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You clearly missed all the points I made, and I won't bother to rehash them.
A major spike in volatility along with a basic decline , pick a number 5%, 10%, 15%, whatever... and the puts you sold at $150 each (that you mentioned earlier) can go to $1000 or $10k or $100K each... you won't be able to buy them back fast enough.
Lets reverse the situation: Why do you think the market will allow you a 20% return on this strategy? Why? Why are they there, willing each month to buy the puts from Ron and allow him to bank that annual 20%??? And don't tell me they "manage a book of options and hedge themselves off..lol" . Lets not play that game.
Why will Mr. Market and all the genius minds, banks, PhD.'s and all other traders happily let you sell them as many puts as you want each month????
When you can answer that honestly, you will understand why selling index puts on 100% of your account is a death trap.
A part of my trading account (approx. 50 %) is used for option selling. I usually hold several positions, and one of them is ES OTM puts, which I hold almost permanently. You find details about how I enter and exit trades in my thread.
Another part of my trading account is used for trading of outrights and spreads. Many of these trades are based on seasonals.
All of my trades (with the exception of selling ES OTM puts) are based on fundamentals (S&D, seasonals, COT data). This is time consuming, and only works if you enjoy studying fundamentals. I am not a system trader, and I do not think this way of trading is suited for system traders.
For me it is essential to balance the portfolio, selling strangles or selling calls and puts of two related commodities. This reduces the influence of the general economic situation (indices, currencies).
The main reason for trading this way are:
Small drawdown via diversification,
decent profits,
good sleep.
There is no need to be underinvested, but I learnt it the hard way that longterm profits tend to rise with reduced position size.
Do you always get out at 50% even if no where near the 30 Days?
The reason I ask is say your current position was implemented
when Vol was higher, so you were able to benefit from higher
principle and to be further OTM. When that position was at 50%
and current market was considerable less Vol. Would you still
close and initiate new position at current conditions?
Here is a chart of days held for my 5 delta short with two 1.5 delta longs study for 2013-2016. As you can see there are many times when days held was around 20 and the next spread was also around 20 days held.
In fact the average days held for the spread that followed a spread that was held 20 or less days was 24.7
I just haven't found any way to time entry that works more often than it didn't work.
This is the post from 2015 with modifications to current version XLS-SPAN (05b) Copy for Forum
The first thing you will need is this folder on your computer.
C:\Span4\Data
All spreadsheets and files need to be in this file. It must have this name exactly as shown.
This Excel spreadsheet is 2010 version. It needs to be Macro enabled. When you first open it it will say Security Warning Macros have been disabled. Click on the box that says Enable Content.
The Excel sheet was done by @Dudetooth. It is a fantastic spreadsheet. Amazing work.
The excel attached is his spreadsheet with a few modifications that I have made to it. The PC-SPAN thread has his version of it at the end of the thread.
On the Parameters sheet the first thing to do is to go to column D and put an "x" in this column for all commodities you will ever use. This is only for CME products. The ICE products listed will be included. This is so that the CME file size can be reduced dramatically and things will run much faster. Right now only the commodities listed can be run.
There are over 2,000 symbols at the CME. Just about all of us will us less than 20. This will reduce the lines in the file from almost 470,000 to < 100,000.
You will need to download a disk array file (CME & ICE) for each trading day you want to include in your research.
Right now you can put in the date (YYYYMMDD format) in cell A1 on the Track sheet and then click tab XLS-SPAN (to the right of "File" then click "Download" on left. But you can only do that for the dates that the CME has in the current file. In cell D1 you can enter a later date and download multiple days of files. Don't try to do multiple years. I have had problems when downloading too many days.
Some folders at the top and then files below them.
We are downloading the files that looks like this cme.20151202.s.pa2.zip The "s" is the important part. That is the end of the day file.
As you can see the files on this example start with 20151130 and go to 20151204.
If you think you will ever need 2013 files I suggest you get all of them now before the end of the year because in the past the CME has removed old years from this ftp page when a new year started. You can just put the zipped files in a separate folder and if you need them you can unzip them into the Data folder.
If you need ICE files they are in the folder named "nyb". They don't need to be reduced in size.
How to use the spreadsheet will be in a following post.
The spreadsheet is saved in Excel 97-2003 format because the forum software wouldn't let me upload a spreadsheet that was macro-enabled.
If you have a newer version of Excel then immediately after opening it and enabling macros, click Save As and use Save as type: Excel Macro-Enabled Workbook.
This post will explain how to use the Track sheet and my Studies sheet.
On the Track sheet in cell A1 is the date that will be used if you click Track/Select or Track/Spread on the XLS-SPAN ribbon.
