Selling Options on Futures?

February 13th, 2016, 09:15 AM

uuu1965

I`m not asking to help me to find the Holy grail. Not at all.
I just try to find some relationship between future move and options value/IM (if there persist any).

There is one chart signal in the S&P that I take care of: the 200 dma. I usually get out of my short ES put trades, when we move below it, and re-enter very carefully, until we move back above it.

On the one hand, that helped me to keep losses minimal in the second half of August, as I liquidated on 19th. On the other hand, I liquidated several times with a small loss and re-entered soon after, eg. in the first half of July 2015

Best regards, Myrrdin

February 13th, 2016, 09:15 AM

myrrdin

No, I do not. And I doubt anybody does.

In my opinion there are two essential parameters for successful ES put selling:

- The choice of the option or options (eg. delta, number, DTE, ...)

- The choice of the exit point (eg. 200 % or 300 % of original value, loss = percentage of account value ...)

You might add the entry point as an additional parameter, but I consider this one as less important and difficult to optimize.

It is the art of trading to optimize these parameters in a way to protect capital on the one hand and to make enough profit to be paid for the work on the other hand.

Best regards, Myrrdin

Thanks Myrrdin
1. About entry point: I just notice that using 2 days ES future % change as entry date can noticeably improve my trade (more ROI, less DH).
2. About others: I`m tend to think that there must be some factors ( put or call side). Behind every trade is human opinion (even if a trade is execute by soft command - soft parameter are adjusting by people too).

February 13th, 2016, 09:33 AM

uuu1965

I`m not asking to help me to find the Holy grail. Not at all.
I just try to find some relationship between future move and options value/IM (if there persist any).

I doubt there is any. Markets sometimes are irrational.

I have never found a technical indicator that was correct the majority of the time.

February 13th, 2016, 12:57 PM

ron99

I doubt there is any. Markets sometimes are irrational.

I have never found a technical indicator that was correct the majority of the time.

I agree with you.
Like most of you I have been doing lots of backtesting since the Aug 24 crash to see what I could have done to change to outcome.
Looking at the chart, the week before there really wasn't anything jumping out that would have signalled a crash, just the normal oscillation and the news events no different. Just like this January, nobody could have predicted that severe of a drop.
In the end I found you have to have have the hedges in place before the crash. Putting them in after it is never as effective. Getting out of unhedged positions will also be painful.

What I haven't determined is the best way to hedge. @ron99 posted a good method of buying 2 puts, it works well in a Aug 24 type crash, but it does not work if it is a slow 10-20% grind downward that takes 30+ days to go down and VIX stays relatively low like it has for the Jan crash.

The problem of hedges is you can't do them for free, they will always cost you something. Determining how much you want to pay and how much protection you will get out of it is the tricky part

February 13th, 2016, 01:15 PM

chubbly2

I agree with you.
Like most of you I have been doing lots of backtesting since the Aug 24 crash to see what I could have done to change to outcome.
Looking at the chart, the week before there really wasn't anything jumping out that would have signalled a crash, just the normal oscillation and the news events no different. Just like this January, nobody could have predicted that severe of a drop.
In the end I found you have to have have the hedges in place before the crash. Putting them in after it is never as effective. Getting out of unhedged positions will also be painful.

What I haven't determined is the best way to hedge. @ron99 posted a good method of buying 2 puts, it works well in a Aug 24 type crash, but it does not work if it is a slow 10-20% grind downward that takes 30+ days to go down and VIX stays relatively low like it has for the Jan crash.

The problem of hedges is you can't do them for free, they will always cost you something. Determining how much you want to pay and how much protection you will get out of it is the tricky part

Excellent post that says the exact same thing I have found.

So basically you still have to somewhat correct of the direction and severity of the movement of futures.

February 14th, 2016, 10:00 PM

Warren534

So to follow up on this, on Thursday 1/28 with CLJ6 at 34.75, implied volatility at 68%, with an IV Rank at 94%, I wrote the following option strangles:

34.5 put and 35 call for 5.93 (essentially a straddle)
29.5 put and 43 call for 1.89
26 put and 46 call for .93

My expectation is that CL will move into a trading range for the next few weeks. If so, implied volatility will decline sharply, IV Rank will get back down towards 50%. Also, time will pass, so both will result in substantial decline in option premiums. With just the choppiness on Friday 1/29, implied volatility fell to 62%, IV Rank declined to 82%, and these positions are already showing good profits.

Hello
Can you give us a report on what happened?
How would you exit?
What the trade analysis looks like?
Thanks Bob

February 15th, 2016, 01:01 PM

rajab

Hello
Can you give us a report on what happened?
How would you exit?
What the trade analysis looks like?
Thanks Bob

I typically follow the Tastytrade approach, and try to exit strangles at about 50% of max profit, and straddles at about 25% of max profit. However, it also depends on how much the positions are making at a given point in time. I exited all of these some time ago, the strangle for 5.53, the 26/46 strangle for .71, and the 29.5/43 strangle for 1.54. I trade CL options a lot, and have made 13 more trades in it since I exited these positions. I'm currently short April 35 calls, expecting a decline in April CL to March 10, and down to 25.12.

mattz · February 16th, 2016, 11:01 AM

Effective Sunday, February 21, (trade date Monday, February 22) Chicago Mercantile Exchange, Inc. will delist serial month options on the E-Mini S&P 500 and will replace them with a Week 3 option.

The full advisory from the CME can found here: https://www.cmegroup.com/tools-information/lookups/advisories/clearing/files/Chadv16-025A.pdf

Thank you,

Matt Zimberg
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

February 16th, 2016, 01:23 PM

So basically the three serial months (Currently Feb Mar Apr) will get replaced with three 'week3' options. So when Feb expires instead of adding May they will add May EW3. Plus they change from American to European.

I predict that the next change will be to go from listing the first 4 weeks of weekly options, to the first 12 weeks... then you'll have three each of EW1, EW2, EW3 & EW4

February 17th, 2016, 12:07 PM

mattz

Effective Sunday, February 21, (trade date Monday, February 22) Chicago Mercantile Exchange, Inc. will delist serial month options on the E-Mini S&P 500 and will replace them with a Week 3 option.

The full advisory from the CME can found here: https://www.cmegroup.com/tools-information/lookups/advisories/clearing/files/Chadv16-025A.pdf

Thank you,

Matt Zimberg
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

How would this information effect "selling puts"?

Thanks in Advance.

Selling Options on Futures?

Discussion in Options

Selling Options on Futures?