RUT Fly adjust

Boy, didn't see that coming. SPX futures down about 24 points at today's open. That kinda sucked, mostly on my August trades that I'm still carrying. But let's move on.

I had said that I was going to add to my RUT fly when RUT moved +/- 20 points from when I put it on (570), or if it was calm like last week, that I'd probably add to it later this week. Well, we moved below 550 this morning, so I waited a little to see if there was going to be a quick recovery, and when I didn't see that, I added my second RUT fly, 20 points below the market. Upon further thought tonight, maybe I should have only put it 10 points below the market. Here's the reason. The original Fly was about 17 delta long. If the new fly would have been put on 10 points below the market, my resulting combined delta would have been -3. The 20 point below the market fly made me -11 delta. Good if the market keeps falling, but not so good if the market bounces. Oh well. It's not the worst thing, so I'll keep it. The single fly was 34 theta, now I'm 71 theta. So -11 delta and +71 theta. Nice. Next adjustment will be to add a third butterfly if the market moves +/- 20 points or so (530-570). Goal will be to neutralize delta, and of course, increase theta.

All of my other Sept trades are doing well and still in the black, although if we have another -2.5% down day soon, I may need to look at adjusting the double diagonals (MNX was -2.9% today, XLE -3.2%).

Trade update

August expiration:
I'm still trying to claw my way back to profitable. My SPX calendar, which I rolled up 3 times and then turned into a double calendar, is now profitable. I'll probably take that off on Monday or Tuesday. I still have some pieces of the MNX double diagonal on, with no hope of profitability, but trying to recover some losses. I'm around -8% on that trade. And I have what started as a couple butterflies in RUT. That trade is still underwater, but I have a relativily low delta with theta >300. I'll try to hold that for another day or two to collect that theta and get out.

September expriation:
I liked that XLE DD that I put on so much, I doubled my position. XLE had moved up a little when I decided to double, so I chose 1 point higher on the call side. I'm currently up 7% and still perfectly centered. Max gain (in the saggy part) is 25%, so I'd be looking to take profits around 15%.

My MNX double diagonal is also fairing well, almost perfectly centered and up about 4%. Max gain (sag) is about 15%, so will look to take profits around 10%. This trade has developed a little tilt. I'll have to watch that, maybe purchase a Oct call to help with the fast slope on the up side.

The RUT fly is going well also. I'm up 9%, but I don't have any plans to take profits any time soon. In fact, I'm looking to double and most likely triple my position. My plan is to add another fly when RUT hits 550 or 590, but RUT has been behaving well and hasn't gone there yet. If we don't hit those points by Thursday, I'll probably add another fly ATM, just so I can get the capital in use.

I put the second tranche of my RUT iron condor on. Since RUT didn't move much since the first tranche, I ended up using the same strikes. The first tranche collected $1.48, whereas the second one netted $1.35, 5 days later. I sold the second one on 8/11, on a 10-point down day, to take advantage of the higher vols on that day. Vols dropped about 2 points the following day, as RUT recovered with a 10-point gain. Even the large drop on 8/14 didn't cause vols to climb much. Not much theta has ticked out of this trade yet, so I'm up only ~3%. Max yield is 12% and looking to get about 10% out.

Watches:
As previously mentioned, I'll probably add another RUT butterfly this coming week. I'll most likely add a SPX Sep/Oct calendar. Possibly a OEX butterfly.

XLE Double Diagonal added

Can you believe it? An honest to goodness down day. I hope I'm not jinxing myself by saying that (Bob D and I have a standing joke about whenever we comment on direction, it reverses...unfortunately reverse psychology doesn't work in this case). This really helped all my positions since they were all delta negative and gave me a rare positive P/L DAY number.

I guess I was in the mood for more action (is there a Traders Anonymous?), so I couldn't help myself and I added another new trade today. This time it's on XLE. Unlike most indexes, XLE isn't trading at recent highs, which made it more attractive to me. The trade of choice was another double diagonal to add to yesterday's MNX DD. I also looked at OIH, but decided to go with XLE. So I started to look at some strike choices, found a setup I liked, and was about to place the trade when I noticed that the back month that I modeled was the Sept Quarterlies. Oh, that's not what I wanted to do. But the Oct isn't available yet. And, quite honestly, the Sept/SeptQTRY trade looked decent. Open interest in the Quarterly looked decent. Not much volume. Bid/Ask spread for the entire double diagonal didn't look to bad, so I went for it. I tried getting filled at mid for about 2 hours. Caving in 0.02 I was able to get filled. I was happy with that fill for a 4-legged trade, especially since I was the only volume on my Quarterly strikes today. Trade is pictured below. Adjust when slightly past the short strikes. Consider taking profits if up about 20% and a stop loss around 25%.

Chart of where my adjustment points are.

