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Selling Options on Futures?

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  #7201 (permalink)
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Entered 18 long put position on ES 29MAY20P1500. I have been building my long put position since 25 March.

During Brexit i was long FX put option on British Pound. The actions of central bank were also swift, The Bank of England injected dollar liquidity into the market almost immediately. My options lost in value very quickly. I reasoned all the bad news already there.Because options had only 10 days until expiration, I chose not to risk and closed my options on Friday at loss, only to see premiums exploding next week.

Of course the past experience does not necessarily repeats itself.

One thing I believe at this point in time, is that negative economic may take even 3 months to fully realize itself.

I do not think we will see a V shaped recovery. A lot of factors contribute, supply chains disruptions, demand&supply shock both at the same time, consumer confidence level etc. Anyway, i know that i know only a fraction, but chances for this trade are decent.

My trade is a swing trade here. Open interest ~1.6K is decent to sell high and buy low 10 options intraday.

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  #7202 (permalink)
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ron99 View Post
I bought 120 EW3k20p1500 at 32.00 for my regular account. Bought 210 for my IRAs.


Jerard View Post
Entered 18 long put position on ES 29MAY20P1500. I have been building my long put position since 25 March.

Found it interesting that your both long 1500s. Which got me thinking. Most of @ron99's work has been maximizing Profit as a function of initial margin posted AND kept in reserve. Which I've always thought was a great and intuitive but non-traditional way of thinking about it. Most proprietary desks think about everything as Return on VaR. I actually know very few traders that have a clue what the margin requirement of their positions are. (To be explicit I think @ron99's analysis is great and more people should understand their margin that well.) Anyway getting back on subject.... As @ron99 has shown in his last few posts, you can make a lot of money on way out of the options even though the underlying doesn't get anywhere near the actual strike price. Which raises the question, what is the best option (or option structure) to buy if you expect a move in a certain direction. Why 1500? Why not 1600? How about 1700/1300 Put spreads? (Just guessing strikes here)

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I know this thread is very equities focused but here's something to start thinking about ...

CME :- Changes to Price and Strike Price Eligibility Flags for Certain Energy Products

This Sunday, April 5 (trade date Monday, April 6), as an operational step toward potentially supporting negative pricing and strikes, the MDP 3 Security Definition (tag 35-MsgType=d) for these NYMEX Energy outright futures and options on CME Globex will be flagged as eligible to trade at negative prices. The options on futures will also be flagged as negative strike price eligible. Trading at negative prices for these outright markets will not be supported at this time. Negative strike prices will not be listed.

If you think about it, this already exists in Eurodollars as they list strike prices greater than 100, hence given that the underlying interest rate is 100 - Price, strikes above 100 are for negative interest rates.

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  #7204 (permalink)
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SMCJB View Post
Found it interesting that your both long 1500s. Which got me thinking. Most of @ron99's work has been maximizing Profit as a function of initial margin posted AND kept in reserve. Which I've always thought was a great and intuitive but non-traditional way of thinking about it. Most proprietary desks think about everything as Return on VaR. I actually know very few traders that have a clue what the margin requirement of their positions are. (To be explicit I think @ron99's analysis is great and more people should understand their margin that well.) Anyway getting back on subject.... As @ron99 has shown in his last few posts, you can make a lot of money on way out of the options even though the underlying doesn't get anywhere near the actual strike price. Which raises the question, what is the best option (or option structure) to buy if you expect a move in a certain direction. Why 1500? Why not 1600? How about 1700/1300 Put spreads? (Just guessing strikes here)


"Which raises the question, what is the best option (or option structure) to buy if you expect a move in a certain direction."


Great question... keen to hear idea on this topic.. i am experimenting with directional strategies (bullish)
buying OTM options, selling a OTM put spread, selling a ATM put spread..., buying call spread...
but am still trying to find my feet with regards to option/option strucuture to buy if you expect a move..
keen to any your thoughts !

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  #7205 (permalink)
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SMCJB View Post
I know this thread is very equities focused but here's something to start thinking about ...

CME :- Changes to Price and Strike Price Eligibility Flags for Certain Energy Products

This Sunday, April 5 (trade date Monday, April 6), as an operational step toward potentially supporting negative pricing and strikes, the MDP 3 Security Definition (tag 35-MsgType=d) for these NYMEX Energy outright futures and options on CME Globex will be flagged as eligible to trade at negative prices. The options on futures will also be flagged as negative strike price eligible. Trading at negative prices for these outright markets will not be supported at this time. Negative strike prices will not be listed.

If you think about it, this already exists in Eurodollars as they list strike prices greater than 100, hence given that the underlying interest rate is 100 - Price, strikes above 100 are for negative interest rates.

More on this subject...

ADVISORY #: 20-152
SUBJECT: CME Clearing Plan to Address the Potential of a Negative Underlying in Certain Energy Options Contracts

https://www.cmegroup.com/content/dam/cmegroup/notices/clearing/2020/04/Chadv20-152.pdf

If WTI Crude Oil futures prices settle, in any month, to a price between $8.00/bbl and
$11.00/bbl, CME Clearing MAY switch its pricing and margining options models from the
existing models to the Bachelier model, currently utilized in numerous spread options
products where negative underlying prices and strike levels are a regular occurrence. If
any WTI Crude Oil futures prices settle, in any month, to a level below $8.00/bbl, CME
Clearing WILL move to the Bachelier model for all WTI Crude oil options contracts as
well as all related crude oil options contracts effective the following trade date. CME
Clearing will send out an advisory notice with one day notice before any implementation
occurs with all appropriate details.

I looked for a layman's definition of the Bachelier model but couldn't find anything easy to understand.

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From Reddit

Last 15m of SPY options today



I computed these using black scholes with the premium and implied volatility values imported

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@Big Mike What are we looking at?

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SPY Options trading from 1:50-3:30 PM today; blue = call & red = put


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SMCJB View Post
Which raises the question, what is the best option (or option structure) to buy if you expect a move in a certain direction. Why 1500? Why not 1600? How about 1700/1300 Put spreads? (Just guessing strikes here)

Sunday morning Math exercise....



FYI
ES 2500 represents a 10% drop in ES, 2350 a 15.5% drop and 2200 a 21% drop.
Time decay is 11 days, Thursday 9th April Close to Monday 20th April Close
Vol increase is 10 points not 10%

I think this chart highlights several things. Most Importantly it shows how large an effect a change in volatility can have.

EDIT:- The Breakeven line is incorrect. Should be at 0% return. Corrected with ES-M0 and EW3-N0 in a few posts forward.

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SMCJB View Post
Sunday morning Math exercise....

FYI
ES 2500 represents a 10% drop in ES, 2350 a 15.5% drop and 2200 a 21% drop.
Time decay is 11 days, Thursday 9th April Close to Monday 20th April Close
Vol increase is 10 points not 10%

I think this chart highlights several things. Most Importantly it shows how large an effect a change in volatility can have. Without an increase in volatility returns on a 10% drop are unimpressive for all options.

