Diversified Option Selling Portfolio - Options on Futures | futures.io
futures.io futures trading


Diversified Option Selling Portfolio
Started: by myrrdin Views / Replies:28,833 / 619
Last Reply: Attachments:43

Welcome to futures.io.

Welcome, Guest!

This forum was established to help traders (especially futures traders) by openly sharing indicators, strategies, methods, trading journals and discussing the psychology of trading.

We are fundamentally different than most other trading forums:
  • We work extremely hard to keep things positive on our forums.
  • We do not tolerate rude behavior, trolling, or vendor advertising in posts.
  • We firmly believe in openness and encourage sharing. The holy grail is within you, it is not something tangible you can download.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.


You'll need to register in order to view the content of the threads and start contributing to our community. It's free and simple, and we will never resell your private information.

-- Big Mike

Reply
 43  
 
Thread Tools Search this Thread
 

Diversified Option Selling Portfolio

  #141 (permalink)
Market Wizard
Houston TX
 
Futures Experience: Advanced
Platform: XTrader
Broker/Data: Advantage Futures
Favorite Futures: Energy
 
Posts: 1,641 since Dec 2013
Thanks: 1,441 given, 2,462 received
Forum Reputation: Legendary


ys91 View Post
I think my margin right now is relatively low since I have a strangle on, but I tried calculating the margin on Zaner360 and looks like, after closing the CLK6 P20, the margin for CLK6 C45 goes up quite a bit. Any thoughts?

When you have more than one position on your margin requirements are set by a program called SPAN which looks at the risk of your portfolio. It does this by looking at 16 predefined scenarios and seeing which of these 16 scenarios has the greatest risk, and that is what your portfolio margin is. Each scenario shocks price &/or volatility by a predetermined about. Hence when you have a way out of the money straddle on, the delta of that position is so small the scenario with the biggest loss is probably be going to be based upon a volatility move/shocl and not a price move/shock. Once you lift a leg on the straddle you now have less volatility risk but you now have more delta risk. Whether the margin goes down or not will depend on whether your new delta risk is greater than your old volatility risk.

http://www.cmegroup.com/clearing/files/span-methodology.pdf

Reply With Quote
The following 3 users say Thank You to SMCJB for this post:
 
  #142 (permalink)
Market Wizard
Linz Austria
 
Futures Experience: Advanced
Platform: Zaner360, Vantage, Trade Navigator
Broker/Data: DeCarley, RJO
Favorite Futures: Commodities
 
Posts: 719 since Nov 2014
Thanks: 1,074 given, 587 received

Took profit on the

KCJ C140 at 90 % (of potential profit),
LHJ P62 at 43 % (of potential profit).

Sold the LHJ P64 at 0.7 .Purpose is to take some profit on the P62, and to have a better balance between the P64 and the C76.

Best regards, Myrrdin


Last edited by myrrdin; February 19th, 2016 at 12:16 PM. Reason: figures for profit oercentage were not clear.
Reply With Quote
 
  #143 (permalink)
Market Wizard
Linz Austria
 
Futures Experience: Advanced
Platform: Zaner360, Vantage, Trade Navigator
Broker/Data: DeCarley, RJO
Favorite Futures: Commodities
 
Posts: 719 since Nov 2014
Thanks: 1,074 given, 587 received



myrrdin View Post
Took profit on the

KCJ C140 at 90 % (of potential profit),

Sold the KCM C150 at 1.00 .

In my opinion the Coffee price will go sidewards for some more weeks.

After 1st of April traders will have to pay for live quotes. Thus, most retail traders will stop trading softs. I am afraid that high volatilities of options will be gone ...

Best regards, Myrrdin

Reply With Quote
The following user says Thank You to myrrdin for this post:
 
  #144 (permalink)
Market Wizard
Linz Austria
 
Futures Experience: Advanced
Platform: Zaner360, Vantage, Trade Navigator
Broker/Data: DeCarley, RJO
Favorite Futures: Commodities
 
Posts: 719 since Nov 2014
Thanks: 1,074 given, 587 received

Some remarks on my positions in the cattle market:

I am still convinced that LCM and LCQ are undervalued, and will expire at a (significantly) higer price. By contrast, LCJ seems to be valued correctly.

Currently I hold the short LCQ P110.

Now the Cattle on Feed report is out of the way. It was as neutral compared to expectations as can be.

Cash prices still can come down significantly in case the S&P index comes down.

Thus, I hedged the LCQ P110 by selling some LCJ C138 options. In addition I bought some LEM outright futures, also hedged via LCJ C138 short options. I expect to buy back all short options at approx. 10 % of their original value.

Best regards, Myrrdin

Reply With Quote
The following user says Thank You to myrrdin for this post:
 
  #145 (permalink)
Trading Apprentice
Chicago, IL, USA
 
Futures Experience: Beginner
Platform: ThinkorSwim Tradestation
Favorite Futures: ES, CL, GC
 
Posts: 13 since Nov 2015
Thanks: 32 given, 6 received

Futures Edge on FIO

myrrdin View Post
Some remarks on my positions in the cattle market:

I am still convinced that LCM and LCQ are undervalued, and will expire at a (significantly) higer price. By contrast, LCJ seems to be valued correctly.

Currently I hold the short LCQ P110.

Now the Cattle on Feed report is out of the way. It was as neutral compared to expectations as can be.

Cash prices still can come down significantly in case the S&P index comes down.

Thus, I hedged the LCQ P110 by selling some LCJ C138 options. In addition I bought some LEM outright futures, also hedged via LCJ C138 short options. I expect to buy back all short options at approx. 10 % of their original value.

