Selling Options on Futures?

April 1st, 2018, 05:19 AM

ron99

On Jan 3 I sold EW3j8p2140(2)p1900(3) for 3.30. Jan 12 I exited at 1.80. Only 9 days held. 8.0% MROI.

I also sold new positions. EW3j8p2250(2)p2000(3) for 2.75.

Hi Ron,
I refer to your posts #6474, #6476 where you mentioned MROI. As I am newbie, please let me know if my calculations given below are correct.
Your profit without commission was 1.5x50= $75. Taking $6.12 RT cost per option which you mentioned in other posts but I am not sure of, total commission is $30.6 for 5 options. So, the net profit is $75-$30.6= $44.4.
Your IM was $462. Initial cash will be 4x$462=$1848. So, the ROI for 9 days= $44.4/$1848=2.4%.
The MROI= 2.4$x 30/9= 8%.

Regards,
Dilip

April 1st, 2018, 07:25 AM

jefforey

Ron, you have mentioned that when market moves against you then you wait till the 2X excess margin you allocated for your position is wiped out. In general what is the option value at that time? is it twice, thrice or more times the buy price? I am asking because margin requirements are different for different brokers/countries. Also span is calculated differently in some countries. If someone were to use premium based stops what would it be?

You need to read all of the thread before you start trading or asking questions.

April 1st, 2018, 07:32 AM

dvbattul

Hi Ron,
I refer to your posts #6474, #6476 where you mentioned MROI. As I am newbie, please let me know if my calculations given below are correct.
Your profit without commission was 1.5x50= $75. Taking $6.12 RT cost per option which you mentioned in other posts but I am not sure of, total commission is $30.6 for 5 options. So, the net profit is $75-$30.6= $44.4.
Your IM was $462. Initial cash will be 4x$462=$1848. So, the ROI for 9 days= $44.4/$1848=2.4%.
The MROI= 2.4$x 30/9= 8%.

Regards,
Dilip

You did it slightly different than I do it but you arrived at about same answer.
I use

MROI=365/days held/12*net profit/(IM*margin factor)

April 1st, 2018, 08:57 AM

Quoting

If when you put on a trade and the margin is 500 you should have 1000 cash excess.

If the loss on the premium plus the increase in margin wipes out your $1000 cash excess it is time to give up on that trade.

Yes i understand your logic. But in someplaces the initial margin itself is very high. So high that margin's are generally not increased by the broker. In such cases your sl logic cannot be applied. If i were to apply your logic to my situation then i will lose 8X the premium collected. Let me give you a live example. I sold nifty 9200 Put expiry May @ Rs.43 and collected Rs. 3225 as premium. The margin blocked is Rs.24000. As you can see i cannot readily apply logic in my situation. I just wanted to know the premium value at the time your sl is hit, generally. Is it 2X, 3X ... of your entry price? My objective is to understand how you are willing to lose on a trade to achieve 95% win rate.

April 1st, 2018, 09:53 AM

jefforey

Yes i understand your logic. But in someplaces the initial margin itself is very high. So high that margin's are generally not increased by the broker. In such cases your sl logic cannot be applied. If i were to apply your logic to my situation then i will lose 8X the premium collected. Let me give you a live example. I sold nifty 9200 Put expiry May @ Rs.43 and collected Rs. 3225 as premium. The margin blocked is Rs.24000. As you can see i cannot readily apply logic in my situation. I just wanted to know the premium value at the time your sl is hit, generally. Is it 2X, 3X ... of your entry price? My objective is to understand how you are willing to lose on a trade to achieve 95% win rate.

If you had read the whole thread you would know that I am now using 5xIM.

April 1st, 2018, 11:15 AM

jefforey

Yes i understand your logic. But in someplaces the initial margin itself is very high. So high that margin's are generally not increased by the broker. In such cases your sl logic cannot be applied. If i were to apply your logic to my situation then i will lose 8X the premium collected. Let me give you a live example. I sold nifty 9200 Put expiry May @ Rs.43 and collected Rs. 3225 as premium. The margin blocked is Rs.24000. As you can see i cannot readily apply logic in my situation. I just wanted to know the premium value at the time your sl is hit, generally. Is it 2X, 3X ... of your entry price? My objective is to understand how you are willing to lose on a trade to achieve 95% win rate.

Hi,
Ron has given many examples in the thread especially in jpg format where you can see how the premium changes. There are some Excel files too on the old strategy.
In case of backtesting of 25 Jan 2018 example, you can see that with initial cash of 5xIM when the MM is close to 100%, the premium is almost half of the initial cash ie drawdown is close to 50%.
You can see some examples if you read even after page 600.
Regards,
Dilip

April 3rd, 2018, 07:07 PM

Ron & all,

Has anyone been putting on new trades given the volatility in the market lately? Is there anything you're looking to change in your process based on the swings in the market?

http:/http://money.cnn.com/2018/04/03/news/economy/us-tariffs-china/index.html/money.cnn.com/2018/04/03/news/economy/us-tariffs-china/index.html
"US proposes tariffs on 1300 Chinese goods."

/rsm005/

April 4th, 2018, 01:01 AM

rsm005

Ron & all,

Has anyone been putting on new trades given the volatility in the market lately? Is there anything you're looking to change in your process based on the swings in the market?

http:/http://money.cnn.com/2018/04/03/news/economy/us-tariffs-china/index.html/money.cnn.com/2018/04/03/news/economy/us-tariffs-china/index.html
"US proposes tariffs on 1300 Chinese goods."

/rsm005/

Currently the percentage of short option trades in my account is smaller than usually. There are more outright and futures spread trades.

When selling options, I also look at ATM short options, currently I am holding the CZ P4 (short-dated) and the KWN P5.

Best regards, Myrrdin

April 4th, 2018, 09:33 AM

rsm005

Ron & all,

Has anyone been putting on new trades given the volatility in the market lately? Is there anything you're looking to change in your process based on the swings in the market?

http:/http://money.cnn.com/2018/04/03/news/economy/us-tariffs-china/index.html/money.cnn.com/2018/04/03/news/economy/us-tariffs-china/index.html
"US proposes tariffs on 1300 Chinese goods."

/rsm005/

I am using more cash excess. Also I will be very careful about selling commodity puts if I do at all.

April 5th, 2018, 07:04 AM

rsm005

Ron & all,

Has anyone been putting on new trades given the volatility in the market lately? Is there anything you're looking to change in your process based on the swings in the market?

http:/http://money.cnn.com/2018/04/03/news/economy/us-tariffs-china/index.html/money.cnn.com/2018/04/03/news/economy/us-tariffs-china/index.html
"US proposes tariffs on 1300 Chinese goods."

/rsm005/

Hi,
For the past few days, SPX has been flirting with 200-day MA which is considered a brick wall. It traded below it also. If two lower highs and two lower lows are formed below 200 MA, then downtrend may be in place. But then will it affect the strategy here? I don't know. I am staying on sidelines till clear picture emerges which means may mean missing on this month's trade. I am not so much worried about the volatility but the possibility of downtrend affecting the strategy here.
Regards,
Dilip

Selling Options on Futures?

Discussion in Options

Selling Options on Futures?