Excellent post! Thank you for posting it.

Am I correct that the breakeven line at 100% is the option on Apr 20 is the same premium as it was on Apr 9?

On Apr 20 these options are only 25 DTE. A 10% futures drop doesn't cover the severe time erosion of premium on most of them.

Could you please do this for ESm20 and EW3n20 options? It would be interesting to see how different DTEs compare.

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Here is VIX chart for last 3 months.
https://finance.yahoo.com/chart/%5EVIX/


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SMCJB View Post
Sunday morning Math exercise....

FYI
ES 2500 represents a 10% drop in ES, 2350 a 15.5% drop and 2200 a 21% drop.
Time decay is 11 days, Thursday 9th April Close to Monday 20th April Close
Vol increase is 10 points not 10%

I think this chart highlights several things. Most Importantly it shows how large an effect a change in volatility can have. Without an increase in volatility returns on a 10% drop are unimpressive for all options.

On Feb 19 ES hit high of 3388. On Mar 11 (21 days) it dropped 19.5%. The VIX went up about 40 points.

So if ES dropped ~20% in 11 days the VIX probably would rise by a lot more than 10 points. More like 40+.

So many variables!

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ron99 View Post
Am I correct that the breakeven line at 100% is the option on Apr 20 is the same premium as it was on Apr 9?

The breakeven line is wrong. The Y axis is % returns so breakeven should be at 0%. Corrected below.

ron99 View Post
Could you please do this for ESm20 and EW3n20 options? It would be interesting to see how different DTEs compare.

Done. See Below

ron99 View Post
On Feb 19 ES hit high of 3388. On Mar 11 (21 days) it dropped 19.5%. The VIX went up about 40 points.

So if ES dropped ~20% in 11 days the VIX probably would rise by a lot more than 10 points. More like 40+.

So many variables!

Yes so many variables. All add some 20% vol changes later. That involves more spreadsheet mods than charting the new expiries though.




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ron99 View Post
I didn't get rise in ES futures from 3:30 to 4 pm like it did last 3 Fridays.

I bought 120 EW3k20p1500 at 32.00 for my regular account. Bought 210 for my IRAs.

Hi Ron -

Did you ever close or roll this trade?

Thanks for sharing!

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kevinkdog View Post
Hi Ron -

Did you ever close or roll this trade?

Thanks for sharing!

I exited at a large loss.

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ron99 View Post
I exited at a large loss.

Ughh sorry to hear that. I was hoping you pulled a rabbit out of your hat like you have many times before.

When Ohio opens for business, we'll have to have lunch at Bob Evans in Medina again!

Kevin

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kevinkdog View Post
Ughh sorry to hear that. I was hoping you pulled a rabbit out of your hat like you have many times before.

When Ohio opens for business, we'll have to have lunch at Bob Evans in Medina again!

Kevin

As we all well know, can't make every trade a winner.

Yeah lunch sometime.

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I was curious how the ROI% (no fees or commissions in calculation) would be today for various strikes of long puts. Here is chart for EW3n20 that are 93 DTE. ES futures were at 2771.75 at that time. Down 2.51%. Current price was average of bid and offer.



The highest ROI% is for options that settled yesterday at a price between 4.00 and 7.50.

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Here is chart for 4:37. Prices have dropped a little even though ES futures are about the same (2771) as prior chart.

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Hi
Any one selling put credit spreads Ron99 strategy?
I know Ron is waiting for Trump to leave.

mROI looks pretty good on puts(-1 for +2) Delta 0.03 and 0.015.

Thanks
Babak

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rajab View Post
Hi
Any one selling put credit spreads Ron99 strategy?
I know Ron is waiting for Trump to leave.

mROI looks pretty good on puts(-1 for +2) Delta 0.03 and 0.015.

Thanks
Babak

Selling ES puts in this volatile environment? No way!

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ron99 View Post
Selling ES puts in this volatile environment? No way!

I fully agree. For selling options, times are too rough.

Best regards, Myrrdin

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I sell mostly strangles/straddles given a positive VRP (IV/RV), I rarely buy options as my research has shown they are only profitable in the top 2 deciles of volatility expansion. However, they do provide significant downside risk protection for a net -gamma -vega portfolio.

Removing some of that negative skew risk is something I have been thinking about. The standard options for reducing this risk typically are:
1. Gamma scalping/hedging in the underlying
2. Defined risk strategies
3. Relative value portfolios

I have an issue with all 3, or rather, none of them are perfect.

For Gamma scalping, it is always locking in a loss and highly dependant on your delta model, plus engages in a lot of commissions. They do give you the closest thing to a variance swap payoff, which is what we want. But if that is the case, the friction in general needs to be lower.

Defined risk strategies, they do reduce your margin. And the ratio you reduce your potential profits to the size of your tail risk protection still ends up leaving you potentially 3x to 5x + losers compared to the premium you harvest. Even more, substantial if you do not go all the way to expiration.

Relative value portfolios where you buy and sell volatility in equal proportions, across multiple products is probably the most realistic solution. Although in this environment were, you may have negative VRP but still in high IV percentiles at the same time; it is hard to find targets. You are also going to need much more sophisticated weighting for your options as simple 1:1 won't fly. Probably vega weighting or theta weighting depending on if you expect a proportional or absolute change in IV vs. RV relationships. This model adds another layer of complexity to the strategy, though it would give you protection and the potential for convex outperformance on 'black swan' moves.

In the current conditions right now, I have relegated myself to a combination of purchasing units and offsetting that risk with some underlying futures positions. Units are very far OTM options that are hard to price because option pricing models and greeks become more erratic the farther from ATM you are. These sell at lottery ticket prices more than IV/distribution based pricing. They also have massive convexity if they ever do become ATM.

I usually do about 10-15% of the total net exposure I have in units for a specific sector or underlying. This method is much cheaper than going full iron condor/butterfly with vast wings, which are synthetic straddles/strangles because those units are 'overpriced' compared to the options your selling that would be price 'normally.' It cuts into your profits much more and increases that negative skew outcome if you do take a loser, even if it is risk defined.

I do not think my way is best, as you are still severely exposed. However, in this market environment, it is difficult to offload some of those risks cheaply. Either through diversification (things went to 1, with precious metals and energy are playing follow the leader with SP500 or vice versa), and most products had a massive vol spike then crush which leaves you in a kind of no man's land for a lot of products to sell or buy vol. This environment leaves defined risk spreads not paying you enough, and naked spreads with more risk than usual.

I am interested in this communities thought on the following

Do you guys ever use the underlying to hedge risk, or buy options?

Does anyone here ever buy options to get long vol?

How do you manage your portfolio risks? On greeks, on margin, on x% shocks?

