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Diversified Option Selling Portfolio


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Diversified Option Selling Portfolio

  #1581 (permalink)
 myrrdin 
Linz Austria
 
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mosalem2003 View Post
When is the difference between selling spreads and outright spreads. Can we take the same trade using NG outright spreads, if yes when to decide to use selling options strangles vs buying outright spreads ?

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Sorry - I do not understand the question. Possibly because of my limited knowledge of the English language.

Could you please explain ?

Best regards, Myrrdin

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  #1582 (permalink)
mosalem2003
Toronto
 
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myrrdin View Post
Sorry - I do not understand the question. Possibly because of my limited knowledge of the English language.

Could you please explain ?

Best regards, Myrrdin

Sorry for the confusion.
I mean what is the strategy to define execution of the seasonal trade as selling options credit spreads strangles as in the example Versus execution of the same trade using normal calendar spreads for the outrights like buying one month outright and selling another month outright....

I assume if it is a directional move , like we expect the spread price to go higher in a certain time then we take the seasonal spread as outright ---
If the market will move in range like NG summer into fall, then we take short of credit option spreads ?

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  #1583 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
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Broker: Interactive Brokers
Trading: Commodities
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mosalem2003 View Post
Sorry for the confusion.
I mean what is the strategy to define execution of the seasonal trade as selling options credit spreads strangles as in the example Versus execution of the same trade using normal calendar spreads for the outrights like buying one month outright and selling another month outright....

I assume if it is a directional move , like we expect the spread price to go higher in a certain time then we take the seasonal spread as outright ---
If the market will move in range like NG summer into fall, then we take short of credit option spreads ?

I like selling strangles when I assume that the underlying moves more or less sideways. Preferably, the volatility is high.

I like buying / selling future spreads, when I assume the spread moves in my direction. (It would not move at all in a sideways market.) Regarding spreads for growing commodities there are special strategies, using futures for two different crops of the same commodity.

Best regards, Myrrdin

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  #1584 (permalink)
 myrrdin 
Linz Austria
 
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myrrdin View Post
On Thursday, I rolled the NGN C3.25 / P2.5 to C3.4 / P2.6 to allow for higher temperatures in June. Weather is difficult to predict.

Additionally, I sold the NGQ P2.5 / C3.5 with 89 DTE.

I intend to follow this approach into fall. Exit point will be when a spread has doubled in value. Assuming 8 trades per year (April contract until November contract), and exiting successful trades at 50 %, this concept will be profitable even if two of the trades fail.

Best regards, Myrrdin



I added the NGU P2.5 / C3.75 with 107 DTE today.

Currently, I hold short strangles in the July, August, and September contracts.

Best regards, Myrrdin

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  #1585 (permalink)
 myrrdin 
Linz Austria
 
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myrrdin View Post
I added the NGU P2.5 / C3.75 with 107 DTE today.

Currently, I hold short strangles in the July, August, and September contracts.

Best regards, Myrrdin

I added the NGV P2.5 / C4 strangle, It has still 130 DTE, but I like the large range for which I received 670 USD, and the slow movements of these spreads.

The NGN strangle now has moved to a profit of 50 %. Currently, I watch this spread closely, and will exit it in the near future.

Best regards, Myrrdin

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  #1586 (permalink)
 myrrdin 
Linz Austria
 
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myrrdin View Post
I added the NGV P2.5 / C4 strangle, It has still 130 DTE, but I like the large range for which I received 670 USD, and the slow movements of these spreads.

The NGN strangle now has moved to a profit of 50 %. Currently, I watch this spread closely, and will exit it in the near future.

Best regards, Myrrdin

My scenario for the exit of the July strangle:

Almost 80 % of the profit has been made with the puts. Thus, the strangle makes nice money as long as the NGN is moving downwards.

I had planned to enter 3 months at the same time, thus, my position in NG now is rather large. As the strangles are threatened by higher prices of the underlying, I will exit as soon as the price moves above the high of the day before and above 3.0 .

Best regards, Myrrdin

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  #1587 (permalink)
 myrrdin 
Linz Austria
 
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myrrdin View Post
My scenario for the exit of the July strangle:

Almost 80 % of the profit has been made with the puts. Thus, the strangle makes nice money as long as the NGN is moving downwards.

I had planned to enter 3 months at the same time, thus, my position in NG now is rather large. As the strangles are threatened by higher prices of the underlying, I will exit as soon as the price moves above the high of the day before and above 3.0 .

Best regards, Myrrdin

After rolling them up once some time ago, I exited the remaining NG strangles.

NG moved upwards too far and to fast. It is still June, and the August contract notes at 3.580 - this has not happened for a while.

Weather is not predictable, and, thus, I prefer to stay at the sidelines for the time being.

Unfortunately, my balance regarding NG this year is negative.

Best regards, Myrrdin

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  #1588 (permalink)
Eugene7902
Mariupol, Ukraine
 
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myrrdin View Post
I do a lot of option selling with Interactive Brokers.

Regarding margin, they are ok as long as you do not sell naked.

Regarding order entering for spreads, they offer everything I wish.

As an Austrian, I also have the problem that I am not accepted as a customer by many US brokers.

Best regards, Myrrdin

Hi. I am just starting to learn about futures options. Can you tell me to what values ​​did IB increase the margin on the sold ES puts in March 2020?

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  #1589 (permalink)
 myrrdin 
Linz Austria
 
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Eugene7902 View Post
Hi. I am just starting to learn about futures options. Can you tell me to what values ​​did IB increase the margin on the sold ES puts in March 2020?

Sorry - I have no idea.

Best regards, Myrrdin

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  #1590 (permalink)
 
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 MDRider 
Washington, DC
 
Experience: Intermediate
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myrrdin View Post
Main criteria for the selection of options include:

Fundamental data, eg. Supply & Demand, Seasonals, COT Data.
Days to expiry: 90 – 180
Option price: $200 – $500
Delta: 0.02 – 0.2
Selection of commodities: Mainly Grains & Beans, Energies, Softs, sometimes Metals, Currencies, and Indices (mainly ES puts, selected according to Ron’s strategy, which I adapted to my concept).
Normal position size: 3 % of portfolio. Sometimes I sell double positions (6 % of portfolio), rarely triple positions.

Exit criteria: If profitable, I exit at 10 – 50 % of the entry price. Otherwise, I exit at approx. double the entry price. Usually I choose a chart criteria for the underlying future which is close to this condition (or closer, eg. at 120 % or 150 %). I also exit if fundamentals have changed significantly. After exiting, I sometimes „roll“ the trade to a new option. But only after careful study of the fundamentals.

I would be happy to discuss all issues regarding this strategy, especially interesting options to sell.

Best regards, Myrrdin

Thanks for sharing your strategy Myrrdin - looks like it would provide consistent profits. Entering that far out will probably capture the exaggerated pricing that seems to exist as option contracts are initiated. Two questions:

1) How do you scan for a particular option's volatility? Is there an alert in ToS that will identify which market has IV over 70%, for instance? What's your IV threshold for selection?

2) I haven't found much on this thread regarding adjustments when the market goes nuts (actually, I don't know how to search for it within a thread and haven't had time to read all the posts since 2014!). Do you have exit/reentry criteria in that case? I optimized a nifty [AUTOLINK]ToS[/AUTOLINK] standard deviation color indicator if people want to use it.

Stay healthy! MDRider

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Last Updated on May 26, 2022


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