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Diversified Option Selling Portfolio
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Diversified Option Selling Portfolio

  #601 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
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ron99 View Post
Sold NGh7p250p230 spread today. I know I am late to the party but I doubt NG is dropping much anytime soon with the cold weather forecast for the rest of Dec.

Surprisingly IM for this spread is only $109. I sold it for $90. Being ultra conservative I am using 10X IM because of the low IM.

If I exit at 50% drop in 30 days the monthly ROI would be 3.0%.

Exited the NGh7p250p230 spread today at 0.003. Days held was 18. Monthly ROI was 6.8% even though I used 10x IM.

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  #602 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
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Favorite Futures: Options on Futures
 
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ron99 View Post
I'm beginning to think that you can throw out all ES seasonals with a Trump presidency.

This was the wrong thing to say.

My seasonal of buying ESh7 on 11/12/16 and selling on 12/26/16 made $5,188 profit this year. My mistake in not trading it with futures. I do have on ES put spreads.

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  #603 (permalink)
Market Wizard
Cleveland, OH
 
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Sold CLk7c70c80 spread today for $0.14. IM is $378.

CL seasonal is to drop 1st 3 weeks of Jan.

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


DCOT report says Managed Money group is 83% long futures only, which is right at peaks of prior 2 1/2 years.

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We won't know if OPEC and non-OPEC countries have produced at new quota levels in Jan until Feb. I hope to be out by then.

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  #604 (permalink)
Trading for Fun
Riga Latvia
 
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Happy New Year and a successfull trading!

Frohes Neues Jahr und ein erfolgreiches Trading!

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  #605 (permalink)
Market Wizard
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I wish everybody a happy and successful New Year !

Best regards, Myrrdin

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  #606 (permalink)
Market Wizard
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I'm ready to forget the last two years so let's have a successful new year in 2017.

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  #607 (permalink)
Trading Apprentice
Goshen Indiana USA
 
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CL

Thanks @ron99 for sharing so much information with the rest of us.

I am sure I read it somewhere but I have searched in vain....what are your parameters/rules for selling spreads on the CL?

RBtrader

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  #608 (permalink)
Market Wizard
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RBtrader View Post
Thanks @ron99 for sharing so much information with the rest of us.

I am sure I read it somewhere but I have searched in vain....what are your parameters/rules for selling spreads on the CL?

RBtrader

My conclusion is somewhere in the other thread.
Here is one post.
https://futures.io/options-futures/12309-selling-options-futures-503.html#post523342

This one is just saying I wasn't able to find a strategy that worked.
https://futures.io/options-futures/12309-selling-options-futures-503.html#post523734

Here is a post showing numerous attempts to find a spread strategy in NG
https://futures.io/options-futures/12309-selling-options-futures-504.html#post523997

I never was able to find one that worked because you can't sell far enough OTM to avoid movements the same amount as in the past and make any money. Also I couldn't find any combination of short and longs that protected.

So I just sell with a long 10 from the short for black swan protection (major disruption in Middle East like a bomb, war, natural disaster, market crash up or down) and cross my fingers.

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  #609 (permalink)
Market Wizard
Linz Austria
 
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Whereas last year I sold naked ES put options I will return to a more conservative strategy in 2017. Reason is that I expect a more volatile trade under president Trump.

I decided to sell ratio spreads, buying a put 2.5 % below current price, and selling puts 5 % and 7.5 % below current price. I intend to sell options with 90 to 110 DTE.

These spreads can currently be sold for approx. $500.

Differences to Ron’s excellent trading system are:

Ron’s protection works in the beginning of the trade, and, thus, Ron closes his trades when the value of the option has decreased by 50 %. For ratio spreads, the protection works in the second half of the trade, and it is more than a protection. I will get to this point later.

Ron’s system can be set up easily. There are clear rules for entry and exit of a trade. Ratio spreads allow for more flexibility when exiting the trade. But you have to decide.

Independently of the kind of protection I prefer to be closer to the money to own a smaller number of options. Disadvantage is that I will be stopped out more often. Advantage is that the damage in case of a “catastrophe” is smaller. To give you an order of magnitude: For an account of $100,000 Ron will hold more than 50 puts, compared to a maximum of 6-12 puts for the ratio spreads. But there is no free lunch …

As mentioned above, the protection of ratio spreads is strong in the second half of their life time. Thus, I intend to sell 1 lot each week with 90 to 110 DTE. I would like to own permanently ratio spreads just entered and ratio spreads which I already own for a while. The second group has lower risk and even can pay for some of the potential losses. In case one of the ratio spreads expires 2.5 – 10 % below the price where I sold it, the long put contributes essential profits. (But this is not the main target of the concept.)

There are various ways to exit a trade.

To begin with the most annoying one: I exit the trades when the break even at expiry time is reached (entry price minus 10 % minus selling price). This is my stop loss.

For the successful trades, I can exit the trade when the price of the spread is zero. This often happens somewhere around 50 % of DTE. But I also can hold them for longer, wait until a few days before expiration and sell the long put (more aggressive) or the long put and the first short put (less aggressive). And I can wait for the long put to expire in the money and provide some extra profit.

I expect profits to be in the order of magnitude of 20 – 30 % per year, but the prediction is not as easy as with Ron’s concept. The probability of being stopped out is significantly higher, but an extra profit via the long puts is possible.

I hope I could make the concept understandable. In case of any questions, please feel free to ask.

And, as always, I am happy about comments.

Best regards, Myrrdin

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  #610 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,700 since Jul 2011
Thanks: 781 given, 4,720 received
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myrrdin, what amount of excess will you hold for your ratio spread?

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