Been following the selling options on futures forum for several months. Very good insights and ideas.
I started selling options on futures in 2012 after many years trading equity options. After just filing taxes for 2012 one clear advantage over equity options (there are many) is the simplicity of tax filing. One simple form vs having to list each trade separately, also options on futures trades taxed at 60% long term / 40% short term rate regardless of length option was held.
Depends on your definition of absolutely hammered.
Lost a few thousand June 2010 on coffee calls. May 2011 on energy puts. Fall 2009 on GC calls. Early 2008 on calls. Late 2008 on puts(recession). Nov 2009 on NG calls (cold snap). Jan 2010 metal puts. July 2011 on CL, RB puts and GC calls (US credit rating downgrade). Sep 2011 on CL puts.
Most of these were quick reversals by the market right after I put the positions on.
But considering I am up a net well into 6 figures the last 5 years, the hammerings weren't too bad.
Absolutely hammered by futures? Absolutely!
The following 3 users say Thank You to ron99 for this post:
Nicely done @ron99. I look forward to you presenting a futures.io (formerly BMT) Options Webinar when you are able.
Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.
Need help? 1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first. 2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses. 3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make. 4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance. 5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers. 6) Help using the forum? Watch this video to learn general tips on using the site.
If you want to support our community, become an Elite Member.
Sure, building it up from basics:
Vertical spread = same type (call/put), same month, different strikes
Calendar spread = same type, different months, same strikes
Diagonal spread = same type, different months, different strikes
[Traditionally a diagonal spread is long the furthest out month, and short the nearest month (which people do to help pay for some of long option theyve bought)]
Reverse diagonal spread (because we're option selling, we want a credit spread) = long the nearest month (but furthest out in strike price) and short the furthest month (the more expensive one, but closer strike)
[In a trending market for my system's time frame, I'll sell a single side spread e.g. calls in bear trend or puts in bull trend]
Reverse double diagonal is doing 2 reverse diagonal spreads (one above the market with calls, and one below the market with puts). It's like an iron condor but with different months (and different strikes), when my system's time frame is signaling 'sideways'. You get the benefit of double perimum on a single margin.
Real example, last Wednesday nights load of the EOD data into my system it generated the following signals to be executed on Thursday:
Sell June 83 Put and
Sell June 108 Call
So to create the reverse double diagonal I did the following trades which brought in about $30k in premium on about $17k of margin with IB:
Sell 30 x June 108 Calls for 0.39 each
Buy 30 x May 110 Calls for 0.13 each (done as a single spread)
Sell 30 x June 83 Puts for 1.44 each
Buy 30 x May 80 Puts for 0.60 each (done as a single spread, 3 dollar spread vs. 2 dollars on the calls was a judgment call, usually I do the same size spread on both sides but I find having a round number in the spread helps get a better relative fill)
I usually do the spreads as equal numbered initially (e.g. sell 30 calls and buy 30 calls) and then right after I'm filled pickup an extra few calls and puts on the long side for black swan protection e.g. in the end I'm short 30 x June 108 Calls, long 33 x May 110 Calls, short 30 x June 83 Puts and long 33 May x 80 Puts. The use of 30 contracts in this specific trade comes from my dynamic position sizing algorithm but it varies with my total account size.
Note most of my system's profits actually come from volatility collapse vs. time decay so I'm usually only in the trade for 3 - 5 weeks when I can take 70% - 80% of the spreads' profit and get out early freeing up margin. I still keep a healthy % of total portfolio in cash however doing my option selling this way is pretty stable and allows a lot of staying power in fast moving markets which helps boost my overall win rate to ~95%.
The following 7 users say Thank You to Homerjay for this post:
Thanks, I did look into them but remember thinking they didn't support options on futures (unlike OX), but would love to be told otherwise if anyone here has opened a new virutal brokers account doing this (and not grandfathered in an account from OX)?