Thanks in advance

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My Brief Summary and Thoughts on this Thread:

I've been following this thread for many years and have added a few comments here and there over the years. What stands out to me is that selling options far OTM is a losing proposition in the long run. Those supposedly rare black swan events come up much more frequently than would be expected by random chance (e.g. fat tail risk). Initially I was quite intrigued by Ron's idea and it seemed almost too good to be true. I think all traders are secretly hoping that the "holy grail" of trading is out there, and I see that many of the first time readers of the thread often posted with these type of comments having their interest peaked.

The premise was that as long as you just held onto your naked option position -- in spite of paper losses of upwards of 80+% -- that eventually the trade would return to profitability. You just needed to have the correct level of IM on the account which was around 4x originally but then later it became 5x or 6x or even more. This was because supposedly there had never historically been a drop in the S&P 500 of over 20% in X number of trading days. So you just hold onto the position through the drawdown because you still have time for the market to bounce back and recover because it never went in the money. You just needed to be able to ride out the margin calls and "paper losses". Much of the original research and tweaks were trying to optimize what margin IM number was needed to ride out these trades based on historical data and backtesting.

The original strategy was changed fairly significantly after massive losses in August 2015. Now it was using ratio spreads instead of naked put options. The idea was to buy even more options that were even further OTM than the number being sold to protect or hedge against the massive unexpected drops and spikes in IV that are the death knell for option sellers. So something along the lines of short 2 options at delta .03 and then long 3 options at delta .01

This new strategy was also tweaked and revised over the next couple years including the IM that needed to be held to avoid taking massive losses by going on margin call. February 2018 was another particularly ugly month with large losses but some say they were able to avoid trading then because they foresaw the volatility coming. Now fast forward to 2020 and I would venture that anyone still using the strategy blew up their account, again...

I was particularly interested to read that @ron99 started trading the exact opposite type of trade this year in 2020. He was now buying large numbers of far OTM ES puts and then continually rolling them down. I'm sure there were very nice profits made if the trade was successfully exited at the bottom and I realize this was a situational trade based on market conditions. But still, in many way this is the ultimate irony to me, and perhaps to many others that have also followed this thread for some time... What started out so many years ago as a set it and forget it strategy of selling naked far OTM puts had come full circle to now buying those exact same far OTM ES puts in large numbers and trying to time/predict the market looking for a drop.

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thomasthomsen View Post
My Brief Summary and Thoughts on this Thread:

I've been following this thread for many years and have added a few comments here and there over the years. What stands out to me is that selling options far OTM is a losing proposition in the long run. Those supposedly rare black swan events come up much more frequently than would be expected by random chance (e.g. fat tail risk). Initially I was quite intrigued by Ron's idea and it seemed almost too good to be true. I think all traders are secretly hoping that the "holy grail" of trading is out there, and I see that many of the first time readers of the thread often posted with these type of comments having their interest peaked.

The premise was that as long as you just held onto your naked option position -- in spite of paper losses of upwards of 80+% -- that eventually the trade would return to profitability. You just needed to have the correct level of IM on the account which was around 4x originally but then later it became 5x or 6x or even more. This was because supposedly there had never historically been a drop in the S&P 500 of over 20% in X number of trading days. So you just hold onto the position through the drawdown because you still have time for the market to bounce back and recover because it never went in the money. You just needed to be able to ride out the margin calls and "paper losses". Much of the original research and tweaks were trying to optimize what margin IM number was needed to ride out these trades based on historical data and backtesting.

The original strategy was changed fairly significantly after massive losses in August 2015. Now it was using ratio spreads instead of naked put options. The idea was to buy even more options that were even further OTM than the number being sold to protect or hedge against the massive unexpected drops and spikes in IV that are the death knell for option sellers. So something along the lines of short 2 options at delta .03 and then long 3 options at delta .01



This new strategy was also tweaked and revised over the next couple years including the IM that needed to be held to avoid taking massive losses by going on margin call. February 2018 was another particularly ugly month with large losses but some say they were able to avoid trading then because they foresaw the volatility coming. Now fast forward to 2020 and I would venture that anyone still using the strategy blew up their account, again...

I was particularly interested to read that @ron99 started trading the exact opposite type of trade this year in 2020. He was now buying large numbers of far OTM ES puts and then continually rolling them down. I'm sure there were very nice profits made if the trade was successfully exited at the bottom and I realize this was a situational trade based on market conditions. But still, in many way this is the ultimate irony to me, and perhaps to many others that have also followed this thread for some time... What started out so many years ago as a set it and forget it strategy of selling naked far OTM puts had come full circle to now buying those exact same far OTM ES puts in large numbers and trying to time/predict the market looking for a drop.

I agree. Selling far out of the money puts is a slow grind way of making money, and every 2 or 3 years you take a hair cut that negates any gains.
I have done much better using order flow with day trading, and with much less risk and concern.

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  #7226 (permalink)
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thomasthomsen View Post
My Brief Summary and Thoughts on this Thread:

I was particularly interested to read that @ron99 started trading the exact opposite type of trade this year in 2020. He was now buying large numbers of far OTM ES puts and then continually rolling them down. I'm sure there were very nice profits made if the trade was successfully exited at the bottom and I realize this was a situational trade based on market conditions. But still, in many way this is the ultimate irony to me, and perhaps to many others that have also followed this thread for some time... What started out so many years ago as a set it and forget it strategy of selling naked far OTM puts had come full circle to now buying those exact same far OTM ES puts in large numbers and trying to time/predict the market looking for a drop.

I bought puts because of specific market conditions. When conditions return to "normal" I will return to selling options.

I don't think there is any trading strategy that you can do 100% of the time.

I don't think there is any trading strategy that you don't make adjustments/improvements over time.

I have been trading 22 years. 19 years as my sole source of income. Yes there have been ups and downs but overall I have been very profitable.

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ron99 View Post
I bought puts because of specific market conditions. When conditions return to "normal" I will return to selling options.

I don't think there is any trading strategy that you can do 100% of the time.

I don't think there is any trading strategy that you don't make adjustments/improvements over time.

I have been trading 22 years. 19 years as my sole source of income. Yes there have been ups and downs but overall I have been very profitable.

It is essential in trading to know, when you have to change strategy. And it helps a lot to have a large basket to choose from.

I made a lot of money with opion selling, but have almost no such trades open for months.

Best regards, Myrrdin

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  #7228 (permalink)
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Longtime follower of this thread. Curious is anyone selling these days with the high levels of IV? Or is it too risky?

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theta130 View Post
Longtime follower of this thread. Curious is anyone selling these days with the high levels of IV? Or is it too risky?

I'm not selling options now.

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theta130 View Post
Longtime follower of this thread. Curious is anyone selling these days with the high levels of IV? Or is it too risky?

I still sell options.

I used the shortterm rise in volatility to sell strangles in CL, NG, and KC. The CL trade is already closed with a nice profit.

And I sold directional trades using ATM options, shorting C and W.

