bollinger and options

Discussion in 'Options' started by aus_SPIder, Oct 3, 2006.

  1. Ive never traded options in my life, but i do trade futures.

    One thing has interested me in the last few weeks. That is writing deep out of the money options at values approximately equal to the bollinger band values

    If those bollinger band values are pierced repeatedly then on the futures market my systems will be jumping on the trend bandwagon and hence ill have positions that will offset any losses on the options, just a matter of adding a few more contracts on.

    The aim of it is to smooth out teh equity curve during range-bound markets with option premiums.

    any comments and would those option premiums be enough to justify the risk? exactly how low risk is it?
  2. Saw a comment from JPM (head of currency overlay team, I think) earlier this year which talked about a similar (long vol/short vol) switching strategy as one being used by a number of FX funds to achieve that equity smoothing goal.

    Not being an indicator affic., don't know how reliable BBs would be for strike selection. If you have historical options prices or vols then I guess you could backtest a simple strangle-selling strategy to get a handle on the r/r
  3. hmm anyone gotta link?