Thursday, December 26, 2019

Options

Hello everybody,
And Merry Christmas to you again. People keep asking if ELP Program can be used to trade options on S&P 500 futures. While I understand advantages of options - limited risk and all - I do not recommend to trade options fully according to ELP Program. Fact is, trades according to ELP may be lengthy time-wise, you could keep a position for days, weeks and even months (rarely). And options have an intrinsic feature of losing value with time, the so-called time decay (theta). It is related to their probability of being exercised profitably, which obviously diminishes as time goes by and there is less and less time to expiration left.
That said, I can imagine a trader using ELP for trade direction, maybe as an additional tool to confirm his or her decision. But you should not maintain a position in options according to ELP! The option may expire useless (with you losing the premium you paid) before ELP gives a signal to close the trade.
I promise I will look into it deeper later and see if there is chance to use ELP in options trading at all. For now, we are sticking to the S&P 500 futures.
Have a good time,
ELP team

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