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  #7231 (permalink)
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Any gold trade ideas? Or it is too late?

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meyer99 View Post
Any gold trade ideas? Or it is too late?

If anything, I would use the relatively high volatility to sell very wide strangles. But in my opinion there are better trades around.

I prefer trading the metals via futures currently.

Best regards, Myrrdin

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Just took up Ron's idea from some time ago and sold some ESZ 1xP2000-2xP1500 spreads for 100 USD each.

I am aware of the risk of this type of position, and, thus, current margin is only approx. 5 percent of account size.

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Which DTE? You got a credit?

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meyer99 View Post
Which DTE? You got a credit?

ESZ denotes the ES future with expiry in December. Expiry date this year is the 18th of December.

Yes, I received a credit of 100 USD per spread.

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11:49 Friday 30th with ES at 3254 the EW1 3255 straddle is worth 156. That's a premium equal to 4.8% of the underlying for a 1 week option!

Alternatively the 3090/3415 Strangle (both strikes 5% out of the money) is worth 43.5 a premium equal to 1.3% so in "it ain't ever going there" math it would require a 6.3% move to lose money!

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Should have added, in 2016 between Fri 4th and Friday 11th the S&P500 had a range of 2083 (Friday 4th low) to 2182 (Thursday 10th High) which is 99 points or about 4.7%

S&P500 doesn't trade at night though! The ESZ16 future had a range of 2028 (Wednesday low) to 2180 (Thursday high) which was 152 points or over 7%

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meyer99 View Post
Any gold trade ideas? Or it is too late?

You are on the topic of selling options right?
So it is only me of course and I wouldn't do it myself because gold volatility is low (implied volatility 20.7%), there is a lot at stake (100 dollars the point for a contract) and I am fully invested in gold already with ETF physical but a naked put options strike at 1850 (aggressive) or 1750 (conservative) should work with an expiry on 23 February 2021 (GCJ21)

Edit 1 It seems I am late for the reply but when clicking on the link and last page it is only your post I saw
Edit 2 Of course you can sell 1850 and buy 1750 same expiry.

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For those premium sellers out there...

With CME Mar21 Bitcoin quoted 18050, the Mar21 20000 Calls are 2400/2650!

If we say the 20000 strike is 10.8% out of the money and 2400 represents a 13.3% premium of the underlying, we get these comparisons...

With ES Mar21 quoted 3601 the 3210 Put (10.9% OTM) is worth 72.5 (2% premium)
With ES Mar21 quoted 3601 the 4000 Call (11.1% OTM) is worth 26 (0.7% premium)

With CL Mar21 quoted 4190 the 4650 Call (11.0% OTM) is worth 137 (3.3% premium)

Obviously expiration's don't line up exactly but you get the picture!

Of course Nov20 Bitcoin is currently 74% above it's early September lows!

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Rich as it sounds donít think Iím gonna take the risk of my getting my head handed to me !!!!


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March quoted 18575 with a high on the day of 18720, so already up 3.5% in the two days since posting it!

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Hi there
Been away for quite long, hopefully everyone doing great here
If by any chance anyone knows if there is a way to buy puts on bitcoin futures?
I have not done my research yet, but i recall despite all this bull run it is very sensitive to regulation and dumps may be very severe out there. So I think this trade may worth a shot in a foreseeable future.

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@Jerard as a non-US resident I think you will find you can trade Bitcoin Options in many places. It's a lot more limiting for US residents as many of the crypto exchanges are off limits. While I don't have first hand experience I have heard that Deribit has a good options market. The CME also list options on Bitcoin futures but liquidity is generally poor and at certain times non-existent. Not surprisingly you will find these options to be have very high premiums, but when the market moves 10% every few days that's not surprising.

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Any one back to selling ES puts Ron99's style?

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rajab View Post
Any one back to selling ES puts Ron99's style?

I'm not. Even though I have missed tons of money the last 9 months, I can sleep at night not being in crazy, unpredictable markets like we had and are now having.

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@ron99 kindly state your safe trade in selling or buying options with hints about pros/cons of both in terms of volatility and etc.
I was about selling straddle for delta below 20 on the weeklies ...seems from your experience as unsafe trade ? So would appreciate your insights to follow it.

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mosalem2003 View Post
@ron99 kindly state your safe trade in selling or buying options with hints about pros/cons of both in terms of volatility and etc.
I was about selling straddle for delta below 20 on the weeklies ...seems from your experience as unsafe trade ? So would appreciate your insights to follow it.

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I'm not doing options right now so I don't think I would be a good source for current information about them.

Also I am getting close to retirement and my avoiding of risk would be different than others not in my situation.

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ron99 View Post
I'm not doing options right now so I don't think I would be a good source for current information about them.

Also I am getting close to retirement and my avoiding of risk would be different than others not in my situation.

Thanks a lot @ron99 --
Any suggestions from the experts here about selling or buying options:
I am thinking about selling the weeklies of ES for example and hedge the selling level with buying or selling the underlying. I am new to options as a trading style as I am a futures trader. Kindly share what are the list of strategies that you are trading in terms of this thread context.

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mosalem2003 View Post
Thanks a lot @ron99 --
Any suggestions from the experts here about selling or buying options:
I am thinking about selling the weeklies of ES for example and hedge the selling level with buying or selling the underlying. I am new to options as a trading style as I am a futures trader. Kindly share what are the list of strategies that you are trading in terms of this thread context.


There is a lot of information on option selling in this thread and in the thread "Diversified Option Selling Portfolio". But I do not remember any successful selling of weeklies of the ES described here. The time horizon of most option traders here is at least two months.

Best regards, Myrrdin

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If your trying to stay delta neutral than you are trying to trade implied versus realized volatility. A lot of your results in this will depend upon whether your right or wrong, but also about how and when you delta hedge, and how well a job you do of it. It's a lot easier to delta hedge long gamma than it is short gamma. No offence but if you don't understand all of that then you probably shouldn't try it.

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The timing is when the sold option becomes ATM or ITM ... Assume that a x strike C is sold at 20 points then when the market is at x or x+20 we r losing money so the hedge of buying a long ES at x or x+20 can eliminate that risk. Is my assumption valid ?

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I think you are over simplifying it. If your not familiar with the terms delta, gamma, vega, theta (and far less important in a ZIRP environment rho) I'd recommend you investigate further. Vanna (DeltaVega) and Charm (DeltaTheta) are also interesting option dynamics if trying to delta hedge options.

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SMCJB View Post
I think you are over simplifying it. If your not familiar with the terms delta, gamma, vega, theta (and far less important in a ZIRP environment rho) I'd recommend you investigate further. Vanna (DeltaVega) and Charm (DeltaTheta) are also interesting option dynamics if trying to delta hedge options.

