Currently I trade a combo of Selling naked calls and puts and Ratio Spreads. For both strategies I don't have a market opinion. I just manage the positions. For the short strangles I'm focussed on risk- and money management (keep a big distance between the strikes and the index and don't use a lot of margin so I have money on the table when the index moves very fast). Very important for me is that the I'm neutral in the market, so if needed I will adjust my position.
FT79, Just curious, what return on investment are you shooting for on your naked short ES strangles? Obviously months with no adjustment do better than having to trade a lot but I was wondering, on average, what returns you are trying to achieve. I would assume you would measure it by average profit to money set aside for this strategy as apposed to measuring it just to the margin requirement. Also, how long have you been doing it, and what is your plan for the black swan gap down?
Can you trade options on CL with interactive brokers? When I try opening the option chain it says no underlying for cl. I am pretty sure I have trading permission for future options.
I have traded ES strangle but went back to the AEX-index (Dutch index). Margin requirements are better (lower). My goal is 3/6% per expiration month but Iâm more focused on the risk. You can lose 10% in 2 days so focussing on the risk is more important.. The adjusting has imho nothing to with the expected return. 6 to 4 weeks before expiration everything is ok, in the last 2 weeks it is more difficult because I donât have to time to watch the market all day. If I need to adjust a lot in the last 2 weeks I will not get 6%. But you can use the next month to adjust if you want. About the Black Swan Gap Down, there is no holy grail with trading, with a Black Swan Gap Down youâll have a big problem selling strangles. Accept it and trade accordingly. When it happens you can do multiple thinks, hedge with options, futures. It will depends when it happens, how it happens, how big my positions are etc. Preparing for a Black Swan Gap Down is difficult because they donât happen often and every situation is unique.
I have some experience with index futures. The only person I've read who has a cogent strategy for selling commodity options is Stu Johnson. What is your strategy? The devil is in the details. Do you always sell puts and calls and how far OTM? Where do you get your volatility charts and how does this influence your positions? What broker are you using? Is your method and repair action systematic or discretionary? I've yet to meet a seat-of-pants premie seller who is profitable long term and hasn't blown up or nearly blown up.
Who is Stu Johnson? Has he written the book on that subject? I always sell naked calls and puts on Crude Oil Futures (About 15 - 20 points away for Calls and 10 points away for puts). My position sizing is quite conservative and I use historical data / volatility of Crude Oil as a guide for entry timing. My method is partly systematic and discretionary, I have about 6 different repairs / follow up strategy if a trade goes against me. Sometimes I have to stay awake all night to defend my position due to timing difference between US and here (I'm 24 years old from Brisbane, Australia) Have been consistently profitable in the last 24 months. Some medium sized losses however the number of wins outweigh the losses. The win rate is about 85 - 90% although the size lof losses is usually 2-3 times bigger than than the size of wins. I have been using Xpresstrade and finding it reliable.