How to Trade Strangles on Futures
Вставка
- Опубліковано 17 чер 2024
- The trading strangles on futures strategy is a great way of generating income . The increased leverage, trading hours, liquidity and diversification of futures options make this trading strategy hard to beat.
We start the strangle on futures by selling a deeper OTM put and call giving us a credit overall for the trade.
In this video we cover:
1. Why we use the strangle trade on futures options
2. Strangle Trade Strategy
3. Trade Risk and Sizing
4. Entry and Exit Criteria
5. Options Strike Selection
To see our live trades and for more advanced trading education, visit us at mrtoptick.com/income-navigator.
Whether you are a seasoned trader or just starting your journey, this video will provide valuable insights and recommendations on which trading strategies to add to your portfolio. With the right trading plan, you can achieve your financial goals over time.
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DISCLAIMER:
Not Financial Advice, this content is for Entertainment and Educational Purposes Only. All financial decisions made by the viewer should be done after talking with a licensed professional.
DUDE - Your 112 and this video.... THANK YOU!
Love to see the weekly video
Great production. Thank you.😊
Would love to see a video on your weekly ideas
Thank you for taking time out to teach and share your knowldge and wisdom.
Hi Tom, many years ago I started trading your 60dte /MES puts back when you were posting it on the facebook group. That led me to naturally discover the leverage offered by futures margins ("woah this /MES uses way less than SPY for a same cash return"), combined with uncorrelated nature and futures strangles became my core piece over the years. Personally i dont use /ES since i trade that short term and have too much an opinion on it, the futures strangles are perfect since i have almost no opinion or skin in the game, especially on lean hogs and corn lol. Thank you for your sharing & spirit of generosity. Not sure if you have a community but they will be surely well led by you. Congrats on your success wish you the best
Thanks Tom for hitting it out of the park... looking forward to finding your video on weekly /es and /gc strangle with management ideas for when they go against you!
Tom, once again a big THANK YOU for sharing your futures options strategy with us! I eagerly await your next video!
great video Tom, keep them coming
your response to "it could go to zero" is the same thing ive been saying over and over. People say that when i post 16 dollar stocks i trade strangles on lol.
Another great video Tom. Lots of food for thought. Appreciated as always. Best.
Very good!!, you're logical, calm and knowledgeable. Excellent 👍👍👍
I appreciate that!
Very informative, thanks
Thanks for watching!
Thanks for the video. I prefer to trade smaller tickers - /MCL and /MES vs /CL and /ES
Dear Tom King, can't thank you enough for bringing us along on the mechanics of one of your core trading strategies! Much appreciated help in sharing your trading gems and philosophy! Cheers!
My pleasure!
Thank you!
Thank you so much.
Would you make a video on your trading weekly strangles on ES and GC.
If you could only do one strangle strategy, would you do the weekly or the regular?
Thanks for this information. I really agree with your philosophy on rolling, it's so much better to just take your medicine and start over. As a "newer to options" trader, I've been lucky on a lot of trades, but when it turns against me, I tried that rolling out and up and etc and it just seemed to be futile in the end. Basically wasting a bunch of buying power to break even or smaller loss or sometimes even about the same loss. Regardless, I am going to try your strangle strategy in a small way to work out my own plan. I really appreciate you sharing what works for you.
When you do it right, rolling is way more profitable than stops! You can get stopped out if the underlying price doesn't move because of volatility changes or if you are a victim of stop hunting.
Yes, the great advantage of strangles is they are so easy to adjust the tested side. @@ricomajestic
GREAT Content, Thanks! Excellent POP, Have you back tested your results over a long period of time?
Thanks
Do you use a limit or market order ? Will it execute after hours ? Thank you for the great videos
You really inspired me on this one ... Do you have a coaching/mentor group?
Also, on the last slide you mentioned the BA version ... NO IDEA WHAT THAT IS!
Lol you're a pretty conservative dude so I'm guess when oil went negative a few years ago you stayed away! I lost 100k and got locked out and was unable to take advantage of the bounce at the time. Got back to where I was the end of last year. Now your steady mind is keeping me from doing anything stupid!
Hi Tom, great video ! One questions remains for me. How does volatility impact the setup of your strangles in future markets ?
I really dont use volatility as a setup indicator. If I waited for vol to get above 30-70, I would never get trades on. I have a 90% win rate on strangles and dont really use vol to enter.
This was a great video! Elegant, simple and succinct. I am going to check out your subscriptions. BTW one thing I did not quite understand - why Wednesday?
I backtestested different days of the week with different strategies and found Wed worked best for the weekly strangle strategy.
Sun 6:05 PM
You sent
Hi Tom. Question, when you place your weekly /ES and /GC strangles do you use just weekly options, or do you use EOM as well?