As we interacted on another topic, you know that it is not to bother you...
Sticking to the title of this topic (I'm not talking about hedging)
Of course one has to read and has to understood the greek letters at least once. However when trading commodities with options (as a private trader) some of these greek letters are not so important.
Out of curiosity: did you read: "William Gallacher - The Options Edge. Winning The Volatility Game With Options On Futures"
He is almost not using any greek letters and this can show that some are not so useful and Cordier's book can be more than enough...
So I wouldn't discourage someone to investigate the word of options on commodities. It is not as complicated as it can sound (particularly for someone that is already used to deal with futures).

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Mixed thoughts on this @Sagal. No experience with either book.

In general I think trading options if you don't understand what you are doing is very dangerous. It's very easy to lose all you have with options, while it would be very difficult to do that with (unlevered) stock. (Question, how much should we protect people from themselves?). Even if you do know what you are doing, there can be lots of surprises. For example all the people who bought Gamestop $25 puts when the stock was trading $350 predicting the crash. Even with the drop in the stock from $350 to $100 range, many of them lost money because the drop in volatility/vega was bigger than than the drop in price/delta. At the same time, done correctly options can definitely reduce risk, and increase risk/reward if done the right way. I would also say that just because somebody doesn't understand what Vega is, doesn't mean they don't understand how volatility effects price. That's just nomenclature. But if they don't understand how volatility effects option prices, should they be trading options?

With regards to the specific question I replied to, the question was about delta hedging short options. This is a short volatility and short gamma strategy, not a directional trade. In this case I definitely think they should understand what they are doing, which means understanding the greeks, whether we call them the greeks or not.

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What's new with this thread?

@ron99 has gone silent?

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Someone else in chat suggested that @ron99 was being dishonest in this thread, and lying about his trades. I do not monitor this thread, but if anyone else thinks that is true and has evidence, it should be reported of course so he can be banned.

The opposite is true, @ron99 has been posting for years and I believed him to be a valuable and helpful member of the community. If he has been, then he deserves the respect that we all do -- and should not be accused of being a scammer without absolute proof.

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edit: I previously quoted Kevin, but I should not have. He did not say anything negative about @ron99.

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Here are all of my option buys for all accounts I trade in March of 2020.

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Big Mike View Post
Someone else in chat suggested that @ron99 was being dishonest in this thread, and lying about his trades. I do not monitor this thread, but if anyone else thinks that is true and has evidence, it should be reported of course so he can be banned.

The opposite is true, @ron99 has been posting for years and I believed him to be a valuable and helpful member of the community. If he has been, then he deserves the respect that we all do -- and should not be accused of being a scammer without absolute proof.

Mike

Here are screenshots of the monthly statement for my personal account with purchase & sale screenshots of all of the ES futures and options acquired in March of 2020.





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  #7262 (permalink)
Market Wizard
Cleveland, OH
 
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Big Mike View Post
What's new with this thread?

@ron99 has gone silent?

Mike

Have been doing other types of trading lately that are not buying or selling of options.

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  #7263 (permalink)
Market Wizard
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Big Mike View Post
Just a note that we have an upcoming webinar that you should be interested in:



Mike

Unfortunately, webinars are usually at a time, when Europeans are already sleeping. But I am sure that there will be a video.

Best regards, Myrrdin

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  #7264 (permalink)
Market Wizard
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I have been posting energy and weather charts on my Twitter account.
https://twitter.com/Ronh999

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  #7265 (permalink)
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Given that this thread has the most experts in the domain. I am about to switch completely from trading underlying Futures to Options on Futures to account for the gaps of high margin beyond the close and premature stops. I am confused regarding what could be best ... Selling options as credit spreads or selling naked options or buying options OTM or ATM... What is the advise here from experts. It seems that there is deviation from selling options or even credit spreads though the webinar Mike posted warns from buying options ... Every advice from experts here is highly appreciated..

Sent using the futures.io mobile app

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  #7266 (permalink)
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ron99 View Post
Have been doing other types of trading lately that are not buying or selling of options.

Glad to see you back and appreciate you sharing statements, for what it's worth.

Mike

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kevinkdog View Post
I deleted my post, did not mean to cause disrespect. You asked a question, I gave what I thought was an honest answer. My bad.

Kevin, my response really should not have quoted yours. So do not worry, it is 100% understood that you were not disrespecting!

I will edit my previous post.

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  #7268 (permalink)
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Kindly @ron99 provide your new strategy details if possible as you are one of the experts in the domain.
ron99 View Post
Have been doing other types of trading lately that are not buying or selling of options.

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  #7269 (permalink)
Market Wizard
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mosalem2003 View Post
Kindly @ron99 provide your new strategy details if possible as you are one of the experts in the domain.

Sent using the futures.io mobile app

I'm trading milk futures. Not something I would recommend to someone who doesn't have a background in the dairy industry.

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Market Wizard
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mosalem2003 View Post
Given that this thread has the most experts in the domain. I am about to switch completely from trading underlying Futures to Options on Futures to account for the gaps of high margin beyond the close and premature stops. I am confused regarding what could be best ... Selling options as credit spreads or selling naked options or buying options OTM or ATM... What is the advise here from experts. It seems that there is deviation from selling options or even credit spreads though the webinar Mike posted warns from buying options ... Every advice from experts here is highly appreciated..

Sent using the futures.io mobile app

My approach as a discretionary trader is to select an own strategy for each trade. I like diversity not only regarding the underlying commodities, but also regarding the tool. Depending on the situation, I trade outright futures, future spreads, options, option spreads, butterflies, ...

According to my experience, there are times when the one or the other work better.

Best regards, Myrrdin

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  #7271 (permalink)
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@ron99 @Big Mike

I am an elite lurker that rarely posts, but feel compelled to chime in. I have always found Ron to be honest, forthcoming, apparent, etc.

If one scrolls back in the thread, Ron had shared his recent trading activity/inactivity. I am not sure what happened (as I didn't see the posts that we taken down and deleted), but it's a shame that Ron was accused and then felt the need to share his statements to repair his reputation. On this site, I have never seen this before and hope is does not repeat in the future.

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  #7272 (permalink)
Market Wizard
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GoldenRatio View Post
@ron99 @Big Mike

I am an elite lurker that rarely posts, but feel compelled to chime in. I have always found Ron to be honest, forthcoming, apparent, etc.

If one scrolls back in the thread, Ron had shared his recent trading activity/inactivity. I am not sure what happened (as I didn't see the posts that we taken down and deleted), but it's a shame that Ron was accused and then felt the need to share his statements to repair his reputation. On this site, I have never seen this before and hope is does not repeat in the future.

Kevinkdog, in his deleted posts, didn't accuse me of anything. He just posted my big losing trade without posting the winners that happened the same month. It gave a inaccurate picture of my trading that month.

Someone years ago had accused me of fraud. He refused to believe me so a blocked him from the thread. So then he started another thread to keep making accusations.

There may have been others accusing me of fraud but I myself haven't seen them.