On the Track sheet I have listed in rows 3 & 4 a spread ESu7p1960p1750 2 by 3. The Net column (column E) for row 3 has a -2 meaning two short contracts. Cell E4 has a 3 for three long options.
The number 1 in the "S1" column (cells F3 & F4) is for spread strategies. Enter the same number for each leg of a spread.
If you enter 20170607 in cell A1 select cells A3 & A4 and then click XLS-SPAN/Track/Spread you should get the results in the above example.
Cell AO3 shows $451 IM for the spread. Cell AN3 says shows spread value in dollars is $180.
Cell AS4 has what the spread would be if you exited at 50% drop in 30 days using the excess that is in cell AS1. In this example I have 4. Cell AT1 is the round turn cost to make the trade. In this example I have 6.12.
The Hist_Data sheet shows the raw data for what you just calculated. I added columns AV to BH to the original excel so that more calculations could be done to the data.
(Note I have had trouble with getting results on the Hist_Pivot sheet if cell AV1 is blank. That usually happens when I change contracts on the Track sheet. If the data on the Hist_Pivot sheet didn't update then check to see if there is a number in cell AV1. If not the put a number in this cell and then on the Hist_Pivot sheet right click on any data that is there now and the left click on Refresh.)
To run historical research on an option or spread to see what it did for a range of days
Go to Track sheet
Put the starting date (format YYYYMMDD) in cell A1. Use one trading day before you are adding the position. So if you want the position to start on 06/05/17 then put 20170602 in cell A1. The reason for this is that when you are looking to add a position today the IM you will have is the IM from the prior trading day.
In cell D1 put the ending date for the research.
Click on Clear HistData in cell J1 to clear the Hist_Data sheet.
Left click cell A3 and then hold the left click and drag down to cell A4 so that both are selected.
Click XLS-SPAN/Historic/H-Track.
You can now watch the program go through each day calculating all of the data. All of this data will be on the Hist_Data sheet.
Go to the Hist_Pivot sheet. It is actually a Pivot Table. It should look like this.
Column A has the dates. Columns B-L have the data.
The first 6 columns (B-G) for each S1 number have raw data. The next 5 columns (H-L) have calculated data. This calculated data is not quite correct if you are using the first date for the day prior to the day you are adding the position. That is why it is best to move it over to the Studies sheet.
To move this data to my Studies sheet that shows some additional info you would copy columns A through G from Hist_Pivot and paste it (Paste Values) to the first column in each block on the Studies sheet starting with Row 4.
Put the positions in the green cells in rows 2 & 3 columns A thru E on the Studies sheet. The column E that has the number of positions is important so that the ROI can know how many contracts are in the position to correctly calculate fees.
In cell L3 of the Studies sheet you should enter your total round turn cost per contract.
In cell J3 you enter the multiplier for that commodity. It is the cost per penny. It is 0.50 for ES. It is 1.00 for NG. It is 10.00 for CL.
In yellow cell M1 you should enter the multiplier for your IM. If you are using IMx4 then the number 4 should be in this cell.
the Studies sheet should look like this
The cell E4 is the IM used for that block to do the calculations.
The cell F3 is the premium used for that block. Enter the price in cell F5. If you want you change this to what you actually entered a trade at you can do that here.
Column H or Pos P/L is profit or loss in dollars since starting the position. It does include RT costs.
Column I or Monthly ROI Exit Today is what your ROI would be if you exited this day.
Column J or Percent of Begin is current premium in dollars divided by beginning premium.
Column K or Draw Down is Pos P/L divided by (beginning IM times the number in cell M1). A negative number means that the position has lost money since it was started. Positive is a profit. I have the lowest number in this column turn to a green background fill.
Column L or MM% of 4xIM (MM stands for Maintenance Margin) is (Current IM/1.1) / (Beginning IM * number in cell M1+ Pos P/L). This percent, if this was the only position you had on and you fully invested in this position, would be how much of your account was now being used by MM. When this number goes over 100% you are on margin call. I have the highest number in this column turn to a green background fill.
The blocks on the Studies sheet can be copied and pasted to other areas of this sheet or to other sheets. If you need more lines per block then insert more lines and then copy down all cells from row 6 into the new added lines. This should keep the cell highlighting correct.
I hope this is clear.
I rushed through this. The spreadsheet is not cleaned up. There are extra columns that aren't needed.
Friday June 16th is the quarterly expiration of the June ES future contract. In 10 of last 11 years from 9:30 am ET till closing that Friday ES futures dropped in price. It's not large, avg of -4.11 for those 11 years but -7.50 last 4 years.
If you get a spare minute would you please tell me what you would have as
initial and maintenance margin for 20 ESU7P1800 by 10 ESU7P2040 99 DTE? (5 by 1.5 Delta)
