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I use iVolatility as my provider for historical data on RUT, SPX, NDX, and VIX options, but I'm not sure about futures options data. The iVolatility data is provided in csv format, that is pretty easy to load into a database (I use MySQL).
I have started to do a new strategy that so far is working well. It is selling ES puts.
I sell around 0.0300 deltas at 90-110 DTE (strikes about 400-500 below futures) and buy back when premium is 50% gone. I keep 3 times the initial margin required for each put for the entire time I hold the option. This is my safety net. This should keep you from having to exit the position up to a 150 point ES futures drop depending on how quickly it drops. If it drops more than 150 you will have to adjust your position because you will be on margin call.
Here are my results before and after the change in strategy.
This is before.
For my 1,384 Jan ES puts the monthly ROI if held to expiration was 3.1%. On these I was getting out when premium dropped to around 0.80. By not waiting until expiration my actual monthly ROI on them was 3.9%. Average days held was 30.
For my 1,955 Feb ES puts the monthly ROI if held to expiration was 2.4%. On these I was getting out when premium dropped to around 0.80. By not waiting until expiration my actual monthly ROI on them was 2.9%. Average days held was 50.
For my 3,738 Mar ES puts the monthly ROI if held to expiration was 3.0%. On these I was getting out when premium dropped to around 0.80. By not waiting until expiration my actual monthly ROI on them was 3.5%. Average days held was 49.
For Jan-Mar the ES puts made 3.4% monthly ROI and were held an average of 46 days. Compounded monthly that would be 49% yearly.
Then I switched to the sell when premium has dropped 50% strategy.
For my 2,487 Apr ES puts the monthly ROI if held to expiration was 3.7%. By getting out when premium was about 50% my actual monthly ROI on them was 9.0%. Average days held was 20.
For my 4,186 May ES puts the monthly ROI if held to expiration was 3.4%. By getting out when premium was about 50% my actual monthly ROI on them was 7.6%. Average days held was 20.
For my 9,179 June ES puts the monthly ROI if held to expiration was 2.7%. By getting out when premium was about 50% my actual monthly ROI on them was 8.9%. Average days held was 17.
My Apr-Jun made 8.5% monthly ROI and were held an average of 19 days. Compounded monthly that would be 166% yearly.
The ROI will vary depending on the futures movement after you acquire your options.
You could, with adjustments, do this in other commodities. I like the ES because the volume makes it easy for me to do the volume I want to do.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
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Posts: 5,048 since Dec 2013
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WOW @ron99 that's some very good an very interesting analysis.
It's also counter to what i would have expected.
So even though your buying back the options earlier - which you would think would mean you are leaving money on the table, your holding time is reduced by so much that the returns actually increase.
Very very interesting.
At delta 0.0300 this is somewhat higher risk than your original sell premium at about 2.00. Nevertheless your results are impressive.
At delta 0.0300, today July 15 ES puts 92 days to expiration, would the premium initially collected be about 2.70 (ES 1630 puts) to 3.50 (ES 1670 puts)? I am taking the average price off TOS when the market is close.
When I was researching this theory I found that being 90+ DTE and 0.0300 delta had the best combination of safety and return.
Here is my research on a worst case scenario from last fall.
On 9/19/14 a Nov 1670 ES put had a 0.0306 delta and premium was 2.55. IM was 701. 63 DTE
On 9/19/14 a Dec 1590 ES put had a 0.0296 delta and premium was 3.15. IM was 670. 91 DTE
Dec had a 0.60 higher premium, 31 lower IM and was 80 further OTM. About the same delta.
Lowest Buying Power happened either 10/14 or 10/15.
The ES puts entered at around 40-60 DTE would hit margin calls sooner than options further DTE.
And surprisingly, options at a lower delta were not as safe as 0.0300 or higher. This was because of the lower margin per option allowed you to acquire more options. But the lower margin also meant you had lower excess per contract.
Thanks to @Dudetooth for his great PC-SPAN spreadsheet that made doing this research so much easier.
"For my 1,384 Jan ES puts the monthly ROI if held to expiration was 3.1%. On these I was getting out when premium dropped to around 0.80. By not waiting until expiration my actual monthly ROI on them was 3.9%. Average days held was 30."
Ron, when you state "my 1,384 Jan ES puts" what are you referring to as 1,384? The number of contracts you are writing? Thank you.
