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Selling Options on Futures?
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Selling Options on Futures?

  #7051 (permalink)
Market Wizard
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psears View Post
If you look at "all" on the chart it goes back to Jan '94 and you can see the historical volatility spikes. Check out the last spike at the end of 2018, and where Cordier was selling at right before it....

That's the thing. People act like it was a freak, black swan, never to happen again event. It's happened 5 other times in the last 20 years. That's once every 4 years!

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  #7052 (permalink)
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SMCJB View Post
That's the thing. People act like it was a freak, black swan, never to happen again event. It's happened 5 other times in the last 20 years. That's once every 4 years!

It has to happen to you once to engrave it deeply in your thought process. Then you start thinking of risk along with the "one-off" and it's consequences on your overall portfolio.

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  #7053 (permalink)
Market Wizard
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SMCJB View Post
That's the thing. People act like it was a freak, black swan, never to happen again event. It's happened 5 other times in the last 20 years. That's once every 4 years!

Very important point.

This is why I like longterm charts for volatility instead of today's value.

Best regards, Myrrdin

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  #7054 (permalink)
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If you are selling volatility, part of your premium exists because you are selling insurance premium for events that have never happened before".

Because most people (me included) just look at the past chart and look to what has happened before and mostly only in recent weeks or months and project that into the future. Most people know that IV is usually higher than historical volatility, but this is the reason - you never know when an extraordinary thing will happen, something never seen before and so you pay a premium for protection against that events. And if you sell premium then you have to know that sooner than later some unforeseen thing WILL HAPPEN! It would be way too easy to exploit higher IV if that was not the case..

just my 2 cents, learned that lesson in CL end of last year. Yeah, CL cannot go from 76 to 50 or lower so fast, no reasons for it, only to watch it go to almost 40 and buying it all the way down.. Erased all 2018 gains in a month.

and agree with the poster who mentioned that it has to happen to you to learn. I knew those things can and do happen, but still did not think they it will happen to me..

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  #7055 (permalink)
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Still 6xIM or more?

Ron,
you mentioned around Dec. 21st that a for a new entry the blocked funds should exceed 6x IM. In the light of all of Dec, what would you consider sensible?

Thanks

Forex37

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  #7056 (permalink)
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Forex37 View Post
Ron,
you mentioned around Dec. 21st that a for a new entry the blocked funds should exceed 6x IM. In the light of all of Dec, what would you consider sensible?

Thanks

Forex37

Off the top of my head, 7x minimum.

I'm not trading ES now. Too much unpredictability now.

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  #7057 (permalink)
Market Wizard
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Interesting announcement from CME with regards to finally launching Micro S&P500 futures. For those of you in the "Selling Options cause it never going there" camp maybe uninteresting. But if your in the [Buying (shhhh) or] "Selling Volaitility" camp because you want to trade I (I mean sell) vol and not delta trade this is a potential way to delta hedge very small ES option positions.

https://www.cmegroup.com/cme-group-futures-exchange/micro-futures.html

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  #7058 (permalink)
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S&P500 at 5.5 month highs about 500 points above it's Xmas lows
VIX at 5.5 month lows almost 25 points below the Xmas highs!
Amazing what 65 days can do!

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  #7059 (permalink)
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ron99 View Post
I'm not doing any ES put spreads right now. But if you are I would suggest moving from 6xIM to higher.

I just watched ES futures drop 50 in 2 hours and then rise 35 in 1 hour. Thursday's moves were even more extreme.

Hello Ron, Myrrdin ...
I am looking for a strategy that allows me to be in the market in any situation without having to worry too much about suffering great losses, even if this means giving up part of profitability. The basis of the strategy that I am thinking about is the -2 + 3PUT of which so much has been spoken in this thread. I have thought to add to the strategy a purchased PUT of expiration to a month approximately by 0.8-1 as anti crash insurance. Each month this insurance protection is renewed. Meanwhile, the original strategy is managed as usual. With this I limit the losses very much in case of big falls and this security allows me to operate month by month without worrying too much about the market. I think Ron has stopped the strategy for more than 6 months because of the current economic and political uncertainty. Adding the proposed insurance would have been able to continue operating the strategy normally, sacrificing, yes, a bit of profitability.
The protective PUT purchased, according to my checks, limits the loss of a lot (-2PUT + 3PUT + 1PUT) to $ 2500 approx. We could reserve for guarantees for each lot that amount that would undoubtedly be less than 7xIM.

I would appreciate comments on this


Last edited by tinaturner; March 23rd, 2019 at 07:45 AM.
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  #7060 (permalink)
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tinaturner View Post
Hello Ron, Myrrdin ...
I am looking for a strategy that allows me to be in the market in any situation without having to worry too much about suffering great losses, even if this means giving up part of profitability. The basis of the strategy that I am thinking about is the -2 + 3PUT of which so much has been spoken in this thread. I have thought to add to the strategy a purchased PUT of expiration to a month approximately by 0.8-1 as anti crash insurance. Each month this insurance protection is renewed. Meanwhile, the original strategy is managed as usual. With this I limit the losses very much in case of big falls and this security allows me to operate month by month without worrying too much about the market. I think Ron has stopped the strategy for more than 6 months because of the current economic and political uncertainty. Adding the proposed insurance would have been able to continue operating the strategy normally, sacrificing, yes, a bit of profitability.
The protective PUT purchased, according to my checks, limits the loss of a lot (-2PUT + 3PUT + 1PUT) to $ 2500 approx. We could reserve for guarantees for each lot that amount that would undoubtedly be less than 7xIM.

I would appreciate comments on this

So you are thinking that adding another long put is better than increasing cash excess. Can you give us examples of how this would have performed vs the -2 + 3 strategy recently with the big drops in ES price?

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