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.

ron99 

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

Jerard 

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)

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.

SMCJB 

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 !

SMCJB 

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.

From Reddit

Last 15m of SPY options today



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

@Big Mike What are we looking at?

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

SMCJB 

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.

SMCJB 

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.