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  #7273 (permalink)
Tallinn, Estonia
 
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I probably donít know enough about the background to be commenting here, but what GoldenRatio mentioned resonated with me and my respect towards ron99 makes me step in. If this all started by these 2 lines in Chatbox (attached), then I really donít understand.

I have followed this thread for over 5-6 years by now and it has played a huge role in my path to becoming the option trader I am today. For this I am extremely grateful to ron99. Over this very long time period he has commented, explained, answered to everyoneís posts very quickly and genuinely. Has been extremely transparent and constructive. All forms of trading can be dangerous and no one has sold a strategy here that has to be followed blindly, no promises regarding performance have ever been made. To me it is extremely worrisome to see that a contributor who has created a thread which is live after almost 10 years and 728 pages, OP has over 2200 posts with over 4000 thanks, has never sold anything and has answered to countless number of traders, can be second-guessed by a 2 line accusation without any proof or explanation by someone who apparently couldn't stay civil enough when expressing themselves.

It is so much easier to destroy something than to build and so much easier to cast doubt than to prove anything. Was just mind-boggled to see that 3 minutes accusation by someone could even theoretically cast doubt on 10-year, thorough contribution by one of the more active FIO members. I love the continued transparency from ron99, but I think he really should not have had to post his statements here. Gives me the feeling of unfairly putting him in the corner which is hard to look past without stepping up for him.

It is a forum. There are hundreds of FIO users that come and go. Threads opened and closed. Never seen before that anybody had to defend why they have stopped posting. Especially as this is not a journal, but has grown into a wider thread on option selling. I know it is hard to define, but there needs to be a balance between the effort that goes into accusing and defending. In any case, this case seems to be closed for this time, but still felt like sharing.



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  #7274 (permalink)
Market Wizard
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Jyrgen View Post
I probably donít know enough about the background to be commenting here, but what GoldenRatio mentioned resonated with me and my respect towards ron99 makes me step in. If this all started by these 2 lines in Chatbox (attached), then I really donít understand.

I have followed this thread for over 5-6 years by now and it has played a huge role in my path to becoming the option trader I am today. For this I am extremely grateful to ron99. Over this very long time period he has commented, explained, answered to everyoneís posts very quickly and genuinely. Has been extremely transparent and constructive. All forms of trading can be dangerous and no one has sold a strategy here that has to be followed blindly, no promises regarding performance have ever been made. To me it is extremely worrisome to see that a contributor who has created a thread which is live after almost 10 years and 728 pages, OP has over 2200 posts with over 4000 thanks, has never sold anything and has answered to countless number of traders, can be second-guessed by a 2 line accusation without any proof or explanation by someone who apparently couldn't stay civil enough when expressing themselves.

It is so much easier to destroy something than to build and so much easier to cast doubt than to prove anything. Was just mind-boggled to see that 3 minutes accusation by someone could even theoretically cast doubt on 10-year, thorough contribution by one of the more active FIO members. I love the continued transparency from ron99, but I think he really should not have had to post his statements here. Gives me the feeling of unfairly putting him in the corner which is hard to look past without stepping up for him.

It is a forum. There are hundreds of FIO users that come and go. Threads opened and closed. Never seen before that anybody had to defend why they have stopped posting. Especially as this is not a journal, but has grown into a wider thread on option selling. I know it is hard to define, but there needs to be a balance between the effort that goes into accusing and defending. In any case, this case seems to be closed for this time, but still felt like sharing.



I found some of bib014 recent posts on Chatbox. Something he said was deleted.

The guy has been holding a grudge for 4 years now and can't let it go. His thread from 2017 is still up with accusations/lies about me. He hasn't made a post since 2019 but he posted on Chatbox about me.

I can ignore idiots like him no problem. Internet is full of them. Big Mike, sadly, gets thousands of attacks that he doesn't deserve.

I posted the statements to not leave any doubt for newbys.

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  #7275 (permalink)
Toronto
 
 
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@ron99 @Jyrgen @myrrdin I fully agree with all of you. I am newbie to Options trading and found that this is the best real thread about Options on Futures. I am too concerned that such behavior would limit the contributions from all of you such that newbies would continue learning and find this thread as a resort to ask for true reliable experience and feedback. I wish to see live interaction again on the thread and that is just a glitch.

Sent using the futures.io mobile app

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  #7276 (permalink)
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Hey guys, yeah someone in the chatbox mentioned @ron99 and I thought that I had missed something. I saw this thread was silent and made a post. @kevinkdog responded to my post, but when I replied I really should not have directed it at Kevin or quoted him, because my reply was talking about the chatbox guy and allegations of fraud.

So, long story short, haters gonna hate. Kevin did nothing wrong, so don't think otherwise. It also seems to me that @ron99 is doing a good job here in sharing his experiences and doing his best to help others where he can. That's the spirit of the site.

Haters always gonna hate. But scammers also always gonna scam. We do a great job here in managing both, thanks to our members and moderation team.

Nothing else to see here. I hope to see the thread continue along.

Mike

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  #7277 (permalink)
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Here is my current dilemma as I am switching from underlying Futures to Options on Futures...
The main reason is that I am accumulating positions without any stop loss at all in the Futures. So when the market is on a down tick, I buy each dip and keep accumulating the position till it unfolds in my direction, the same for the rally.

So my issue was the holding that accumulated position beyond the close which will incur a huge maintenance margin and if I roll to next market open, I have to take a realized loss...

So I am switching to option on futures to fill the premature stops and the lasting power to stay beyond the close to next session or next couple of days etc....

The question that there is very limited info regarding Options on Futures...and if any they are whether brokerage which bias people in complex strategy to gain more commission or some people who never try real money risk and just sell courses... Here u r the right people to get their actual experience ..

So if I will accumulate long ... Should I:
Buy an OTM call such that the best gamma is where this option will go into ATM?

Or Sell credit Put spreads ?

Or sell Naked Puts ?



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  #7278 (permalink)
Legendary Market Wizard
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I agree with all the support @ron99 is getting. Anybody following this thread knows he acknowledges his losers as much as his winners. He was very open about how much in lost last March. Raises serious questions about the accuser.

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  #7279 (permalink)
Market Wizard
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mosalem2003 View Post
Here is my current dilemma as I am switching from underlying Futures to Options on Futures...
The main reason is that I am accumulating positions without any stop loss at all in the Futures. So when the market is on a down tick, I buy each dip and keep accumulating the position till it unfolds in my direction, the same for the rally.

So my issue was the holding that accumulated position beyond the close which will incur a huge maintenance margin and if I roll to next market open, I have to take a realized loss...

So I am switching to option on futures to fill the premature stops and the lasting power to stay beyond the close to next session or next couple of days etc....

The question that there is very limited info regarding Options on Futures...and if any they are whether brokerage which bias people in complex strategy to gain more commission or some people who never try real money risk and just sell courses... Here u r the right people to get their actual experience ..

So if I will accumulate long ... Should I:
Buy an OTM call such that the best gamma is where this option will go into ATM?

