NexusFi: Find Your Edge


Home Menu

 





Diversified Option Selling Portfolio


Discussion in Options

Updated
      Top Posters
    1. looks_one myrrdin with 812 posts (1,274 thanks)
    2. looks_two ron99 with 207 posts (489 thanks)
    3. looks_3 manuel999 with 109 posts (108 thanks)
    4. looks_4 TraderGriz with 66 posts (26 thanks)
      Best Posters
    1. looks_one SMCJB with 2.4 thanks per post
    2. looks_two ron99 with 2.4 thanks per post
    3. looks_3 myrrdin with 1.6 thanks per post
    4. looks_4 manuel999 with 1 thanks per post
    1. trending_up 281,345 views
    2. thumb_up 2,296 thanks given
    3. group 139 followers
    1. forum 1,598 posts
    2. attach_file 93 attachments




 
Search this Thread

Diversified Option Selling Portfolio

  #1241 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785

CME mulls changes to soy, corn contracts

https://www.reuters.com/article/us-cme-group-grains-storage/exclusive-cme-mulls-changes-to-soy-corn-contracts-customers-idUSKBN1FQ1Q8

Reply With Quote
Thanked by:

Can you help answer these questions
from other members on NexusFi?
My NT8 Volume Profile Split by Asian/Euro/Open
NinjaTrader
Are there any eval firms that allow you to sink to your …
Traders Hideout
Better Renko Gaps
The Elite Circle
NT7 Indicator Script Troubleshooting - Camarilla Pivots
NinjaTrader
Online prop firm The Funded Trader (TFT) going under?
Traders Hideout
 
  #1242 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,041 since Dec 2013
Thanks Given: 4,377
Thanks Received: 10,193



Interesting, but I don't understand. Why do they not converge? Also this makes it sound like CME set the VSR and then VSR sets the market price. Well doesnt that basically mean CME sets the market price? isn't that the definition of price manipulation?
Under the VSR system, storage rates at contract delivery points can be adjusted up or down to “reflect the true value being discovered in the physical market,” according to CME - which has used the mechanism in past situations.

Reply With Quote
Thanked by:
  #1243 (permalink)
 
CobblersAwls's Avatar
 CobblersAwls 
London, United Kingdom
 
Experience: Intermediate
Platform: N/A
Broker: Bloomberg
Trading: Energies
Posts: 310 since Jul 2014
Thanks Given: 1,089
Thanks Received: 386



SMCJB View Post
Under the VSR system, storage rates at contract delivery points can be adjusted up or down to “reflect the true value being discovered in the physical market,” according to CME - which has used the mechanism in past situations.


Is the divergence due to different S&D dynamics in the various regions? Is the VSR used to attract more supply to a region?

Visit my NexusFi Trade Journal Reply With Quote
  #1244 (permalink)
ys91
Chicago, IL, USA
 
Posts: 19 since Nov 2015
Thanks Given: 46
Thanks Received: 9

@myrrdin @ron99

I have a question for you and others on here who are more experienced in shorting premium in the commodities markets. I understand that getting a certain level of premium is important for this to be long-term viable (I think myrrdin referred to $200-400/contract recently), so I am curious what your thoughts are on selling verticals rather than naked options?

I haven't been in meats and grains thus far, but trying some hypothetical trades results in IM/MM that are almost 60-70% lower for verticals compared to naked shorts. Of course this means paying much more in commissions for same amount of premium shorted.

Just curious what your thoughts are on this (similar to Ron's earlier 1X1 / 1x2 strategy on ES) in commodities space. Given how a mere 3-4 cent move impacts overall premium of a position, wondering if you had any experience applying a vertical strategy and how those results compared to naked shorts.

Thanks!

Reply With Quote
  #1245 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,686
Thanks Received: 2,651


ys91 View Post
@myrrdin @ron99

I have a question for you and others on here who are more experienced in shorting premium in the commodities markets. I understand that getting a certain level of premium is important for this to be long-term viable (I think myrrdin referred to $200-400/contract recently), so I am curious what your thoughts are on selling verticals rather than naked options?

