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4 Comments

  1. Ohad Osterreicher
    January 14, 2022 @ 5:58 am

    Hey, great content as always (:

    Have you thought of using the same strategy but with gold future options?
    I mean, GLD options have a relatively small notional value. So if someone wanted to implement this strategy on a larger account, he could achieve a higher capital efficiency by writing gold FOP (e.g., fewer commissions, spreads, etc. drag). What do you think?

    Reply

    • spintwig.com
      January 14, 2022 @ 9:32 am

      Thank you!

      Yes. Performance should be identical-to-slightly better due to commission efficiency of FOPs. I chose GLD as the underlying as it is more accessible (eg: smaller accounts can trade it) but it can indeed be supported by notionally-larger instruments.

      Reply

      • Ohad Osterreicher
        April 5, 2022 @ 3:25 pm

        So after a 3 months of running this strategy profitably (: I’m confident in saying that GC=F is the way to go.

        Pros:

        • * lower commissions – on IB I pay $2.37 for one FOP and about $0.55 for one GLD option contract. To get the same exposure as with the GC=F, I would have to sell around 10 GLD contracts, and pay double the commission.
        • * Trading hours – 23/5 with FOP vs. regular trading hours with the GLD. It’s true that outside RTH the FOP aren’t much liquid, but I still managed sometimes to get some good fills outside RTH.
        • * lower margin req. – I use portfolio margin, and IB asks me to put up about 11K maintenance margin for one FOP and about 3.6K for one GLD contract.
        • * Order fills – since I have to sell only one FOP, I always get a full fill on my orders. With the GLD it happened to me that I only got a partial fill.

        Cons:

        • * Tick size – GC=F options have a tick size of $0.1. This can cause a problem when there’s no bid/ask spread, and the market doesn’t move much. Usually I try to get a fill between the spread, but sometimes I just have to go to the bid. GLD options have $0.01 tick size and are very liquid.
        • * Margin req. location – the margin for the FOP belongs in the commodities account. If you don’t have enough cash lying around, you will be charged margin interest. This is only 1 or 2 dollars a week, but it’s still a cost to consider.

        Reply

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