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


Diversified Option Selling Portfolio
Started: by myrrdin Views / Replies:28,692 / 618
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

  #351 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,374 since Jul 2011
Thanks: 645 given, 4,028 received
Forum Reputation: Legendary

I know this isn't option selling but I wonder if this is a way to play possible high volatile days like the upcoming Aug 12th Crop Production report. Buy OTM options at the same price. Both puts and calls since you don't know which way it will move.

The options on the winning side could move far more than the losing side.

Here is an example in corn. On 20160620, Sep corn was 4.267. The next day it dropped 24.5 cents. If you had bought calls and puts, the next day the puts would have made more than the calls lost.

Here are some examples. The lower the DTE the better it worked.
Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Reply With Quote
The following 6 users say Thank You to ron99 for this post:
 
  #352 (permalink)
Market Wizard
Linz Austria
 
Futures Experience: Advanced
Platform: Zaner360, Vantage, Trade Navigator
Broker/Data: DeCarley, RJO
Favorite Futures: Commodities
 
Posts: 718 since Nov 2014
Thanks: 1,073 given, 586 received


ron99 View Post
I know this isn't option selling but I wonder if this is a way to play possible high volatile days like the upcoming Aug 12th Crop Production report. Buy OTM options at the same price. Both puts and calls since you don't know which way it will move.

The options on the winning side could move far more than the losing side.

I had a look at this strategy some time ago. The problem is that volatility rises before these reports, and it collapses afterwards. In case the report causes a large move this strategy works. In case there is only a minor move it causes a loss.

Many reports are non-events. I am not sure that this strategy in the long run is profitable.

Best regards, Myrrdin

Reply With Quote
The following 5 users say Thank You to myrrdin for this post:
 
  #353 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,374 since Jul 2011
Thanks: 645 given, 4,028 received
Forum Reputation: Legendary



myrrdin View Post
I had a look at this strategy some time ago. The problem is that volatility rises before these reports, and it collapses afterwards. In case the report causes a large move this strategy works. In case there is only a minor move it causes a loss.

Many reports are non-events. I am not sure that this strategy in the long run is profitable.

Best regards, Myrrdin

OK I see that is what happened in 2014.
Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Reply With Quote
The following 5 users say Thank You to ron99 for this post:
 
  #354 (permalink)
Market Wizard
Houston TX
 
Futures Experience: Advanced
Platform: XTrader
Broker/Data: Advantage Futures
Favorite Futures: Energy
 
Posts: 1,627 since Dec 2013
Thanks: 1,431 given, 2,445 received


ron99 View Post
I know this isn't option selling but I wonder if this is a way to play possible high volatile days like the upcoming Aug 12th Crop Production report. Buy OTM options at the same price. Both puts and calls since you don't know which way it will move.

The options on the winning side could move far more than the losing side.

Here is an example in corn. On 20160620, Sep corn was 4.267. The next day it dropped 24.5 cents. If you had bought calls and puts, the next day the puts would have made more than the calls lost.


myrrdin View Post
I had a look at this strategy some time ago. The problem is that volatility rises before these reports, and it collapses afterwards. In case the report causes a large move this strategy works. In case there is only a minor move it causes a loss.

Many reports are non-events. I am not sure that this strategy in the long run is profitable.

I was thinking the same as you @myrrdin, that the implied vol crush following the report would kill any profits. But when you look at @ron99 's examples in his first post you'll see the implied vol wasn't crushed, in fact the Call IVs actually went up.


ron99 View Post
OK I see that is what happened in 2014.

The big difference in your first example, which seemed to make money, and your second example which doesn't is how far the options are out of the money. For the options in June you used a straddle that's width was equivalent to 42% of the underlying price, but in your 2014 examples that lose money the straddle width's are only 7% and 14% of the underlying. What happens if you looked at a 3.20/4.30 Strangle or even a 3/4.50 (for 20140811)

Reply With Quote
The following 3 users say Thank You to SMCJB for this post:
 
  #355 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,374 since Jul 2011
Thanks: 645 given, 4,028 received
Forum Reputation: Legendary

Futures Edge on FIO

Which products do you trade?