Or Sell credit Put spreads ?

Or sell Naked Puts ?

You are almost day trading. I have no experience trading this way. So I have no opinion on this. Sorry I couldn't help.

Try paper trading it or back test it on different situations.

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  #7280 (permalink)
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mosalem2003 View Post
Here is my current dilemma as I am switching from underlying Futures to Options on Futures....

So if I will accumulate long ... Should I:
Buy an OTM call such that the best gamma is where this option will go into ATM?

Or Sell credit Put spreads ?

Or sell Naked Puts ?

Sent using the futures.io mobile app

Itís a tough market to start trading options because of the extreme volatility. No matter what type of trade you make you should have a good understanding of how options work. The basics for options and how they work and how they are priced is the same for futures as for other underlying instruments. Iím not currently trading options, but if I was I would probably be selling put spreads (if I was bullish) to limit my risk.

Kevin

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ron99 View Post
You are almost day trading. I have no experience trading this way. So I have no opinion on this. Sorry I couldn't help.

Try paper trading it or back test it on different situations.

Thanks a lot @ron99 I am open to swing trade or position trade as well. It's just applying the same concepts to a longer time frame. In your opinion what could be applicable strategy employing options ?

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  #7282 (permalink)
Bettendorf iowa
 
 
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I am glad to have come across this link. I have been trading options for about 20 years. I have been doing naked futures options also. I am not as active as @ron99.
I am currently trade with TD and Tastyworks. I am looking for some other platform and data vendor better than the two I have mentioned. Tradeovate brokers have very little info regarding option selling. can you let me know how are they about data and commission? What is the margin for naked calls and puts?
Thanks in advance.

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srip View Post
I am glad to have come across this link. I have been trading options for about 20 years. I have been doing naked futures options also. I am not as active as @ron99.
I am currently trade with TD and Tastyworks. I am looking for some other platform and data vendor better than the two I have mentioned. Tradeovate brokers have very little info regarding option selling. can you let me know how are they about data and commission? What is the margin for naked calls and puts?
Thanks in advance.

Broker for options selling is not easy to find specially here in Canada. I think if you are in US you can try DeCarley as they deal with FCMs that are options friendly. I have an IB which is charging higher than SPAN and have a TD Canada which doesn't support futures at all. I assumed Tasty is good for options but it seems you detected some issues ?

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  #7284 (permalink)
Toronto
 
 
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@ron99 your Twitter has comprehensive details for energy specially NG, LNG tanker info and also the weather charts. Do you trade NG and CL using options or only milk futures ?

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  #7285 (permalink)
Toronto
 
 
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I don't see the "Quick Summary" post #2 for the thread from my desktop but I am able to see it from the mobile application. Is this expected?

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  #7286 (permalink)
Strasbourg, France
 
 
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mosalem2003 View Post
Broker for options selling is not easy to find specially here in Canada. I think if you are in US you can try DeCarley as they deal with FCMs that are options friendly. I have an IB which is charging higher than SPAN and have a TD Canada which doesn't support futures at all. I assumed Tasty is good for options but it seems you detected some issues ?

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@mosalem2003. you said in pm:


Quoting 
I am trying to use options to fill the gaps of Intraday and swing trading like premature stops and huge margin beyond the daily close.
I got your point that selling naked is a disaster in crash events.

My thinking is to adopt buying OTM cheap calls that would be ITM during the trade. For example if target price is 100 and market trades around 40..then buying a call from 0.25 to .45 delta would make a good trade given the leverage included in options and using also short dated options to have that best gamma of the option when ATM...

Another way for markets that I don't need to pay attention daily is to sell credit put spread ..at least is there is a crash u have a hedge on the sold option....

I don't have experience in that either.
Options for me is about OTM options on commodities (maybe on forex, as the rest is not paying enough to my taste). I tried for approx. 9 months spread options on different commodities. End result: failure. Experience there is over. I stopped definitely doing that.
I tried naked options with ready to close the position with a loss or ready to protect with the underlying: it can works (and I'm still confident on that part) but one needs 1- to avoid the catastrophic events that happened from time to time (e.g. wti in March 20) and one has to be good in trading futures. At the end of the day if you are sufficiently good in trading futures, what is the point of trading naked options? In some specific situations? Close to the reversal of the trend? Or in some situations where prices are definitely too high or too low? Or in some situation where the price is in a range?
I would say yes to that
Otherwise it is better to stay with the futures
For commodities are we in one of these three situations I described? I don't think so.
Therefore I don't have plans for options for the time being.

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  #7287 (permalink)
Market Wizard
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Sagal View Post
@mosalem2003. you said in pm:



I don't have experience in that either.
Options for me is about options on commodities (maybe on forex, as the rest is not paying enough to my taste). I tried for approx. 9 months spread options on different commodities. End result: failure. Experience there is over. I stopped definitely doing that.
I tried naked options with ready to close the position with a loss or ready to protect with the underlying: it can works (and I'm still confident on that part) but one needs 1- to avoid the catastrophic events that happened from time to time (e.g. wti in March 20) and one has to be good in trading futures. At the end of the day if you are sufficiently good in trading futures, what is the point of trading naked options? In some specific situations? Close to the reversal of the trend? Or in some situations where prices are definitely too high or too low? Or in some situation where the price is in a range?
I would say yes to that
Otherwise it is better to stay with the futures
For commodities are we in one of these three situations I described? I don't think so.
Therefore I don't have plans for options for the time being.

In recent months, I made most money in naked option selling when I sold strangles at times of high volatility. I avoid well-known weather markets, eg. NG options from Z to H, and C as well as S during late spring.

A good example were NGJ, NGK, and NGM strangles which I entered some weeks ago in a phase of high volatility. I already bought back all of them with profits of beyond 50 %.

Other such trades were in KC and LC.

I use MRCI data, which not only shows implied and historical volatility, but also seasonal charts and long term charts for these volatilities.

Best regards, Myrrdin

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  #7288 (permalink)
Toronto
 
 
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myrrdin View Post
In recent months, I made most money in naked option selling when I sold strangles at times of high volatility. I avoid well-known weather markets, eg. NG options from Z to H, and C as well as S during late spring.

A good example were NGJ, NGK, and NGM strangles which I entered some weeks ago in a phase of high volatility. I already bought back all of them with profits of beyond 50 %.

Other such trades were in KC and LC.

I use MRCI data, which not only shows implied and historical volatility, but also seasonal charts and long term charts for these volatilities.

Best regards, Myrrdin

Thanks a lot @myrrdin for the insights. It's good to know that selling options strategies still work as I got an impression that the main thread contributors refrained from it due to risk.

However, I would summarize your strategy as selling options in high volatility based on MRCI data.

