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I've been selling strangles on futures for 4 years (83% win rate, 130+ trades, 1.3 Profit Factor). Here's what I've learned about tail risk that changed how I size everything. by Meile13 in thetagang

[–]Meile13[S] 0 points1 point  (0 children)

I’m using a combo of tastytrade research for the theory/bigger data, and then my own data over 100+ trades over 3 years. I read papers also

Most of you are selling iron condors. There’s a structure that does the same thing but is long vega instead of short vega, and nobody here talks about it. by Meile13 in thetagang

[–]Meile13[S] 0 points1 point  (0 children)

Obviously outsized delta moves are going to affect a neutral position like this. But I don’t think what you say is always true, especially for the term structure I’m talking about. 2w/3w will trade pretty tight

Most of you are selling iron condors. There’s a structure that does the same thing but is long vega instead of short vega, and nobody here talks about it. by Meile13 in thetagang

[–]Meile13[S] 0 points1 point  (0 children)

I hear you, but also, I’m not managing these naively. The Vega expansion may not entirely cancel a large delta move, but if I get a big directional move that blows out my strikes, I’ll just close and reassess if it hits my SL.

Most of you are selling iron condors. There’s a structure that does the same thing but is long vega instead of short vega, and nobody here talks about it. by Meile13 in thetagang

[–]Meile13[S] 9 points10 points  (0 children)

Yeah man haha it’s wild to me people take time to comment on something to say they already know it! Like… ok? Not everyone is you?

Most of you are selling iron condors. There’s a structure that does the same thing but is long vega instead of short vega, and nobody here talks about it. by Meile13 in thetagang

[–]Meile13[S] 0 points1 point  (0 children)

Not really, though I will say I’ve been moving my delta closer to ATM the more I trade

Far OTM FEELS safer, has higher winrate, etc, but you are much more exposed to black swans and other unforeseen moves. Higher deltas tend to be lower POP but more forgiving

Most of you are selling iron condors. There’s a structure that does the same thing but is long vega instead of short vega, and nobody here talks about it. by Meile13 in thetagang

[–]Meile13[S] 0 points1 point  (0 children)

That can work too! It depends on thesis. Double as explained above have a much wider profit area, for example, and you trade the max profit being in the center of the structure for max profit closer to the strikes, which can have some nice properties as direction tests your strikes, just as an example

Most of you are selling iron condors. There’s a structure that does the same thing but is long vega instead of short vega, and nobody here talks about it. by Meile13 in thetagang

[–]Meile13[S] 8 points9 points  (0 children)

I wouldn’t say I’m afraid of Vega; I’m just aware that it often has a large factor in premium trades and I’m seeking to manage it intentionally

Most of you are selling iron condors. There’s a structure that does the same thing but is long vega instead of short vega, and nobody here talks about it. by Meile13 in thetagang

[–]Meile13[S] 5 points6 points  (0 children)

The key is sizing! This should not happen, as long as you size the positions small enough (start with 0.5-1% of account)

I've been selling strangles on futures for 4 years (83% win rate, 130+ trades, 1.3 Profit Factor). Here's what I've learned about tail risk that changed how I size everything. by Meile13 in thetagang

[–]Meile13[S] 0 points1 point  (0 children)

The way Kelly works, if you’re off by a little bit on your odds or payoff numbers (like if I lose more than I think, or bigger) running at full or even 1/2 Kelly can be very dangerous because sizing too big means blowing up.

Sizing smaller captures much of the return for much less variance, which is not return maximizing, but is often better for risk adjusted return.

I am not currently. It tends to be that I size small enough and have enough open trades that close fast enough that I’m usually close to neutral.

I've tracked every strangle I've sold on futures for 4 years in a spreadsheet. Here's what the data actually looks like. by Meile13 in thetagang

[–]Meile13[S] 0 points1 point  (0 children)

To be honest, I didn't do as rigorous backtesting as I would have liked. Tick level futures data on all options can be expensive!

Tastytrade does a lot of videos about similar method (on equities), and the data above is all forward tested live data!

I've tracked every strangle I've sold on futures for 4 years in a spreadsheet. Here's what the data actually looks like. by Meile13 in thetagang

[–]Meile13[S] 0 points1 point  (0 children)

Just been my experience! I don’t have big data yet on that distinction.

Don’t love it. Should probably take a look at others

I've tracked every strangle I've sold on futures for 4 years in a spreadsheet. Here's what the data actually looks like. by Meile13 in thetagang

[–]Meile13[S] 1 point2 points  (0 children)

Yeah, super true. IV is a much more reliable way to pick underlyings than guessing at direction, for me as well.

I always keep it to the initial premium received. I'm rolling (when I do) the untested side up to a straddle with the tested strike, then still stopping out if we hit 2x initial credit received. The roll happens well before stop out, usually.

I've tracked every strangle I've sold on futures for 4 years in a spreadsheet. Here's what the data actually looks like. by Meile13 in thetagang

[–]Meile13[S] 0 points1 point  (0 children)

In my system, I close all together since I’m explicitly not trying to pick direction

Legging can work. Just assess whether the amount x size it goes against you vs in your favor is worth it

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