Best regards, Myrrdin

@myrrdin thanks for the info... Have a question for you:

Why do you think the S&P and live cattle are that (highly?) correlated? I can understand that from a macro spandpoint, commodities in energy space and/or higher shelf life and under trade can be correlated to financials and (maybe more importantly) to the US dollar strength. Of course, we've been seeing highly correlation in oil and S&P as well, but I am not sure why you'd think S&P index and live cattle are positively correlated. Care to shed some light on this for my understanding?

Also (again as a new entrant in the area) why would the volatility drop in the options with fees for live quotes? Wouldn't access to the market on a low delay basis invite a bit more speculation, and consequently higher volume (long and short) and thus increased/same volatility (going by the "fear" index saying about volatility)? I can imagine (if wrong) how ridiculous this might sound!
Unless you think the wide spreads will go away and as a result std. dev. will reduce causing the volatility to drop.. (again, not sure if there's a connection here b/w bid/ask spread, std. dev. and vol.)


Last edited by ys91; February 22nd, 2016 at 06:59 PM.
Reply With Quote
The following user says Thank You to ys91 for this post:
 
  #146 (permalink)
Market Wizard
Linz Austria
 
Futures Experience: Advanced
Platform: Zaner360, Vantage, Trade Navigator
Broker/Data: DeCarley, RJO
Favorite Futures: Commodities
 
Posts: 719 since Nov 2014
Thanks: 1,074 given, 587 received


ys91 View Post
@myrrdin thanks for the info... Have a question for you:

Why do you think the S&P and live cattle are that (highly?) correlated?

Also (again as a new entrant in the area) why would the volatility drop in the options with fees for live quotes?

I do not think that Live Cattle and S&P index are highly correlated. There are many effects that cause LC prices to move up or down, which are independent of the S&P.

But: Beef is a more expensive meat than pork or chicken. A significant part of beef is consumed in restaurants. Thus, traders are afraid that if the economy (and the S&P index) comes down beef consumption is reduced. And, as a consequence, the live cattle futures move downwards. Have a look at the LC chart in the second half of August 2015 or in the first half of January 2016.

I assume that many retail traders will stop trading ICE products, eg. coffee or cocoa, as soon as they have to pay $110 per month for live data. And I assume that the high implied volatility of the coffee calls in recent years is mainly caused by retail traders. I hope that I am wrong ... Although coffee is in a downtrend since October 2014 (!) you still get 400 - 500 $ for an option 90 DTE and a strike 25 % above the market.

Best regards, Myrrdin

Reply With Quote
The following 3 users say Thank You to myrrdin for this post:
 
  #147 (permalink)
Market Wizard
Linz Austria
 
Futures Experience: Advanced
Platform: Zaner360, Vantage, Trade Navigator
Broker/Data: DeCarley, RJO
Favorite Futures: Commodities
 
Posts: 719 since Nov 2014
Thanks: 1,074 given, 587 received

Sold the LHJ C74 / P68 strangle in addition to the LHJ C76 / P64.

I expect sideways movement of the hog prices until the expiry of the options on April 14th.

Best regards, Myrrdin

Reply With Quote
 
  #148 (permalink)
Market Wizard
Linz Austria
 
Futures Experience: Advanced
Platform: Zaner360, Vantage, Trade Navigator
Broker/Data: DeCarley, RJO
Favorite Futures: Commodities
 
Posts: 719 since Nov 2014
Thanks: 1,074 given, 587 received

Bought back the KCK C150 with a profit of 84 %.

Intend to sell KCN calls on a move higher. Assume coffee prices will move sidewards for a while, as production figures from Brazil look very high.

Sold CTZ P50. Intend to hold them longterm. Prices between 50 and 55 should convince some farmers in the US to plant something else.

Best regards, Myrrdin

Reply With Quote
 
  #149 (permalink)
Elite Member
rutherford NJ
 
Futures Experience: Intermediate
Platform: Sierra xtrader Qtrader
Broker/Data: Amp and Optimus and CQG
Favorite Futures: NG ZS CL GC
 
Posts: 269 since May 2013
Thanks: 197 given, 90 received

How about a ZB double diagonal

and remove before FOMC
a quick trade
double diagaonal since vol will rise
160 and 170 short strikes for April?

Reply With Quote
The following user says Thank You to jokertrader for this post:
 
  #150 (permalink)
Market Wizard
Linz Austria
 
Futures Experience: Advanced
Platform: Zaner360, Vantage, Trade Navigator
Broker/Data: DeCarley, RJO
Favorite Futures: Commodities
 
Posts: 719 since Nov 2014
Thanks: 1,074 given, 587 received


Sorry - here I do not have an opinion. I am not good in predicting the ZB.

Best regards, Myrrdin

Reply With Quote

Reply



futures.io > > > > Diversified Option Selling Portfolio

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

2016 True Edge Awards: Voting is open until Jan 21!

Now
 

An Afternoon with FIO member Massive l

Elite only
 

Anthony Drager: Pulling the trigger with confidence

Elite only
 

Leo Murphy: The Art and Science of Technical Analysis

Elite only
 

FuturesTrader71: Ask Me Anything

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Webinar: Option Selling with and without insurance w/Carley Garner Big Mike Options on Futures 50 March 24th, 2015 06:52 PM
Portfolio Trader no erocla MultiCharts 1 November 27th, 2014 11:56 AM
"DTS" Diversified Trading System - Anybody out there!? ShaunG Vendors and Product Reviews 2 July 30th, 2014 06:54 AM
Diversified Trading Systems soch Vendors and Product Reviews 3 February 18th, 2013 10:12 PM
Portfolio Construction dgresens Psychology and Money Management 3 October 25th, 2012 04:33 AM


All times are GMT -4. The time now is 04:11 AM.

no new posts
Page generated 2017-01-20 in 0.16 seconds with 21 queries on phoenix via your IP 23.23.37.116