Monthly Income On ES Mini Writing Options

N

newguy05

This is a continuation of this thread: http://www.elitetrader.com/vb/showthread.php?s=&threadid=123188 Since all the key posters have stopped playing, it's more appropriate for my to start a journal instead.

All previous profits removed, account restarted as a clean slate at $25,000. Trades will be posted real time or eod. Will keep things simple.
-----------------------------------------------------------------
Goal
Generate monthly incoming by writing options on ES mini by focusing on technical and market sentiment to determine entry and exit. More specifically for technical, i focus on price/volume, common patterns, 20/50/200MA, and VIX only. Greeks are considered for order execution & exit, but never the reason for entry.

Why
1) ES makes it easier for me - to just focus on 1 instrument
2) ES movements are relatively predictable and provide time for stop loss, meaning you will not have 50% gap up/downs overnight.
3) Options provide some room for error on the price prediction, cushioned by theta decay.
4) Get more familiar with the ES behavior to start daytrading in the future on the es.
--------------------------------------------------------------------
JULY
Opened:
SHORT 4x JUL 1290P at 15pt
Current Holdings:
SHORT 4x JUL 1290P at 15pt
Comment: Solid support at 1330-1328, 1318, and 1300 area. Expect a turn next week after option x.
Realized P&L: $0
---------------------------------------------------------------------
Not related to ES (separate account), i am making a long term bet on oil (USO), might as well track it here for my own record.

LONG 10x JAN 2010 109P at 21.7
SHORT 10x JUL 2007 99P at 2.5

Plan is to keep rollover the diagonal spread by writing the front month otm put contract, if oil continues to move up, the pocketed premium will offset some of the losses. If oil moves down below the front month strike, the whole position will be closed at expiration for the 10 spread on expiration.
Oil is not sustainable at these levels (look at the uso historical daily chart back 3 years, and the political and social attentions linked to it. It's pretty obvious). Question is when not if, the big money will make the move to exit. This is a long term play, not expecting much adjustments to my positions.
 
So looks like you sold a long term vertical put on oil. Also, you are selling the es puts naked?

By the way, can you sell es future options on thinkorswim, or if not what broker do you go through and what is the min account size needed to sell options on es futures?

Quote from newguy05:

This is a continuation of this thread: http://www.elitetrader.com/vb/showthread.php?s=&threadid=123188 Since all the key posters have stopped playing, it's more appropriate for my to start a journal instead.

All previous profits removed, account restarted as a clean slate at $25,000. Trades will be posted real time or eod. Will keep things simple.
-----------------------------------------------------------------
Goal
Generate monthly incoming by writing options on ES mini by focusing on technical and market sentiment to determine entry and exit. More specifically for technical, i focus on price/volume, common patterns, 20/50/200MA, and VIX only. Greeks are considered for order execution & exit, but never the reason for entry.

Why
1) ES makes it easier for me - to just focus on 1 instrument
2) ES movements are relatively predictable and provide time for stop loss, meaning you will not have 50% gap up/downs overnight.
3) Options provide some room for error on the price prediction, cushioned by theta decay.
4) Get more familiar with the ES behavior to start daytrading in the future on the es.
--------------------------------------------------------------------
JULY
Opened:
SHORT 4x JUL 1290P at 15pt
Current Holdings:
SHORT 4x JUL 1290P at 15pt
Comment: Solid support at 1330-1328, 1318, and 1300 area. Expect a turn next week after option x.
Realized P&L: $0
---------------------------------------------------------------------
Not related to ES (separate account), i am making a long term bet on oil (USO), might as well track it here for my own record.

LONG 10x JAN 2010 109P at 21.7
SHORT 10x JUL 2007 99P at 2.5

Plan is to keep rollover the diagonal spread by writing the front month otm put contract, if oil continues to move up, the pocketed premium will offset some of the losses. If oil moves down below the front month strike, the whole position will be closed at expiration for the 10 spread on expiration.
Oil is not sustainable at these levels (look at the uso historical daily chart back 3 years, and the political and social attentions linked to it. It's pretty obvious). Question is when not if, the big money will make the move to exit. This is a long term play, not expecting much adjustments to my positions.
More...
 
Quote from oraclewizard77:

So looks like you sold a long term vertical put on oil. Also, you are selling the es puts naked?

By the way, can you sell es future options on thinkorswim, or if not what broker do you go through and what is the min account size needed to sell options on es futures?
More...

Not to get technical with the terms, but i think vertical spreads are same expiration, different strike. horizontal spreads are different expiration same strike. What i am doing is different expiration, different strike, which makes it a diagonal spread.

Yes selling es puts naked

TOS may have rolled out options on futures now you can call them to check, i use IB which has an account min of $10k.
 
LONG 10x JAN 2010 109P at 21.7
SHORT 10x JUL 2007 99P at 2.5, EXIT at 0.9 +1.6

USO is at the top of the trading range, exiting short and waiting for pullback for reentry. If pullback does not occur and it breaks above the current range, will reenter as well.
 
Quote from newguy05:



TOS may have rolled out options on futures now you can call them to check, i use IB which has an account min of $10k.
More...

TOS does offer ES future options trading ...good trading new guy
 
Quote from newguy05:


SHORT 4x JUL 1290P at 15pt
---------------------------------------------------------------------
More...
ES 1290 Puts hit 28.25 today.
That is an 88.3% loss on your trade.
Anyone who happens to read this - no option professional will ever refer to selling naked options as a "monthly income" opportunity.
 
Quote from opt789:

ES 1290 Puts hit 28.25 today.
That is an 88.3% loss on your trade.
Anyone who happens to read this - no option professional will ever refer to selling naked options as a "monthly income" opportunity.
More...

Yes we all know this, it's been repeated millions of times here by everyone and their mother. As i said in the first post, i am not an option trader, and i am not a daytrader. I use options conservatively with respect to my margin, to buffer my bias.

Obviously today is just a bloodbath, and my ES puts are now in the red at -$3000 loss. But using options does serve my purpose of providing a buffer, if i were long on the underlying directly my loss would be significantly higher.

3 Strikes of today's bloodbath.
1) TECH: RIMM/Oracle reports precevied as negative due to growth #s
2) FINANCIAL: Goldman surpirse downgrade of Citi. Made much worse by the wording, essentially they are forcefully telling the street to sell citi. Dragging down entire financial.
3) OIL: gap up due to the $170 price target remark, and fed keeping rate constant.

Observation
1) I did not take stop loss today due to quite a few factors:
- We are very close to a triple bottom AND historical lows, should provide a very strong support
- Although the numbers looked like a black swan, there really isnt a black swan event, ie bsc collapse like last time. This usually means short term panic and fear
- multiple solid support were cut through without a pause, it is quite amazing really, and add to the probability of a retrace to those support levels.
- As said earlier, oil is now at upend of the range, if it falls within the range as expected, market will go up. It's an inverse relationship currently.

2) Volume is high, unknown if it is due to panic selling or big players unloading. Volume for the next few days will make this clear.

Plan:
My stop loss will be if the positions moves below 1270 on heavy downward volume OR there is no sign of an upward movement the week after July 4th weekend (significant timeframe)

The next 2 weeks will be watched closely.
 
I don't disagree with anything you've said, as i know little about options. But if you are talking trading this for a living you have already lost over 10% of the account which is unacceptable for a pro account. I know nothing about what % this is of your total trading capital of course...
 
You have $25k and you think selling 4 naked ES Puts is using options "conservatively with respect to my margin"? You're kidding right?

The minimum account size for that trade to be anything but overleveraged gambling is $60k.

Yes I know, you are experienced and understand options like every other trader on ET and don't need or want help. That's fine, my comments were to warn any newbies from considering this.

You have no plan or are in anyway prepared for gap risk, you have no idea what happens if the market ever does panic, no predetermined stop, you are ridiculously overleveraged, and think that trying to passively earn 12% in month is no problem.

Here is a golden rule for trading options: learn to trade before you ever trade an option. I will leave you alone now.
 
Quote from opt789:

You have $25k and you think selling 4 naked ES Puts is using options "conservatively with respect to my margin"? You're kidding right?

The minimum account size for that trade to be anything but overleveraged gambling is $60k.

Yes I know, you are experienced and understand options like every other trader on ET and don't need or want help. That's fine, my comments were to warn any newbies from considering this.

You have no plan or are in anyway prepared for gap risk, you have no idea what happens if the market ever does panic, no predetermined stop, you are ridiculously overleveraged, and think that trying to passively earn 12% in month is no problem.

Here is a golden rule for trading options: learn to trade before you ever trade an option. I will leave you alone now.
More...

Again all you are doing is just reading through generic option rules and copy pasting them because my journal's subject has keyword "monthly income" + "sell options".

I agree with those rules in general. But:

1) I am not a full time trader, this is just a hobby, i make few trades a month and hold it for weeks usually. The 25k is not my entire account, it's a relatively small amount i put into this new account purely for this. It's basically my profit from doing this for the last couple months. I want an account purely for this so it's easier to track.

2) I trade ES only. ES does not gap up or down 50% (your gap risk). Go back 10 years, look at all the blackswans and the percentage ES/sp500 gapped.

3) My stop loss are based on daily technicals only, and i already stated why i did not take the stop loss today.

4) I am not "riduclusly" overleveraged, with 25K capital, i am naked selling 4 ES option contracts at 15 pt.

5) I am not "trying to passively earn 12% in month thinking no problem". Again you keep copy/pasting those generic remarks. I do not have a profit target each month, i only enter/exit based on my TA bias.

6) "learn to trade before you ever trade an option. " Wonderful insight, thanks. But I was hoping to get some good discussion, like criticism why i didnt exit at certain price level when certain technicals tell you etc..
 
You must log in or register to reply here.
Back
Top