Diversified Option Selling Portfolio (Page 48) - Options on Futures | futures.io
futures.io futures trading
 

Go Back   futures.io

> Futures Trading, News, Charts and Platforms > Traders Hideout > Options on Futures


Diversified Option Selling Portfolio
Started:September 6th, 2015 (11:22 AM) by myrrdin Views / Replies:26,466 / 581
Last Reply:December 2nd, 2016 (01:20 PM) Attachments:38

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
 38  
 
Thread Tools Search this Thread

Diversified Option Selling Portfolio

Old September 30th, 2016, 03:17 PM   #471 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,327 since Jul 2011
Thanks: 634 given, 3,905 received

Weekly cattle slaughter is estimated to be up 3.21 pct from a week ago and up 7.38 pct from a year ago.

Weekly hog slaughter is estimated to be dn 1.22 pct from a week ago and up 7.36 pct from a year ago.

Reply With Quote
     
The following user says Thank You to ron99 for this post:
     

Old September 30th, 2016, 03:22 PM   #472 (permalink)
Elite Member
Linz Austria
 
Futures Experience: Advanced
Platform: Zaner360, Vantage, Trade Navigator
Broker/Data: DeCarley, RJO
Favorite Futures: Commodities
 
Posts: 680 since Nov 2014
Thanks: 1,032 given, 550 received


ys91 View Post
Cattle limit down today. Looking at the report, I'm not sure I see the reason for a massive downward move like this. Anyone has any insights to understanding this much of bearishness?

No, I have no idea. According to my opinion this move is not driven by fundamentals.

On the one hand, I am convinced we will see 110 before the December contract expires. On the other hand, such moves can go further than your account allows.

Currently I still hold my positions.

Best regards, Myrrdin

Reply With Quote
     
The following user says Thank You to myrrdin for this post:
     

Old October 3rd, 2016, 04:40 PM   #473 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,327 since Jul 2011
Thanks: 634 given, 3,905 received


Good article on Hog situation


Quoting 
The huge supplies are coming at a time of tepid export demand. China, which more than doubled U.S. pork purchases in the first half of the year, has now put the brakes on buying. Devaluation of the peso also threatens shipments to Mexico, the destination for 40 percent of U.S. hams.


Quoting 
Pork output surged 10 percent in August to 2.15 billion pounds, according to U.S. Department of Agriculture data released Sept. 22. The trend is likely to continue as weekly figures show that the number of slaughtered animals has consistently climbed in September from a year earlier. Hog supplies typically peak in the fourth quarter, which means even more animals are coming. U.S. production of the meat this year is forecast to be the largest ever.

“We could have not just a record, but an obscene record supply,” Rich Nelson, chief strategist at Allendale Inc. in McHenry, Illinois, said by telephone.

As of Sept. 1, the U.S. hog herd rose 2.4 percent from a year earlier to 70.85 million head, according to a USDA report released Sept. 30. That’s the highest ever for the month in data that goes back to 1866. Analysts in a Bloomberg survey expected a gain of 1.2 percent.


Quoting 
While exports in some weeks during April and May exceeded 5,000 metric tons, they sank below 1,000 tons in mid-September, USDA data show.

Too Many Fat Pigs Are Making Hogs Biggest Commodities Loser - Bloomberg

Reply With Quote
     
The following 4 users say Thank You to ron99 for this post:
     

Old October 3rd, 2016, 05:21 PM   #474 (permalink)
Elite Member
rutherford NJ
 
Futures Experience: Intermediate
Platform: Sierra xtrader Qtrader
Broker/Data: Amp and Optimus TT and CQG
Favorite Futures: ZS CL NQ NG
 
Posts: 262 since May 2013
Thanks: 184 given, 83 received

Selling puts on Live cattle?


myrrdin View Post
No, I have no idea. According to my opinion this move is not driven by fundamentals.

On the one hand, I am convinced we will see 110 before the December contract expires. On the other hand, such moves can go further than your account allows.

Currently I still hold my positions.

Best regards, Myrrdin

Hi wondering why we dont sells puts deep OTM like 5 delta etc like we do with ES? is it because the premium received is JUST NOT worth the risk since there could be large continued moves as compared to ES
or it more a liquidity issue? or both of the above?

Reply With Quote
     
The following user says Thank You to jokertrader for this post:
     

Old October 3rd, 2016, 06:04 PM   #475 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,327 since Jul 2011
Thanks: 634 given, 3,905 received

Futures Edge on FIO

Are you a NinjaTrader user?

 

jokertrader View Post
Hi wondering why we dont sells puts deep OTM like 5 delta etc like we do with ES? is it because the premium received is JUST NOT worth the risk since there could be large continued moves as compared to ES
or it more a liquidity issue? or both of the above?

Because most options other than ES are closer to ATM than ES with the same STD.

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


A 5 delta Feb LC put is 80 which is 20 OTM. LC can easily move 20 in 30 days. Did it last year.

A 5 delta ES put is 1815 which is 345 OTM. ES has never moved 345 in 30 days other than once in history in 2008 when it dropped 380.

In the last 5 weeks LCz has moved 15. A 95 put which was 20 OTM from the 115 futures on 8/9/16 was 0.375 on 8/9/16. It is now at 2.425.

Not saying you shouldn't do it but you have less room for error. More risk.

