Weekly Option (on Futures)

[mjim]

Would like to explore ask few things about use of Weekly Expiry options
( Options on Futures NOT on ETF or Stock )
To start with although they "look" cheap" because of the short duration on an annualized basis they are expensive!
For example I checked the cost of a ATM PUT on ES ( ES @2170)
- Expiry 1 day = around 7.50
- Expiry 9 Days = around 13.50

A) Married PUT or Protective CALL (Both ATM)
Q1) Is it worth doing it? for the Strategy to succeed the underlying has to move not only in correct direction but has to recover cost of the Protection.
Q2) for this what is the "Optimum" time frame of the Option expiry ( using weekly)
Q3) What indicator can be used to back study how much a Futures contract moves in a specific time frame ( in terms of points not %)

B) Buy Straddle ATM ( Long CALL + Long PUT)
In above example = approx 15 or 27 points approx

Q: For the Strategy to succeed the underlying has to move rapidly + sufficiently in any direction.
Same questions as above

 

[Virge666]

Would like to explore ask few things about use of Weekly Expiry options
( Options on Futures NOT on ETF or Stock )
To start with although they "look" cheap" because of the short duration on an annualized basis they are expensive!
For example I checked the cost of a ATM PUT on ES ( ES @2170)
- Expiry 1 day = around 7.50
- Expiry 9 Days = around 13.50

A) Married PUT or Protective CALL (Both ATM)
Q1) Is it worth doing it? for the Strategy to succeed the underlying has to move not only in correct direction but has to recover cost of the Protection.
Q2) for this what is the "Optimum" time frame of the Option expiry ( using weekly)
Q3) What indicator can be used to back study how much a Futures contract moves in a specific time frame ( in terms of points not %)

B) Buy Straddle ATM ( Long CALL + Long PUT)
In above example = approx 15 or 27 points approx

Q: For the Strategy to succeed the underlying has to move rapidly + sufficiently in any direction.
Same questions as above

What kind of profit target are you after. The only way i have been profitable with weeklies to to be in and out quite quickly and be very very quick to defend.

The Gamma risk is freaking high.

for what it is worth. I would butterfly the ES is IV is low or Iron Fly if the IV is high. Go for a quick 10-25% profit on the margin and find the next one. I wouldnt buy straddles as they are just too expensive and the odds are not in your favour with the Gamma risk.

With regards to time decay . . . buy on the Wednesday or Thursday previous and try to be out by Monday Tuesday. I would go for a 16 delta on each side, being one standard deviation. If you like to stay up all night and watch it... go for a 20-25 delta but you probably have to defend it... but collect more.

Q3, Delta will answer this question. You can work it out from there.

Hope i have helped...

 

[priya0710]

Option contracts is a very good options for traders having less risk bearing capabilities. Here the risk is only the premium amount paid at the beginning of contract.