatility positions ever, that had been open since at least 2012 and the overnight futures " ramping / pumping up services " were seemingly paused for 10 days or so, but they have now been practically completely reestablished.



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  #6640 (permalink)
Trading for Fun
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Based on how Wheat is moving up I'm thinking Cordier's analysis of that market is off.

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