Reply With Quote
     
The following 5 users say Thank You to ron99 for this post:
     

Old October 3rd, 2016, 06:12 PM   #476 (permalink)
Elite Member
rutherford NJ
 
Futures Experience: Intermediate
Platform: Sierra xtrader Qtrader
Broker/Data: Amp and Optimus TT and CQG
Favorite Futures: ZS CL NQ NG
 
Posts: 262 since May 2013
Thanks: 184 given, 83 received

Thanks much a pic is worth a thousand words

This makes it clear on 2 aspects
a) why pick puts vs calls especially for ES (even for GC)

b) risk/reward based on historical movement

Thank you

Reply With Quote
     

Old October 3rd, 2016, 10:14 PM   #477 (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




In this case Ron, how do you assess whether market's priced in the oncoming placement of the hogs into processing for Q4. I mean, if this increase is priced in, we should be close to or at the bottom, but if only a partial pricing in of this supply there still might be a chance of further downward pressure on hogs.

I guess what I'm really asking, probably wrongly, is how to find/assess whether market is pricing in the full hogs supply build-in until Q4 or not.

Reply With Quote
     

Old October 4th, 2016, 09:19 AM   #478 (permalink)
Elite Member
Linz Austria
 
Futures Experience: Advanced
Platform: Zaner360, Vantage, Trade Navigator
Broker/Data: DeCarley, RJO
Favorite Futures: Commodities
 
Posts: 680 since Nov 2014
Thanks: 1,032 given, 550 received


jokertrader View Post
Hi wondering why we dont sells puts deep OTM like 5 delta etc like we do with ES? is it because the premium received is JUST NOT worth the risk since there could be large continued moves as compared to ES
or it more a liquidity issue? or both of the above?


There are three reasons, which are connected to each other. I will explain the first two reasons for the ES puts. I currently hold the 2100 strikes.


During periods of low volatility I prefer selling puts with higher delta, as they seem to suffer less, if a sudden rise of volatility occurs. Vega per premium for FOTM options is significantly higher. Examples for the ESZ puts:

2100 (delta = 34 %): vega per premium = 0.00196
1900 (delta = 9.2 %): vega per premium = 0.00335
1700 (delta = 2.4 %): vega per premium = 0.00435

Margin per premium for FOTM options is significantly higher. Examples for the ESZ puts:

2100 (delta = 34 %): margin per premium = 1.9
1900 (delta = 9.2 %): margin per premium = 3.2
1700 (delta = 2.4 %): margin per premium = 4.5

Obviously there is an inverse correlation between vega per premium and margin per premium, which does make sense.

In dramatic situations it can be dangerous to hold a large number of FOTM options - their value might explode. The risk for a significantly smaller number of closer to the money options is smaller. This is of special importance for some commodities. In case of a severe desease among hogs or cattle, severe weather issues among grains or coffee or an attack of terrorists on the oil industry there can be major moves of the underlaying. This is bad news for every trader being on the wrong side. But it is even worse if you are short a large number of options with a small delta. Such events can happen during the weekend ...

Of course there is no free lunch, there are disadvantages selling options with a high delta. Most notably you have to use tighter stops to avoid getting into the money. And it often takes longer to achieve the target value for an exit in case the market moves sideways.

Best regards, Myrrdin

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

Old October 4th, 2016, 12:25 PM   #479 (permalink)
Market Wizard
OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,327 since Jul 2011
Thanks: 634 given, 3,905 received


ys91 View Post
In this case Ron, how do you assess whether market's priced in the oncoming placement of the hogs into processing for Q4. I mean, if this increase is priced in, we should be close to or at the bottom, but if only a partial pricing in of this supply there still might be a chance of further downward pressure on hogs.

I guess what I'm really asking, probably wrongly, is how to find/assess whether market is pricing in the full hogs supply build-in until Q4 or not.

That is a question that nobody knows the answer. It will depend on what inventories are after the holidays and the amount of hogs going to market in Q1.

Reply With Quote
     
The following user says Thank You to ron99 for this post:
     

Old October 5th, 2016, 11:11 AM   #480 (permalink)
Elite Member
Linz Austria
 
Futures Experience: Advanced
Platform: Zaner360, Vantage, Trade Navigator
Broker/Data: DeCarley, RJO
Favorite Futures: Commodities
 
Posts: 680 since Nov 2014
Thanks: 1,032 given, 550 received


Rolled the SF C10.4 into the SF C10, taking a loss of approx. 15 - 20 % for the SF C10.4 . Will exit on a close above 10.

Yield estimates continue to come in significantly above average and at record highs. USDA already reported very large demand figures. South American production looks much better than last year.

Best regards, Myrrdin

Reply With Quote
     

Reply



futures.io > Futures Trading, News, Charts and Platforms > Traders Hideout > Options on Futures > Diversified Option Selling Portfolio

Thread Tools Search this Thread
Search this Thread:

Advanced Search



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

Al Brooks: Stop Losing when a Good Trade goes Bad, Correcting Mistakes

Elite only
 

Trading Technologies: ADL hands-on

Dec 13

Normal webinar schedule resumes after the holidays

January

Ernie Chan: Risk Management

Elite only

Dedicated Trading Servers: Advantages/Disadvantages w/sam028

Elite only

An Afternoon with FIO member Massive I

Elite only

Leo Murphy: TBA

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 07:31 AM.

Copyright © 2016 by futures.io. 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.
 
no new posts
Page generated 2016-12-09 in 0.15 seconds with 20 queries on phoenix via your IP 54.161.128.52