Paragon Options – A Low Risk ES Short Trade

Paragon Options is a service that focuses exclusively on futures options. By doing so we are taking advantage of superior premiums compared to stock options and asset diversification offered by futures. Paragon Options is a directional options service that focuses on Metals, Energies, Bonds, Currencies, and Commodities. This service launched on June 25th. 

A Low Risk S&P 500 Short Trade

The S&P 500 (ES future) had been forming a falling megaphone and broke down from that intraday on Monday 18th June. A rally was very possible from there but we were expecting to make a low in the 2680-2700 area by the end of the month, so we decided to enter a low risk short position on ES future there.

ES Future Sep 60min (AM 19th June):

 

 

 

 

 

 

After this low is made we are expecting S&P 500 to start a leg up that should at least retest the all time high on SPX. As we were getting close to the target area yesterday, and the position was very well in profit, we decided to cash in the short and put on the first leg of the next long while the Vix was still spiking. We are expecting a likely retest of yesterday’s low, at which point we will be considering adding another leg. SPX 60min chart:

 

 

 

 

 

 

 

 

 

 

 

 

 

ES (e-mini futures) futures options – long put spread vs short call

This futures options trade was opened on Monday 18th June with the e-mini trading at 2756 and was closed yesterday at 2716 (25th June).  We were looking for a retrace towards the 2700 level in the e-mini.  This was a very low risk trade with a short call at 2850 used to increase the credit received.

Long Sep 2650 / 2500 put spread vs short 2850 call

We opened the above futures options position, buying a Sep 2650 put, selling a Sep 2500 put against it and also selling a Sep 2850 call.

This futures options position was set up for a credit of $1.38.  The put spread part of this position was reduced in cost by selling the Sep 2850 call over the top of the position.  This also increased it bearishness, moving the delta to -40.

Here is a P&L chart of the trade

 

 

 

 

 

 

 

You will note that between 2700 and 2850 there is a plateau in the P&L line.  This means that should the e-mini stay within this range and not fall as we expect, but also not rally, then we will still make a profit as we will collect the premium from the initial setup of the trade.

The design behind this strategy was simply to have a gentle position that would turn a decent profit if we were correct in our view of a 50 handle drop occurring in e-mini.  However we also had in mind that should it not fall and just go sideways, it would be nice to collect a small profit from the credit received.  We deemed the risk of the e-mini going above 2850 to be very small.

Exit and summary

We exited this futures options position yesterday (25th June) with the e-mini trading at 2716.  We felt that the fall was about done and decided to book a nice profit.  It was closed at $13, and so made a profit of $14.38 in 9 days.

We have now opened a new e-mini position in the paragon options portfolio as we are live as of the 25th June and if you are interested you can sign up for that by clicking this link.

This is the first time we have used a put spread vs a call on the blog and is demonstrative of the wide range of strategies we embrace to express our trade ideas and risk management views.

Pre-Launch Portfolio

We intend to complete all 15 trades in the pre-launch portfolio.. So far the track record shows a 66% win percentage with a 10% return on margin in 6.5 weeks which annualized would be a 61% return on margin employed. We are still managing 6 open trades. See our final performance in the coming weeks in our next blog post.

There is a substantial risk of loss of capital when trading and/or investing. Past performance is no guarantee of future results. See our disclaimer here.