NexusFi: Find Your Edge


Home Menu

 





Diversified Option Selling Portfolio


Discussion in Options

Updated
      Top Posters
    1. looks_one myrrdin with 812 posts (1,274 thanks)
    2. looks_two ron99 with 207 posts (489 thanks)
    3. looks_3 manuel999 with 109 posts (108 thanks)
    4. looks_4 TraderGriz with 66 posts (26 thanks)
      Best Posters
    1. looks_one SMCJB with 2.4 thanks per post
    2. looks_two ron99 with 2.4 thanks per post
    3. looks_3 myrrdin with 1.6 thanks per post
    4. looks_4 manuel999 with 1 thanks per post
    1. trending_up 281,240 views
    2. thumb_up 2,296 thanks given
    3. group 139 followers
    1. forum 1,598 posts
    2. attach_file 93 attachments




 
Search this Thread

Diversified Option Selling Portfolio

  #961 (permalink)
 manuel999 
Germany
 
Experience: Intermediate
Platform: TWS
Trading: Options on futures
Posts: 155 since Jul 2014
Thanks Given: 341
Thanks Received: 142


myrrdin View Post
In how far do you think this will have an impact on wheat price ?

Best regards, Myrrdin

I would consider the possibility that there may be efforts by governments to keep prices lower if social unrest threatens.

Thus, like OPECs jawboning with oil, politics may come into play more than usual.

Reply With Quote

Can you help answer these questions
from other members on NexusFi?
NexusFi Journal Challenge - April 2024
Feedback and Announcements
New Micros: Ultra 10-Year & Ultra T-Bond -- Live Now
Treasury Notes and Bonds
Are there any eval firms that allow you to sink to your …
Traders Hideout
Exit Strategy
NinjaTrader
Futures True Range Report
The Elite Circle
 
  #962 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,686
Thanks Received: 2,651


manuel999 View Post
I would consider the possibility that there may be efforts by governments to keep prices lower if social unrest threatens.

Thus, like OPECs jawboning with oil, politics may come into play more than usual.

I am not sure if it is in the interest of the current American president to keep wheat prices low and, thus, to reduce profits of farmers. Ukraine and Russia, two other large Producers of wheat, probably also are happy with high wheat prices.

I think wheat price will come down when farmers begin talking about their planting intentions for 2018. At current prices acreage might rise.

Best regards, Myrrdin

Started this thread Reply With Quote
Thanked by:
  #963 (permalink)
TraderGriz
Minnesota
 
Posts: 89 since Feb 2017
Thanks Given: 178
Thanks Received: 38


Yes if some recent weather changes it could go down a bit more. Some farmers I know use it as thier first crop then silage it or bale it green then plant a second crop behind it in the same yr. Maybe a fast maturing bean or peas or a cover of oats seeded with alfalfa in in which case they normally bale the oats. Either way they get two crops out of the same field but if wheat gets so high they may forget about the second crop an let the wheat mature, in which case there may be more wheat on the market than one thinks. Just a thought of mine.

Regards griz

Reply With Quote
Thanked by:
  #964 (permalink)
Calamari88
Henderson, NV, USA
 
Posts: 63 since Feb 2015
Thanks Given: 91
Thanks Received: 33

When selling options what percentage of an account is a reasonable to risk on one trade?

Reply With Quote
  #965 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,686
Thanks Received: 2,651


Calamari88 View Post
When selling options what percentage of an account is a reasonable to risk on one trade?

For a first estimate, I suggest 1 % of account value per 30 DTE.

If you sell options with 90 DTE, that would mean to risk 3 % of account value.

Best regards, Myrrdin

Started this thread Reply With Quote
  #966 (permalink)
rajab
westhills california US
 
Posts: 94 since May 2015
Thanks Given: 130
Thanks Received: 20


myrrdin View Post
For a first estimate, I suggest 1 % of account value per 30 DTE.

If you sell options with 90 DTE, that would mean to risk 3 % of account value.

Best regards, Myrrdin

Can you give an example please?

