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DC had me convinced that option premium selling had changed and was a
guaranteed return. Now you take me back 20 years to exactly what my
experience was. Rats.
Jimmy
When I owned an FCM we used to have a saying about option premium sellers.
They ate like birds and crapped like elephants. They also scared the devil
out of us. Their trading was 99% boredom and 1% sheer terror- - especially
those who had it all figured out. Good luck to you.
Regards, Jack.
----- Original Message -----
From: "DC" <dc010225@xxxxxxxxxxxxx>
To: "Omega-List" <omega-list@xxxxxxxxxx>
Sent: Wednesday, July 05, 2006 6:47 AM
Subject: Re: Implied Volatility for Futures Contracts
> Howard,
>
> I am selling only options on futures at MAN Financial. My next goal is to
develop options
> selling for E-Mini Stock Index Futures (e.g. Russell 2000) at
TradeStation Securities.
> For this reason, TS 8.1 has to correctly compute the implied volatility as
explained in my
> prior posting. The implied volatility topic is the focus of my postings,
all my other
> comments are secondary.
>
> Under normal market conditions (Gaussian/Normal distribution of returns),
it is relatively
> easy to develop a selling strategy with very reasonable gains. However,
this is not
> enough, and you should not start selling options unless you study in
details so called
> "extreme" markets conditions.
>
> These conditions happen when market returns are beyond of 3 standard
deviations, at the
> "fat tail" region of distribution curve (markets behave closely to the
inverse power
> laws). I recommend that you create an "inventory" of these events, study
them, and then
> develop a simple and effective hedging strategy for all cases when market
prices get to
> close to your striking price. Hedging will costs you money, and will
decrease the gain for
> the particular month. In very rare cases, you will experience a very small
drawdown
> (1-2%), that can be recovered the following month. So far, no losing month
for me in spite
> of several "fat tail" events.
>
> If given futures market doesn't support well enough your hedging strategy
(i.e. it is
> illiquid under extremes) then don't dare to trade it. Otherwise you will
end up as famous
> Victor N.
>
> DC
>
> ----- Original Message -----
> From: HBernst963@xxxxxxx
> To: omega-list@xxxxxxxxxx
> Sent: Tuesday, July 04, 2006 8:27 PM
> Subject: Re: Implied Volatility for Futures Contracts
>
>
> In a message dated 7/4/2006 11:00:54 AM Eastern Standard Time,
dc010225@xxxxxxxxxxxxx
> writes:
> I can accurately compute synthetic options prices, and greatly simplify
the
> backtesting of my option strategies: selling the deep-out-of-the-money
options for about
> 30% annualized gains and with zero drawdowns.
>
> DC
>
> Are you selling options on individual stocks as well as commodity futures?
You say zero
> drawdowns but there can be so called 'black swan' events such as a stock
being bought out
> where it jumps 30-40% in a day; a freeze in Brazil causing coffee prices
to soar, Iran
> could blockade the Persian Gulf and crude oil soars, as examples. Are you
saying that you
> have never had a losing trade?
>
> If you are looking for a program where you can find implied volatility on
both stocks and
> futures, OptionVue software is what I use and recommend.
www.optionvue.com
>
> Thanks for replying,
>
> Howard Bernstein
>
>
>
> --
>
>
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