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Selling Options on Futures?
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Selling Options on Futures?

  #6851 (permalink)
Elite Member
Cleveland, OH
 
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dvbattul View Post
I traded ES ratio credit spread as mentioned in the book by James Cordier for two years from 2016 till Feb 2018 using weeklys. I stopped it as it required too much monitoring when the trade is on and encountered big loss on Feb 2, 2018 because I could not exit on time at planned stop loss.
I was doing the spread about 15 DTE on ES weeklys, about 2 trades per month. A position involved one long Put contract at a strike 10 points below a strong support which was 40-50 points below ES at that point in time and 3-4 short Put contracts 40-50 points below the long strike to get a premium around $70-100. I never had a losing trade till Feb 2, 2018 as the market was uptreding till then. I used to let the options expire worthless which worked for all trades except on Feb 2, 2018 after which I decided to stop for the reason given above.
But, due to many successful weekly ratio spread trades prior to Feb 2018, I am tempted to do (using first papermoney or backtesting) ES ratio credit spread similar to the current strategy being discussed in this forum at 90-110 DTE; but doing reverse i. e. one long Put contract at certain delta of say -3 and 3-4 short Put contracts at lower delta of say -1. Exit is similar to that of the current strategy we have now with 6x IM etc etc.
I feel if ES comes down slowly, the long put option premium will increase more than that of the short put option giving a profit to the position. Only when ES falls sharply, both puts' premiums will increase and the position will be at a loss. The strike at which the trade makes a loss can be calculated.
Has anyone done this kind of ES ratio credit spread and if so, at what deltas? Is it worth spending time on this? Will be thankful for any inputs.
Regards,
Dilip

Have you backtested this on worst case scenarios?

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  #6852 (permalink)
Trading Apprentice
Singapore
 
Futures Experience: Intermediate
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Backtesting of ES ratio credit spread


ron99 View Post
Have you backtested this on worst case scenarios?

Hi Ron,
I am on Thinkorswim platform since 2007 and it is very difficult to backtesting. I papertraded ES ratio credit spread on weeklys for 15 DTE for 6 months. They worked well. So, I went live and did these for 2 years.
Now I am thinking of using this strategy for 90-110 DTE with 6xIM and exits as per the current ES strategy of this forum.
As mentioned, I wish to do backtesting or papertrade this strategy which I have not done yet . But before I do that I wanted to know if any one has tried this strategy or has any inputs.
Regards,
Dilip

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  #6853 (permalink)
Elite Member
Cleveland, OH
 
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dvbattul View Post
Hi Ron,
I am on Thinkorswim platform since 2007 and it is very difficult to backtesting. I papertraded ES ratio credit spread on weeklys for 15 DTE for 6 months. They worked well. So, I went live and did these for 2 years.
Now I am thinking of using this strategy for 90-110 DTE with 6xIM and exits as per the current ES strategy of this forum.
As mentioned, I wish to do backtesting or papertrade this strategy which I have not done yet . But before I do that I wanted to know if any one has tried this strategy or has any inputs.
Regards,
Dilip

You can backtest using the XLS-SPAN excel.

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  #6854 (permalink)
Trading for Fun
westhills california US
 
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Any one else getting lousy mROI% on sepESput selling -2p+3p strikes 2140, 1840 respectively. Iam with TOS and getting potential 1.2% mROI.

Can anyone tell me the SPAN please?

Thanks
Babak

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  #6855 (permalink)
Elite Member
Singapore
 
Futures Experience: Beginner
Platform: TOS, MT4
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Optimal DTE

What's the rationale for the trade being in the 90-120 days expiry range? i know the answer is somewhere here but couldn't find it when i was browsing through the previous pages.

Playing a devil's advocate, if i were to sell say, the July Monthly expiry (31 DTE) with the same deltas, my ROI% is actually higher? What am i missing here?

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  #6856 (permalink)
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rajab View Post
Any one else getting lousy mROI% on sepESput selling -2p+3p strikes 2140, 1840 respectively. Iam with TOS and getting potential 1.2% mROI.

Can anyone tell me the SPAN please?

Thanks
Babak

SPAN IM is 463. Using 6xIM I get 1.7% mROI.

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  #6857 (permalink)
Elite Member
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sapiens View Post
What's the rationale for the trade being in the 90-120 days expiry range? i know the answer is somewhere here but couldn't find it when i was browsing through the previous pages.

Playing a devil's advocate, if i were to sell say, the July Monthly expiry (31 DTE) with the same deltas, my ROI% is actually higher? What am i missing here?

Because you are further OTM and less likely to have your short go ITM when doing short options at -3.00 delta when trading options 90-120 DTE.

Sep 2200 put or July 2445.

The ESh18 futures dropped 281 in 30 day period.

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  #6858 (permalink)
Elite Member
Singapore
 
Futures Experience: Beginner
Platform: TOS, MT4
Favorite Futures: ES
 
Posts: 19 since Dec 2017
Thanks: 12 given, 4 received


ron99 View Post
Because you are further OTM and less likely to have your short go ITM when doing short options at -3.00 delta when trading options 90-120 DTE.

Sep 2200 put or July 2445.

The ESh18 futures dropped 281 in 30 day period.

Thanks for the reply! I understand if doing further out the strikes are lower.. but isn't the likelihood the same since the deltas are theoretically the same? the probability % of them being OTM should be the same right?

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  #6859 (permalink)
Trading Apprentice
BARCELONA/SPAIN
 
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Another exit option(no exit)

Hello Ron
I am studying a possibility of output different from the system -2 + 3. Although studies tell us that 6 x IM can be enough to hold a position, this does not assure us that the next time it will be equal. A possible closing of the operation at 6 x IM would suppose about 3000 $ of loss by lot. In a situation like this we would lose the gains obtained with 1 lot in 5 years. Too hard to fit. Therefore I thought that a good way to manage the operation could be doing the opposite operation to cover us if the price is close to the short strikes and we reach a loss of 6 x IM. The opposite operation would be with continuous strikes to the originals. Example: -2PUT2190 + 3PUT1875. Once we reach the loss of 6 x IM we cover with + 2PUT2200 -3PUT1880. From here, if the SPX continues to go down, all are benefits. If SPX turns around the loss is practically frozen (6 x IM) but with the advantage that at an appropriate time we can close the coverage and continue managing the initial operation. I think that this exit strategy (no exit) is much more bearable psychologically.
Any comments will be welcome

EDIT: The cover will be +2PUT2200 -3PUT1870


Last edited by tinaturner; June 21st, 2018 at 11:30 AM.
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  #6860 (permalink)
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BARCELONA/SPAIN
 
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Another exit option(no exit)


The covering will be same expiration as the original -2+3, of course.

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