Also interesting is that since 2008 there have been more days up >1% than days down >1%.

I've come across something that may be of interest to folks selling ES put spreads. I took TFOpts idea of using a database to store the risk scenarios to quickly get the margin for spreads and created my own database using the EW contract. I expected my results to be different than what he was seeing in ES, but didn't think they would be too far off.

I used Ron’s spread strategy as my baseline and tried to come up with some ideas. Ron’s spread uses 3 options to create a delta 2 position. I wanted to see if you could get similar performance with just 2 options in a simple credit spread creating a delta 2 position.

I ran my tests in the same manner that TFOpts did his. All tests started with 6x IM and exiting at 50% profit. I tried the following: Ron’s method; short 7 delta / long 5 delta; short 5 delta / long 3 delta; and a short 3 delta / long 1 delta. Then I added a spread that had short 7 delta / long 5 delta, but exited once 40% profit was achieved and used only 5x IM.

The results I had for EW were favorable, but I asked TFOpts to check the same methods with his ES database. The attached image is from the tests TFOpts ran. I believe that the results show that a simple credit spread has the potential to be just as effective in terms of returns and risk management.

I hope this helps.

Dudetooth 

I've come across something that may be of interest to folks selling ES put spreads. I took TFOpts idea of using a database to store the risk scenarios to quickly get the margin for spreads and created my own database using the EW contract. I expected my results to be different than what he was seeing in ES, but didn't think they would be too far off. I used Ron’s spread strategy as my baseline and tried to come up with some ideas. Ron’s spread uses 3 options to create a delta 2 position. I wanted to see if you could get similar performance with just 2 options in a simple credit spread creating a delta 2 position. I ran my tests in the same manner that TFOpts did his. All tests started with 6x IM and exiting at 50% profit. I tried the following: Ron’s method; short 7 delta / long 5 delta; short 5 delta / long 3 delta; and a short 3 delta / long 1 delta. Then I added a spread that had short 7 delta / long 5 delta, but exited once 40% profit was achieved and used only 5x IM. The results I had for EW were favorable, but I asked TFOpts to check the same methods with his ES database. The attached image is from the tests TFOpts ran. I believe that the results show that a simple credit spread has the potential to be just as effective in terms of returns and risk management. I hope this helps.

Thanks this is interesting. Do I assume correctly that you included commissions and fees in these calculations?

One reason I didn't go higher than 5 delta for the short was because a higher than 5 delta short would put you ITM for the largest ES drop in 90 day time frame since 2009, 19.3% for Dec 2011 contract.

Here are the results from 2 studies





Win Rate = % of scenarios that have a positive return
E(mROI) = average mROI
Med(mROI) = median of mROI
E | Loss = average mROI for losses
E(DTS) = average days from acquisition to liquidation
Med(DTS) = average days from acquisition to liquidation
Max(%M) = Maximum margin requirement as % of margin held

ron99 

Thanks this is interesting. Do I assume correctly that you included commissions and fees in these calculations?

The image is from the tests TFOpts ran. I'd gather that he used commissions & fees since he added them into prior tests.

ron99 

One reason I didn't go higher than 5 delta for the short was because a higher than 5 delta short would put you ITM for the largest ES drop in 90 day time frame since 2009, 19.3% for Dec 2011 contract.

I only have risk files for the beginning of each month from May 2008 to Apr 2009 (that TFOpts uploaded) and daily data from 2013, so I am unaware of how things would have performed for the Dec 2011 contract. Were you able to get more historical risk files from CME?

Dudetooth 

I only have risk files for the beginning of each month from May 2008 to Apr 2009 (that TFOpts uploaded) and daily data from 2013, so I am unaware of how things would have performed for the Dec 2011 contract. Were you able to get more historical risk files from CME?

No I don't have more CME files. I'm looking at ES futures prices.

Most/all? of the time a 7 delta is less than 19% OTM. I would think that if short is ITM but long isn't that it is unlikely you aren't on margin call. But I have no proof of that. Of course I have no way right now to backtest 2011.

I sold ZM calls early last week. Fridays report made them blow up in value and I had to exit at a loss today. Trying to learn from that mistake. Do you all time your grain trades so that you're not selling options right before a major crop report comes out?

Calamari88 

I sold ZM calls early last week. Fridays report made them blow up in value and I had to exit at a loss today. Trying to learn from that mistake. Do you all time your grain trades so that you're not selling options right before a major crop report comes out?

Did you mean to post in this thread instead.

Diversified Option Selling Portfolio I trade a diversified option selling portfolio for many years. Different than other concepts to sell options, I strive for diversification (I strive for holding 8 – 15 options), and, thus, spend a lot of time studying fundamentals of various commodities. …

Dudetooth 

The image is from the tests TFOpts ran. I'd gather that he used commissions & fees since he added them into prior tests. I only have risk files for the beginning of each month from May 2008 to Apr 2009 (that TFOpts uploaded) and daily data from 2013, so I am unaware of how things would have performed for the Dec 2011 contract. Were you able to get more historical risk files from CME?

My runs include $7 RT fees.

If you compare run 0 (sell 1 at -5 delta and buy 2 at -1.5 delta) to run 2 (sell 1 at -5 delta and buy 1 at -3 delta), the returns are about the same (especially at the median); but the maximum % of margin held is quite a bit lower on run 2 (75.1% instead of 97.1%).


There's probably opportunity to hold a lower margin multiple, e.g. 5 instead of 6, on run #2 to increase ROI while still avoiding a margin call historically.

Ron, I can't find the post but at some point I think you tested buy 1 sell 1 and came to the conclusion that buy 1 sell 2 was safer. Do you recall the work you did on that?

TFOpts 

My runs include $7 RT fees. If you compare run 0 (sell 1 at -5 delta and buy 2 at -1.5 delta) to run 2 (sell 1 at -5 delta and buy 1 at -3 delta), the returns are about the same (especially at the median); but the maximum % of margin held is quite a bit lower on run 2 (75.1% instead of 97.1%). There's probably opportunity to hold a lower margin multiple, e.g. 5 instead of 6, on run #2 to increase ROI while still avoiding a margin call historically. Ron, I can't find the post but at some point I think you tested buy 1 sell 1 and came to the conclusion that buy 1 sell 2 was safer. Do you recall the work you did on that?

This post discusses higher ROI with 2 longs vs one long.

Selling Options on Futures? Interesting comparison of the same short ES put, ESz6p1750 with either two 1520 longs or one 1650 long. Both had about the same net delta and same premium on 20150830. Used 6X IM. Took 42 days held till both had more than 50% drop in premium. The …

This one has a table with the first two in table having one long

Selling Options on Futures? I exit at 50% drop in premium. I'm staying with 5.00 delta short with two 1.50 delta longs. I updated all of my long term studies on ES puts. Here is a summary. All of the data is in the attached spreadsheet. If you change the Margin …

This one looked at the single long being one month before the short. That didn't work.

Selling Options on Futures? I have some results of my research. I will post the results in several posts as there is a lot of data. I ran multiple covered option strategies. Here is selling one option and buying option(s) one month in front of the short option. Note the possible …

TFOpts, would it be possible to do easily, what percent the short option is of futures the day entered and see the max and average for the study? For example, EW3v792020 is -5.07 delta and 83.2% of ES futures 2426.

The Dec 2011 ES futures dropped 19.3% in 88 day time frame.