 

SMCJB View Post
The big difference in your first example, which seemed to make money, and your second example which doesn't is how far the options are out of the money. For the options in June you used a straddle that's width was equivalent to 42% of the underlying price, but in your 2014 examples that lose money the straddle width's are only 7% and 14% of the underlying. What happens if you looked at a 3.20/4.30 Strangle or even a 3/4.50 (for 20140811)

For the Sep contracts, 11 DTE on 8/11/14, the 3.20 was $19. The rest of your examples were at cabinet.

Here is what you get for the Oct 2014 46 DTE options. They are still losers.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


My first example were just a random date picked before a big down day. The rest of the examples were the day before a major report.

Reply With Quote
The following 4 users say Thank You to ron99 for this post:
 
  #356 (permalink)
Market Wizard
Linz Austria
 
Futures Experience: Advanced
Platform: Zaner360, Vantage, Trade Navigator
Broker/Data: DeCarley, RJO
Favorite Futures: Commodities
 
Posts: 718 since Nov 2014
Thanks: 1,073 given, 586 received

Sold the KCH C240, following a recent suggestion of James Cordier.

The current crop is huge, and even some problems during blooming period should not pose problems for the next couple of months.

Best regards, Myrrdin

Reply With Quote
 
  #357 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,374 since Jul 2011
Thanks: 645 given, 4,028 received
Forum Reputation: Legendary


myrrdin View Post
Sold the KCH C240, following a recent suggestion of James Cordier.

The current crop is huge, and even some problems during blooming period should not pose problems for the next couple of months.

Best regards, Myrrdin

I'm curious why so high DTE.

Reply With Quote
 
  #358 (permalink)
Market Wizard
Linz Austria
 
Futures Experience: Advanced
Platform: Zaner360, Vantage, Trade Navigator
Broker/Data: DeCarley, RJO
Favorite Futures: Commodities
 
Posts: 718 since Nov 2014
Thanks: 1,073 given, 586 received


ron99 View Post
I'm curious why so high DTE.

From October 2014 until some time in spring 2016 KC was in a clear downtrend. During this period, I preferred to sell calls with less DTE, as I considered selling KC calls as a directional trade. Recently this has changed, and KC moved above its 200 dma. Thus, I do not expect a further move down as for many months. In my opinion, KC should move sidewards in a wide range. To allow for KC price to move upwards, and still receive an acceptable premium, I decided for the March contract.

Seasonals show a move sidewards until December. At that time, the March options should have lost most of their value.

Finally: My recent experience with coffee calls having less DTE was mixed. On some occasions I was stopped out with a loss.

Best regards, Myrrdin

Reply With Quote
The following 2 users say Thank You to myrrdin for this post:
 
  #359 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,374 since Jul 2011
Thanks: 645 given, 4,028 received
Forum Reputation: Legendary

Here's KCh without abnormally high 2012. I added softs and LC to my Seasonal Futures charts this morning.
Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

https://public.tableau.com/profile/ron.h8870#!/

Reply With Quote
The following 3 users say Thank You to ron99 for this post:
 
  #360 (permalink)
Market Wizard
Linz Austria
 
Futures Experience: Advanced
Platform: Zaner360, Vantage, Trade Navigator
Broker/Data: DeCarley, RJO
Favorite Futures: Commodities
 
Posts: 718 since Nov 2014
Thanks: 1,073 given, 586 received



ron99 View Post
Here's KCh without abnormally high 2012. I added softs and LC to my Seasonal Futures charts this morning.

Thanks a lot for your seasonal chart.

There is an interesting difference between your data and MRCI data: The October high of MRCI is lower for all time frames (5, 15, 30 years) than the August high.

The October high, that occurs in some years, is probably caused by dryness during the blooming period. Your data shows very nicely, that in years with a small crop (and consequently high prices) - KCH11 and KCH15 - the move upwards in October is approx. 40 cents, whereas in years with a large crop (KCH10, KCH16 - as in 2016) this move is approx. 15 cents. This confirms my assumption that potential dryness during the blooming period will be less critical this year than in years with small supply.

Best regards, Myrrdin

Reply With Quote
The following 2 users say Thank You to myrrdin for this post:

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
 

Bookmap New Indicator Panel, Cumulative Delta, Order Flow demo

Jan 17
 

An Afternoon with FIO member Massive l

Elite only

Leo Murphy: Making sense of Technical Analysis and Random Walk

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 02:50 AM.

no new posts
Page generated 2017-01-17 in 0.15 seconds with 20 queries on phoenix via your IP 54.205.153.63