Which delta levels ? Which OI threshold you consider to ensure exit liquidity specially at disaster? Why not using a credit spread to hedge the short naked option leg? Does it work or its theortical?
What is your excess money level to money used for margin ?
What is the min account size for this type of trading ?
When do you decide to exit for loss , when your strike breached or your breakeven or u have a formula for current premium, initial margin, credit, etc ?
What is the margin required to sell Naked option on average, just a figure from your broker.. I know each had their own relative to Span..
How would you compare this to long volatility strangles at low volatility times ? This has theortical endless profit and limited risk ?




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  #7289 (permalink)
Legendary Market Wizard
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mosalem2003 View Post
Thanks a lot @myrrdin for the insights. It's good to know that selling options strategies still work as I got an impression that the main thread contributors refrained from it due to risk.

They are not mutually exclusive! As @myrrdin said...

myrrdin View Post
I avoid well-known weather markets, eg. NG options from Z to H, and C as well as S during late spring.

Knowing when not to trade is a very important trading decision. Minimizing losses is as important, if not more important, than maximizing gains.

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mosalem2003 View Post
Thanks a lot @myrrdin for the insights. It's good to know that selling options strategies still work as I got an impression that the main thread contributors refrained from it due to risk.

However, I would summarize your strategy as selling options in high volatility based on MRCI data.

Which delta levels ? Which OI threshold you consider to ensure exit liquidity specially at disaster? Why not using a credit spread to hedge the short naked option leg? Does it work or its theortical?
What is your excess money level to money used for margin ?
What is the min account size for this type of trading ?
When do you decide to exit for loss , when your strike breached or your breakeven or u have a formula for current premium, initial margin, credit, etc ?
What is the margin required to sell Naked option on average, just a figure from your broker.. I know each had their own relative to Span..
How would you compare this to long volatility strangles at low volatility times ? This has theortical endless profit and limited risk ?
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I would summarize my strategy as selling strangles(!) in high volatility based on MRCI data. This is only one of my strategies.

I do not consider the absolute delta levels. On the one hand, I am looking to receive an acceptable price in relation to fees. On the other hand, I am looking to choose strikes above / below significant support / resistance levels.

As this is only one of several strategies, the question of excess money is a more complex one.

In case you only sell strangles, a rather small account should be good enough, eg. $50,000.

I exit a trade with a loss in case that the underlying moves beyond a pre-defined support / resistance level. This level is chosen in a way that the value of the options does approximately double.

The margin required depends on the commodity, DTE, delta.

I do not trade "long strangles", and, thus, do not have any experience.

Best regards, Myrrdin

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myrrdin View Post
I would summarize my strategy as selling strangles(!) in high volatility based on MRCI data. This is only one of my strategies.
...

Are you shorting a strangle (a put and a call option) at the same time? So for NGK21 you would sell the put at 2.7 and sell the call at 3.0 collecting approx: 1.5K with 55 days to expiry? Or will you in the case of NGK21 start by selling the put and if price goes from 2.88 to 2.95 then as a second step sell the call (more what I have in mind)?
From "the bible of options strategies"

Edit to be honest, I keep maintaining the options I could take depending on price evolution, I have just start to assess CLN21 and keeping an eye on SIN21 and KCU21 while NGK21, RMN21, HEJ21, and KCN21 will not be pursued...

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Sagal View Post
Are you shorting a strangle (a put and a call option) at the same time? So for NGK21 you would sell the put at 2.7 and sell the call at 3.0 collecting approx: 1.5K with 55 days to expiry? Or will you in the case of NGK21 start by selling the put and if price goes from 2.88 to 2.95 then as a second step sell the call (more what I have in mind)?
From "the bible of options strategies"

Edit to be honest, I keep maintaining the options I could take depending on price evolution, I have just start to assess CLN21 and keeping an eye on SIN21 and KCU21 while NGK21, RMN21, HEJ21, and KCN21 will not be pursued...

Usually I sell both legs at the same time. Compared to your example, I go further OTM and enter with more DTE.

Best regards, Myrrdin

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Sagal View Post

Edit to be honest, I keep maintaining the options I could take depending on price evolution, I have just start to assess CLN21 and keeping an eye on SIN21 and KCU21 while NGK21, RMN21, HEJ21, and KCN21 will not be pursued...

I sold the HEJ C90 recently as a more speculative trade, and the LCQ P116, as I consider this contract to be severely undervalued. But these are other strategies. I just want to show that there is a lot to pick up. I consider it to be important to have a large repertoire of strategies.

All the other commodities you mention are on my watch list, but I am waiting for higher volatilities. I like selling strangles with 60 to 100 DTE.

Best regards, Myrrdin

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Coming from a Futures background, thinking about strategies that would combine the power of selling premium and technical/fundamental analysis:

Is it feasible to sell credit Put spreads, sell 1 P ATM and buy 1 P OTM to limit the risk at all dips to use the high IV associated with the dip ?
Should we use longer dated to build that inventory as 45 DTE or longer, or can apply this with the weeklies ?
exit the spread once the collected premium is 50 to 80 % from initial credit and hold the losing trades till expiry, just in case it would recover or accept the limited risk from the spread?



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mosalem2003 View Post
Coming from a Futures background, thinking about strategies that would combine the power of selling premium and technical/fundamental analysis:

Is it feasible to sell credit Put spreads, sell 1 P ATM and buy 1 P OTM to limit the risk at all dips to use the high IV associated with the dip ?
Should we use longer dated to build that inventory as 45 DTE or longer, or can apply this with the weeklies ?
exit the spread once the collected premium is 50 to 80 % from initial credit and hold the losing trades till expiry, just in case it would recover or accept the limited risk from the spread?



I sell ATM puts in special fundamental situations. But it seems to be your intention to sell ATM puts regularly based on the chart. I do not have any experience in this kind of trading.

I suggest testing it in a paper account for a while to find out, how it works.

Best regards, Myrrdin

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myrrdin View Post
I like selling strangles with 60 to 100 DTE.

Best regards, Myrrdin

60 to 180 DTE is my working period. Short strangles are not part of my strategy for commodities and I don't think it will be any time soon.
I could enter a short strangle or a vertical short strangle but as a 2nd step when prices are moving away from my first leg.
Usually (except when the leverage is too important as Silver and Gold), when I enter a short leg, if the price moves unfavorably, I'm ready to enter another short position at a different level and/or with another expiry and if the price moves very favorably I could then but only then enter a short strangle and similarly if prices go unfavorably for this newly added position, be ready to add another position at a different price and/or expiry.
To summarize when I enter a short leg with options, I can end up by having 2 naked put and 2 naked call and on top of that be ready to intervene with the underlying. As with WTI in March 2020: be ready to check prices every 15 mn, shorting futures or exiting the futures position and doing that eventually 2 to 3 times per day, and as well stay awake up to at least the first 30 mn after the opening and put an alarm during the night (European time) to check prices. It is a full commitment....So I need to be convinced before entering and for my part certainly not relying on a third party or on historical analysis or seasonal analysis only. It is focusing then on only one commodity.

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