Question about selling Index Futures Options

Hi all,

Instead of naked puts or Iron Condors, I'm also interested to apply Collars strategy on futures options (on index/commodities) but there are few hurdles I can think of:
- we have to 'roll' the underlying futures contract on every expiry (i.e. quarterly), which means additional cost
- we might have some slight difference in the underlying price when rolling out the Collars (e.g. when rolling between Sept and Oct)
- we are charged interest on the margin borrowed to purchase the underlying futures contract

Would greatly appreciate for anyone's experiences/thoughts on this?

Thanks!
Aswin
 
Quote from windsurfer:

This may help the discussion.

Below are the published results, based on actual trades only and after a 30% incentive fee, for a CTA that currently uses a $1 premium system similar to that which benysl uses. (I apologize for the formatting). The initial capital is $50,000 and 1 SP put is sold each month ($250 premium) and puts are rolled in some cases- hence the losses in some months. The recent Rate of Return is about 12%, although it is just flat this year:

Year Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Year
1999 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 5.9% 5.9%
2000 2.4% 4.5% 2.0% 2.6% 6.6% 1.1% 0.2% 1.0% 0.2% 2.7% 1.1% 4.0% 32.1%
2001 2.0% -2.5% 8.1% 4.3% 1.0% 2.7% 2.6% 0.5% -3.1% 4.7% 5.0% 3.0% 31.7%
2002 3.3% 2.8% 1.3% 0.3% 1.3% 1.9% 8.1% 0.5% 6.4% 7.2% 4.1% 2.2% 46.5%
2003 -1.1% 7.3% 0.8% 4.0% 2.1% 1.5% 0.6% 1.1% -0.9% 4.0% 0.5% 1.3% 23.1%
2004 0.9% 1.7% 2.7% 1.2% 0.8% 1.8% 1.2% 1.0% 1.9% 1.4% 1.1% 0.7% 17.6%
2005 0.5% 0.7% 0.9% 1.1% 1.2% 0.9% 1.0% 1.9% 1.7% 0.5% 1.1% 2.1% 14.4%
2006 1.5% 1.0% 1.5% 0.7% 1.4% 1.9% 0.9% 0.8% 1.1% 0.4% 0.1% 1.0% 12.8%
2007 0.6% -2.9% 3.4% 0.9% 1.8% 0.7% -3.7% N/A N/A N/A N/A N/A 0.5%
More...
Thanks for the interesting data, but I have a few questions.

1) What is a 30% incentive fee?
2) What does CTA mean?
3) How does a $1 premium system give $250 premium?

BTW, in addition to the P/L shown any related cash would earn interest (about 5% recent years).

Thanks again,

Don
 
You asked (see Qs below):

Q1) What is a 30% incentive fee?

A1) The CTA takes a 30% fee. In other words, before the fee, the return was 100/70 higher.

Q2) What does CTA mean?
A2) Commodity Trading Advisor

Q3) How does a $1 premium system give $250 premium?
A3) The SP multiple is $250- just as the ES multiple is $50

The CTA is Zenith Index Options. If you go to the following link and scroll down to the 6th CTA you will find it:
http://www.ctaguide.com/CTAspt_longterm.htm

I have no association with them. It just seemed that their results were relevant to this discussion.
 
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