Reply With Quote
  #967 (permalink)
Calamari88
Henderson, NV, USA
 
Posts: 63 since Feb 2015
Thanks Given: 91
Thanks Received: 33

I'm re-examining my exit strategy for losses now that I have a sizable sampling of trades on my current option selling system. In the past 11 months I have completed 110 trades. I either exit when a trade drops down to cabinet price or when it hits a multiple of the premium. I'm wrestling with the pro's and cons of different premium multiples for taking losses. Ei; lower multiples have smaller losses but more losing trades. On the other hand larger multiples have bigger losses but less losing trades. Based on the performance below I'd be grateful for some opinions on what would be the best premium multiple to take a loss on.

110 option selling trades (draw-downs prior to exiting at cabinet price):

0% draw-down: 38 of 110 trades (34.5% had no draw-down)
100% draw-down: 20 of 110 (18.2% doubled)
200% draw-down: 7 of 110 (6.4% tripled)
300% draw-down: 4 of 110 (3.6% quadrupled)
400% draw-down: 3 of 110 (2.7% increased 5x)
500% draw-down: 2 of 110 (1.8% increased 6x)
600% draw-down: 1 of 110 (0.9% increased 7x)
None of the trades had a larger draw-down than 650%

Based on this sampling if I worked with a risk parameter of 700% I wouldn't have had any losses. However that requires trading a smaller number of contracts in order to keep the risk per trade at a reasonable amount. Still perhaps that's the way to go?

What multiple of premium would you all use for taking losses based on this track record?

Thanks! Looking forward to your thoughts.

Reply With Quote
Thanked by:
  #968 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,686
Thanks Received: 2,651


rajab View Post
Can you give an example please?

I intend to sell an option with 90 DTE. Could be corn or coffee or an index. could be calls or puts.

My account size is $ 100,000.

The price of the option is $ 400. I intend to buy back the option at a price of $800 (or lower in case of a change in fundamentals etc.).

If I risk 3 % of the account size = $ 3,000, I would sell 7 options = $2,800. Risk would be 2,800 plus fees.

Best regards, Myrrdin

Started this thread Reply With Quote
  #969 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,686
Thanks Received: 2,651


Calamari88 View Post
I'm re-examining my exit strategy for losses now that I have a sizable sampling of trades on my current option selling system. In the past 11 months I have completed 110 trades. I either exit when a trade drops down to cabinet price or when it hits a multiple of the premium. I'm wrestling with the pro's and cons of different premium multiples for taking losses. Ei; lower multiples have smaller losses but more losing trades. On the other hand larger multiples have bigger losses but less losing trades. Based on the performance below I'd be grateful for some opinions on what would be the best premium multiple to take a loss on.

110 option selling trades (draw-downs prior to exiting at cabinet price):

0% draw-down: 38 of 110 trades (34.5% had no draw-down)
100% draw-down: 20 of 110 (18.2% doubled)
200% draw-down: 7 of 110 (6.4% tripled)
300% draw-down: 4 of 110 (3.6% quadrupled)
400% draw-down: 3 of 110 (2.7% increased 5x)
500% draw-down: 2 of 110 (1.8% increased 6x)
600% draw-down: 1 of 110 (0.9% increased 7x)
None of the trades had a larger draw-down than 650%

Based on this sampling if I worked with a risk parameter of 700% I wouldn't have had any losses. However that requires trading a smaller number of contracts in order to keep the risk per trade at a reasonable amount. Still perhaps that's the way to go?

What multiple of premium would you all use for taking losses based on this track record?

Thanks! Looking forward to your thoughts.

I usually use the order of magnitude of a 100 % draw-down. I like having a strong support / resistance in the underlying, which I use as criterium to exit.

Furthermore I buy back an option in case fundamentals change significantly, or if I do not understand the price movement anymore.

Best regards, Myrrdin

Started this thread Reply With Quote
Thanked by:
  #970 (permalink)
TraderGriz
Minnesota
 
Posts: 89 since Feb 2017
Thanks Given: 178
Thanks Received: 38



myrrdin View Post
I usually use the order of magnitude of a 100 % draw-down. I like having a strong support / resistance in the underlying, which I use as criterium to exit.

Furthermore I buy back an option in case fundamentals change significantly, or if I do not understand the price movement anymore.

Best regards, Myrrdin

I think a key point, at least for me is if I no longer understand the movement. I have been in those situations an contemplate holding my position or getting out. Those are wise words myrrdin!

Reply With Quote
Thanked by:




Last Updated on May 26, 2022


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts