Well, when you trade es you are already leveraged. It would be pretty expensive to buy protection using puts.
Option hedge for futures
- Thread starter Mdtbyk
- Start date
Not if I use the same put to protect for a few month all my call es futures
Correct - but if you use short term put to protect longer term call, you need to buy a new put each time the old one expires. If ES doesn't move or moved up a little bit, both options will lose money.
What you describe is basically a calendar strangle. I used this strategy for VIX with some limited success, but I don't think it will work well for ES. I would do some backtesting before committing real money.
hi Kim, can you explain your concept of a "calendar strangle"? It seems to me that what he is doing is a synthetic long call (long underlying + long put) for the duration that the put covers. I understand a strangle as long call and long put, call strike > put strike (long strangle) or short call and short put call strike > put strike (short strangle). I am always looking for new strategies... could you elaborate?
I don't buy two options
I buy one future contact that I use as a delta for short / mid term trading and one long call / or long put for a few month ahead which I keep even after I sell the future contract for further long calls that I will purchase and if The market doesn't continue in that direction the put will be worth money ...
He mentioned "one es call future that will expire in dec 2017 and one short term put". This is a strangle but with different expirations, hence I call it calendar strangle (it is not an official name). So I'm not completely clear what is exactly the setup.
Robert Morse
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I think I missed that. I thought it was long future plus long put.