What is the name of the weekly /es an /GC video? I’d like to watch it.
Great video here btw!
Hey Tom, great video as always! Been following a lot of your content along with Eli Buyko. I was wondering if you had an opinion on putting on or scaling positions according to IV or IVR? Also have you found the correlations between ES, GC and ZB to affect your overall P&L and risk?
I do not use IV or IVR. The probabilities are the probabilities. 7 delta is 93% POP no matter what the volatility. Low vol means a little less premium but less chance of a big move. High vol is slightly more premium but more chance of bigger swings. I don’t want anything in a strong trend, but probabilities are probabilities.
Many thanks again Tom King for your response to a related query on whether should we wait for IV/ IVR to be high: 'Most of my trades are mechanical entries now and not discretionary. So IVR will not impact me here. At 90DTE, it's not a big deal anyway. I don't wait for money as a Theta trader. Time is money every day. Get Theta working _Tom King
Hey Tom. Good stuff. Do you put the strangle on as one order and take them of as one or do you leg into and out of each leg separately?
One order on and off. Letting in or out is too much work.
89% change of profit on 6/7 delta, crazy.
Hi i have a question please. What time options on futures expires PM contracts. Thank you.
Hi Tom. Thank you for the video and knowledge shared. A question, do you consider both the put and call credit together when calculating the 2x loss or do you calculate the loss for each side? When you actually close at your max loss do you close both sides or only the side under attack?
I open as one and close as one trade put and call. SO the 2X loss is based on the total initial credit.
Thank you Tom for clarifying for me.
Thank you period if you could only trade this strategy or the weekly strangle strategy. And your account size was about $50000. Which one would you do?
Tom - How do you manage the tail risk on these short strangles? There must be instances where these commodities go limit up and down?
Nice video. How do you handle stop loss? For instance in this days with IV running up in corn, a 200% is stoping me out in a couple of days!
I stick to my trade plan. But also I am selective about some futures. Right now corn or /ZC is super volatile due to planting season and drought conditions. I am avoiding strangles for now and using a 112 on ZC.
@@TommKing13 Hi Tom, thank you for sharing your knowledge. Do you have some rules to determinate if a future is volatile? which strategy use between strangle or 112?
Can you explain how youre setting your stops? Do you do it on each leg individually? IIRC tasty wont let you set it on the strangle price.
I will manually close at my 3x stop/2x loss. When we get to 150% loss, I start watching more closely. I will close the entire strangle in one order.
Thanks for the videos ! Just started trading futures with a 2500 account. Adding one strategy at a time until I have about 10k. Do you recommend the strangles or the 112 first ?
Strangles will generate more income faster. But I start with 112s in small accounts until I get 4 working. Then strangles. Use MES on small accounts.
@@TommKing13 that was very close to my plan. Thanks! Makes me think I’ve been paying enough attention. What’s the rationale for doing 2 contracts every other week and not 1 contract every week ? Is it just an overlapping strike issue with slight moves ?
I thought to strangle, we'd be using options which would have standard hours... (but i'm only mid video :) )
How long have you been trading this ???
You didn't mention volatility at all, which is by far the most important metric for this strategy to be profitable in the long run.
What makes you decide to put in a trade, or more importantly-NOT put in a trade-in a particular market? Or are you just blindly putting on trades every month in all markets?
Back in April 2020 oil went down to minus $ 20 or30/ barrel in some flash crash scenario, that would be devastating for a strangle unless you stop loss was triggered. Have you ever seen a similar event in any other futures market ?
Oil going negative wiped out a lot of accounts due to margin calls.
Did these strangles work in 2022?
Hi there, I have a hard time understanding "max loss is 2x the credit received (3x stop)". Say credit is $1000, pnl is at -$2000, I get out. So what does 3x stop really mean ?
You get out at 3x, that is, when P/L is -3000, so your loss is 3000 - credit received = 2000.
@@GusUruguay oh man thanks so much for explaining!
Your stops are manual, right?
Yes on TT
Ya if it ever goes to zero we all better be better at hunting and fishing than anything else
Hi Tom
I'm new to trading options on futures so here is my question. What happens when you get assigned on a futures contract? On a stock you buy/sell the underlying at a given price. For futures what happens? Do I get say... 10 tons of corn on m front door step? LOL
Thanks
So you don't roll? What happens when the trade goes against you? Just take the lose?
Yep. I have stops on all my trades. Rolling is taking a loss and opening a new trade in the same asset that is failing. Why would I do that?. I take the loss and will likely open a new trade, but maybe not in that underlying. I find something with a better setup.
Do you use a limit or market order ? Will it execute after hours ? Thank you for the great videos