I haven't been in meats and grains thus far, but trying some hypothetical trades results in IM/MM that are almost 60-70% lower for verticals compared to naked shorts. Of course this means paying much more in commissions for same amount of premium shorted.

Just curious what your thoughts are on this (similar to Ron's earlier 1X1 / 1x2 strategy on ES) in commodities space. Given how a mere 3-4 cent move impacts overall premium of a position, wondering if you had any experience applying a vertical strategy and how those results compared to naked shorts.

Thanks!

I have to admit that I do not make the kind of excellent quantitative studies as Ron does.

When trading commodities (and not indices) I usually sell naked options. There are three reasons:

These trades are directional trades, and I have to use rather close stops (compared to Ron's concept for selling ES puts).

My portfolio is strongly diversified, and each trade uses only a small percentage of my account size. Thus, a large quick move of one commodity does not affect the account.

Fees are smaller. The percentage of loosing trades is probably higher compared to selling FOTM ES puts. And of course you have to pay fees for the loosing trades, too. The further you go OTM (and, thus, the more options you sell per $ premium) the more relevant this topic gets.

Thus, I understand why Ron is selling spreads, but prefer to sell naked options for my account.

There is one exception: I sell some options in my IB account where I hold my stocks. Here I prefer selling spreads as they use a large margin for naked options.

Best regards, Myrrdin

Started this thread Reply With Quote
Thanked by:
  #1246 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,686
Thanks Received: 2,651

Currently I hold the following positions in the short option portfolio (positions in brackets are already liquidated and only included in the list to make a comment):


(LHJ C80)
(LHJ P66)
Liquidated this strangle with a nice profit, as LH price moved down more than I had expected.

LHM P72
Sold some of these puts yesterday, and intend to sell more of them (3 more lots of LHM P72 and P70) at a lower price, if given the opportunity.

LCJ P114
LCJ C134
LCM P100
LCM C126
Longterm.

(WZ C6)
Liquidated this position with a small loss, and placed an order for the WZ C6.5 above the market. Very longterm.

I also hold several futures covered by short options as longterm trades.

Currently the percentage of longterm outright futures or futures spread trades is larger as I find more possibilities here than in option selling.

Best regards, Myrrdin

Started this thread Reply With Quote
Thanked by:
  #1247 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,686
Thanks Received: 2,651

Further intentions:

I intend to sell the WZ C6.5, as stated in my most recent post.

In addition I intend to sell short-dated SX calls (expiry in June) just above the market. Crop in Brazil seems to get very large, and gains here should compensate for losses in Argentine. I assume that acreage in the US will get larger (and definitely will not get smaller) than expected. I prefer the new crop contract as the risk of sudden moves (eg. because of a strike in Brazil or Argentine) is smaller. The short-dated contract avoids weather risk during the blooming period in the US during August.

Best regards, Myrrdin

Started this thread Reply With Quote
Thanked by:
  #1248 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,686
Thanks Received: 2,651


myrrdin View Post
Further intentions:

I intend to sell the WZ C6.5, as stated in my most recent post.

...

Best regards, Myrrdin

Another trade I intend to enter is selling puts for Natural Gas, probably in the first half of March.

Seasonal charts support this trade, and COT data will get bullish in case the price moves further down during the next couple of weeks.

Best regards, Myrrdin

Started this thread Reply With Quote
Thanked by:
  #1249 (permalink)
 manuel999 
Germany
 
Experience: Intermediate
Platform: TWS
Trading: Options on futures
Posts: 155 since Jul 2014
Thanks Given: 341
Thanks Received: 142


myrrdin View Post
(WZ C6)
Liquidated this position with a small loss, and placed an order for the WZ C6.5 above the market. Very longterm.

Why did you closed that position already?
Is it already clear that supply of Wheat will be bad by the end of the year?

Reply With Quote
  #1250 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,686
Thanks Received: 2,651



manuel999 View Post
Why did you closed that position already?
Is it already clear that supply of Wheat will be bad by the end of the year?

I used a very tight stop, as COT data is bullish. I will enter this trade again just above the current market. I think I was too early.

Fundamentals and seasonals are still favourable for this trade.

Best regards, Myrrdin

Started this thread Reply With Quote
Thanked by:




Last Updated on May 26, 2022


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts