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Diversified Option Selling Portfolio
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Diversified Option Selling Portfolio

  #361 (permalink)
Market Wizard
Linz Austria
 
Futures Experience: Advanced
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Sold the CTZ C90 (and find myself holding three positions of ICE traded commodities - KC, SB, CT).

COT data as well as seasonals look bearish.

There is rain in the 6-10 days forecast for the Lubbock region, which - if materialized - would improve crop conditions significantly.

Crops of Pakistan and India look good.

Best regards, Myrrdin

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  #362 (permalink)
Market Wizard
Linz Austria
 
Futures Experience: Advanced
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myrrdin View Post
Sold the CV P330.

Fundamentals look positive (US corn is cheaper than corn from competing nations, South Americas are tight corn, high temperatures in the US might cause stress).

Best regards, Myrrdin

Bought back the CV P330 at a loss of 25 %.

Corn price looks weak, and US$ moves upwards. Risk currently seems high compared to potential reward.

Best regards, Myrrdin

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  #363 (permalink)
Trading Apprentice
hudson ohio summit
 
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Performance


I appreciate the details on your trading positions. I'm brand new to this forum. How are your returns annually with your diversified portfolio approach? I'm trying to figure out if the risk/reward is appropriate.

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  #364 (permalink)
Market Wizard
Linz Austria
 
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meg10 View Post
I appreciate the details on your trading positions. I'm brand new to this forum. How are your returns annually with your diversified portfolio approach? I'm trying to figure out if the risk/reward is appropriate.

If performed properly, you should end up with an annual profit between 10 and 40 % in the long run.

To avoid severe drawdowns, it is essential to diversify, to keep lot sizes small, and to limit losses. You will find more details on the concept within this thread.

Good luck !

Best regards, Myrrdin

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  #365 (permalink)
Market Wizard
Linz Austria
 
Futures Experience: Advanced
Platform: Zaner360, Vantage, Trade Navigator
Broker/Data: DeCarley, RJO
Favorite Futures: Commodities
 
Posts: 963 since Nov 2014
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Free monthly newsletter on softs:

https://www.theice.com/publicdocs/futures_us/ICE_Monthly_Softs_Fast_Facts.pdf?sp...pReportId=ODQwNjYzMDkwS0

Best regards, Myrrdin

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  #366 (permalink)
Trading Apprentice
hudson ohio summit
 
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Portfolio Composition

when you are establishing your positions, how many underlying are you trading. Do you attempt to establish the correlation factors and select short call on those at upper price extreme, and puts on negative correlative assets. managing overall greeks, specifically delta? Or are you trying to carry x number of positions and establishing put or call based on seasonality/fundamentals.

are you going 90 days and under to expiration. Or are you going out 6-9 months. I've seen both approaches work.

Do you attempt to ladder into your positions relatively mechanically. As some expire or hit profit targets, you establish the same position at preferred expiration.

Do you establish at low deltas like Ron99 (.02). Do you typically like to do verticals or straight naked?

Sorry for all of the questions, as I went through the thread I wasn't connecting on the specific strategy that you employ.

Finally, when you say 10-40%. are you pretty consistent at the 2-3% per month, and what type of drawdown do you expect?

I will leave you alone for awhile. Thanks.

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  #367 (permalink)
Market Wizard
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meg10 View Post
Do you establish at low deltas like Ron99 (.02). Do you typically like to do verticals or straight naked?

Hi fellow NE Ohioan. I'm in Wooster.

I no longer use .02 delta. I am now using .05 delta with two .015 delta longs for ES trading. Usually one long for other commodities.

I also only do verticals now. Markets are too prone to having black swan events now compared to a 10 years ago.

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  #368 (permalink)
Market Wizard
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meg10 View Post
when you are establishing your positions, how many underlying are you trading. Do you attempt to establish the correlation factors and select short call on those at upper price extreme, and puts on negative correlative assets. managing overall greeks, specifically delta? Or are you trying to carry x number of positions and establishing put or call based on seasonality/fundamentals.

are you going 90 days and under to expiration. Or are you going out 6-9 months. I've seen both approaches work.

Do you attempt to ladder into your positions relatively mechanically. As some expire or hit profit targets, you establish the same position at preferred expiration.

Do you establish at low deltas like Ron99 (.02). Do you typically like to do verticals or straight naked?

Sorry for all of the questions, as I went through the thread I wasn't connecting on the specific strategy that you employ.

Finally, when you say 10-40%. are you pretty consistent at the 2-3% per month, and what type of drawdown do you expect?

I will leave you alone awhile. Thanks.

I have basic guidelines for my trading, but I decide each trade individually. I do not have a "trading system" that I follow blindly.

I am not sure if I understand your first question correctly. But I try an answer. Puts and calls are selected according to fundamental data (eg. S&D, seasonals, COT). Basic criterium for the number of options is risk. A good measure for risk of a position is 3 % of the account. Thus, if risk for a position is 100 % of the original value, the number of options is chosen accordingly.

I often sell options with 90 - 120 DTE. Sometimes I sell them 4 to 6 months out, rarely more. I do not often sell options with less than 90 DTE. The decision which expiry date to choose depends on fundamentals and on the availability of options that satisfy my criteria for minimum size (approx. 200 USD) and for a stop loss far enough away from the current price.

I do not ladder in mechanically. I treat each trade as an individual one, and check fundamentals etc.

As you can see from the trades I enter I use higher Delta than 0.02. But there is no standard value.

Usually I sell naked options, but only hold a relatively small position.

There are drawdowns. The size of them depends on the percentage of your account you use for trading, the grade of diversification, and the balancing of trades (eg. using strangles). To give you an order of magnitude: I you you risk 3 % per trade one looser yields a drawdown of 3 % (or 4 - 5 %, because you cannot buy options back via a stop loss market order, and the price of the option might have moved up over the weekend or during a time when you were not sitting in front of your computer.)

Please do not leave me alone. Feel free to ask questions, and to post your trade considerations / trades in this thread to have them discussed by other traders. This is a cheap and successful way to improve your own trading.

Best regards, Myrrdin

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  #369 (permalink)
Market Wizard
Linz Austria
 
Futures Experience: Advanced
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Posts: 963 since Nov 2014
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Why do I currently sell ES puts with higher delta ?

Recently I sold ES puts with approx. 100 DTE and strike prices of 1950 and 2050, whereas some months ago I had sold puts significantly further OTM.

Reason is the current low volatility. It is my experience that options with low delta suffer more when volatility rises than options with high delta.

Short excursion to the greeks from optionstradingpedia.com:

"The Vega of an option indicates how much, theoretically at least, the price of the option will change as the volatility of the underlying asset changes.

Vega is quoted to show the theoretical price change for every 1 percentage point change in implied volatility. For example, if the theoretical price is 2.5 and the Vega is showing 0.25, then if the implied volatility moves from 20% to 21% the theoretical price will increase to 2.75."

Thus, Vega per value of the option shows the sensitivity of an option regarding a change of the volatility:

Strike Vega Price Vega / Price
2050 4,22 36 0,12
1800 1,86 11 0,17
1400 0,38 1,8 0,21

This table shows the values for Vega per option price (December put options), which is significantly higher for FOTM options.

Thus, in case I expect rising volatility I prefer selling closer to the money puts. Strike price is selected in a way that I am out of the position (exit due to rolling, stop loss) before getting into the money.

In case you find anything incorrect regarding these considerations, please let me know.

Best regards, Myrrdin

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  #370 (permalink)
Market Wizard
Linz Austria
 
Futures Experience: Advanced
Platform: Zaner360, Vantage, Trade Navigator
Broker/Data: DeCarley, RJO
Favorite Futures: Commodities
 
Posts: 963 since Nov 2014
Thanks: 1,355 given, 1,038 received
Forum Reputation: Legendary


Sold the EW3X6 P2050 yesterday.

The ES puts sold recently have lost value, and I try to own short ES put options of a constant value permanently, as long as the S&P index is above the 200 dma.

Best regards, Myrrdin

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