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You will be much better off in the future ignoring news / opinions and just keep playing the probabilities. Try to sell premium on VOL pops and stay mechanical and stick to your risk management plan.
Ignore opinions from everyone, as I said above no one knows ****. It's a numbers game. Don't go looking for answers as to why this big move happened, it's just the nature of markets. Long periods of low volatility with occasional violent spikes. Take advantage of the pops and don't get complacent in low vol environments.
edit: Before anyone comes in and tells you they 'knew' last week's sell-off was coming because of "XYZ", all I can say is that many people knew a big sell-off was likely - it's the nature of markets. But no one can accurately tell you when it will occur. Next day, next week , next month, six months from now, etc... Don't be tempted to listen to anyone's BS.
I would focus more on the implied volatility, not a two-day drop and the likelihood of a third down day. A doubling of IV, not a 5% price drop is what's slamming the position. The market could be a little softer on Sunday pm/Monday and if volatility comes down a bit you might be surprised at how quickly the position begins to turn around. I think you only have two or three trades on so it's really easy to stress test them in an simple options calculator.
If you're going to sell options on physical commodities, make sure you understand what you're getting into. A doubling or even tripling of IV in a week or two is not unheard of, and over the course of three or four weeks I wouldn't even consider it rare. As for a 5% price decline in two or three days, that's actually pretty common in commodities.
For your strategy when you say "exit point" do you close the position and wait until the market calms down to re open a new position or would you roll the position down closer to the current .03 delta within the same expiration or on the next expiration?
Last time SPY down more than 5% in two days is Nov 1, 2011. Here is the complete list:
Find the worst down in 2 days?
19971027 -8.1631
19980827 -5.2511
19980828 -5.0519
19980831 -7.4699
19981001 -5.8414
20000414 …
Only 42 times in 4,500 trading days in the last 18 years. And 16 of those were in 2 month time frame in 2008.
Also since 1986 there have been 28 occurrences of consecutive 2% down days. That's only 28 in almost 30 years. We had some pretty rare stuff happen last week.
If I hit exit point and close positions I would watch market and attempt to pick bottom and roll down. It may be soon after closing or it may be a few days after closing.
I would follow my same rules when rolling down. You can sell Nov 1400 or lower and be pretty sure those will be good. I may go IMx4 at first for a little bit then add more quickly as market rebounds.
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@rsm005, no idea what Sunday night will bring, but if your worried about illiquidity in the options, but want to get out, you could always sell some ES futures to protect your delta, and then on Monday when you unwind your option positions do it with a delta hedge, which should offset your short futures.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
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Many of you saw my earlier post on how rare consecutive 2% down days is...
So I decided to expand the analysis a little to see what the daily change is day by day rather than just 1 day, 5 days & 20 days later and this is what I got...
I think this does a good job showing that on average we get a pretty good bounce the next day and how much the data is skewed by Black Monday. Black Monday was actually a 4th consecutive >2% down day.
But then this evening I was reading @rsm005's post in the ES Option Selling thread...
Which got me thinking, is that true, is Friday selling really that scary... which then had me generate this pretty scary chart...
Post 1987 there have been 24 consecutive down days.
21 of these have occurred on Mon-Thur and the next day the market is up and average of 2.1%
Just 3 of these have occurred on a Friday. ALL All 3 OCCURENECES the market was DOWN the next day by an average of 2.2%. Even worse 2 of the 3 occurrences the market was down AGAIN on the following day.
Remember this is post 1987 and excludes Black Monday If you include 1987 these numbers will look much much worse.
The 3 Fridays in question were 7/19/2002, 8/2/2002 & 1/30/2009
Re Black Monday. On Wed 10/14/1987 -2.95%, Thu 15 -2.34%, Fri 16 -5.08%, Mon 19 -20.46%, Tue 20 +5.23% & Wed 21 +9.10%
Apologies for cross posting this but I'm posting it in the ES options Selling Thread, ES Analysis Thread, Big Mike's Thread & the Homework Thread.
@SMCJB Thanks for sending this out, incredible post. So based on this it looks like the expected scenario starting Sunday night will be a 2.4% - 5% decline leading into Monday with another round of selling on Tuesday. My gut has been telling me the selling will probably bottom out around 1930....give or take. It also seems, from that pretty scary chart you posted that the overall trend is a down trend? Weird. It's strange how that trend differs from every other one.