A few words at the end of Q3, regarding the diversified option selling portfolio.
Profit before commissions for these 9 months was 20 – 25 %, based on the total account. (About 1/3 of my account is used for option selling.) This is the result of a good Q1, an excellent Q2, and a disappointing Q3. The strong moves of the indices had consequencies for various commodities, especially cattle prices and currencies went against me during this time.
Summed up commissions were in the order of magnitude of 10 % of the account value, although I get a quite acceptable rate per round-trip. This value was lower in the past, as I moved to smaller delta (and, thus, a larger number of sold options) in this year. But I have to be aware, that for an actively traded option selling account one reason to avoid very low delta is commissions.
I traded options of 17 different commodities plus of several currencies. Interesting to note, that I made major profits with only three of them: Wheat, Crude Oil, and the S&P index (ES puts), further significant profits came from Soybeans and Cotton. Major losses were caused by the currencies, Live Cattle, and Bean Oil. Number of trades for most of these commodities was larger than 15, thus it was not just one trade that decided the results.
Consequencies: Regarding commissions, I will check for each trade, if a very low delta is necessary, and keep „rolling“ of trades to a minimum. Furthermore, I will avoid trading currencies via short options. And I will be very careful in the cattle market.
Please feel free to ask all kind of questions, make comments, and talk about your trade suggestions.
Best regards, Myrrdin
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I intend to reduce the rather large wheat position, and to add on the small ES position via selling January puts. Furthermore, I intend to add to my successful positions in LH and BO. I will add to ZBZ calls or add ZNZ calls only in case we get back to the recent highs.
Sold the ESF6 P1500. I chose a lower delta to reduce commissions, as explained below. Whereas I had bought puts at approx. US$ 200, I will buy them at US$ 300 - 400.
In my opinion, the low in the indices is in. Thus, I take up again systematically Ron's concept of selling ES puts.
My rules regarding a stop loss are different: I define a stop in the underlying where I expect the option to approximately double in value. Here I intend to exit on a close below 1870.
If successful, I will buy back the options at 50 %, and re-enter a new position.
Currently I hold two lots (1 regular lot is approx. 3 % of the account value). Due to the uncertain situation regarding the indices, I did not re-buy the ESZ P1300 at 50 %, and re-enter. I intend to re-buy and re-enter a full second position during this week.
Best regards, Myrrdin
Last edited by myrrdin; October 5th, 2015 at 06:12 AM.
Reason: Adding comment regarding delta.
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