Whoa. I almost forgot that I entered another new trade today. I put half of my RUT iron condor on today. I'm short the 480 and 630 strikes, and I bought some extra longs (460 and 640) as "insurance" against fast, big moves. I sold about 10 delta on both sides and collected $1.48.

New MNX Double Diagonal

Well, isn't this run up exhilarating? That's a code word for "sucks for a delta neutral trader". I have most of my positions off (at a loss, mind you) and am still hanging onto a RUT multiple butterfly (if that's what you can call it after so many adjustments) and a SPX calendar at 980 (after several rolls up). Both are struggling to come back from the losses from the previous rolls, and both are still delta negative. The slight pause in the market has finally given me a day with a positive "P/L DAY" finally. Can you believe that RUT had a reasonable down day for the first time in over two weeks? (-0.9 points on 7/29 doesn't count)

MNX/NDX has had some minor form of consolidation the last five trading days, whereas SPX and RUT kept climbing. I took this so-called opportunity to place a new trade in MNX, a double diagonal. This trade is similar to last month's MNX and NDX double diagonals, but I'm hoping that this month is actually profitable. (NDX exited at -20%, MNX is clinging by a thread at -9% with hopes of clawing back to at least break even.)

Trade strategy is to exit with about $500 profit (9%) or roll the short strike to the next strike out if MNX goes past the short strike by 0.50. Simple trade, simple adjustments. Contingent GTC orders already resting.


I also tried getting into a RUT iron condor, 470-480-640-650, for $1.25 - $1.30 credit, as much as a nickel worse than mid price, but didn't get filled. Will try again tomorrow.

Playing catch-up

Well, I guess I've caught my breath now...I came out from under the bed and have started breathing again. This "crash up" has toasted most of my delta neutral positions.

My NDX double diagonal went through several adjustments to the upside, nearly every other day, until I finally threw in the -20% max loss towel. Have you looked at a NDX chart lately? From 7/13 to 7/23, NDX had an up range of 15% in 9 trading days. Not good for the delta neutral, market neutral trader.

I have a similar MNX double diagonal with embedded calendar trade on. It too has had some adjustments but isn't quite out of the game yet. (Read: I'm not at max loss yet.) Actually, I'm only down about 6%.

My normal 36-day RUT high prob iron condor was wiped out only 9 days into the trade. Luckily, I had "call side insurance" (extra long calls, in case of a big/fast move up) and it allowed me to stay in a little longer, but with so many days in a row of higher highs, it wasn't enough. Instead of waiting until my -20% max loss, I pulled the plug a little earlier, with "only" a -13% loss. My stop loss exit points are -20% loss, or 10 points from the short strike, whichever occurs first. In this case, I was within 10 points of the short strike, which allows me to escape with a little less loss. This trade was started on 7/14 with RUT at $496, and exited 7 trading days later on 7/23 when we went past $540, 10 points from my 550 short strike. That's >9% move up in 7 days. Crazy. Some people would reposition their entire trade up at that point, but when the max yield is only ~12%, and you took a 15-20% loss, you're only going to get close to scratching. Granted, scratching is better than a 15% loss, but you also have a chance of turning that 15% loss into a 30% loss. I'm taking the position of keeping my powder dry until next month...what's left of it. I'm also afraid with such a strong run up, that we could retrace fairly quickly too, so repositioning, especially the puts, isn't appealing to me at this point.

I still have a SPX calendar on. Originally, it was a bearish bias 900 strike, and 7 days into the trade I rolled it up to a 930 strike, still bearish. Now a couple days ago I added a 980 strike to make it a double calendar, give me a little more theta, and cut my delta a hair (not much). My new break evens are aroun 915 - 1000. The last couple days have been kind to me as vols crept higher, helping this vega positive trade. I'm currently sitting at around a 3% loss, even with the previous roll.

Last but not least, I have several butterflies on RUT. What started out as a single butterfly with a second one added a week later has morphed into butterflies at several different strikes and for the most part, I'm now managing the entire trade by the greeks, trying to keep delta relatively low (but no where close to zero) and theta high and positive. I'm still very leary of a downward move, so I'm still leaning a little negative delta.

Overall, a pretty rough month for delta/market neutral trading.

IBM adjustment, pre-announcement

As mentioned in my earlier post, IBM was on it way up to $110 before the close. I decided to close the 105 calendar and just leave the 110 calendar, as IBM was over $110. In fact, it reached a high of $110.97 before closing at $110.64.

It looks like it was a prudent adjustment, as IBM reported great earnings. "The earnings per share results were the highest for any first, second or third quarter in the company's history", reporting $2.32 EPS with the street's expectation of $1.98. IBM hit $114.48 after hours, which is beyond my upper breakeven. Looks like it's settling around $112.5. We'll see what tomorrow morning brings, along with housing starts report and a few other earnings announcements BMO.

IBM Earnings Play, Modelling IV changes from earnings

Decided to put on a IBM earnings "spec" play. IBM reports earnings today after market close (AMC) and tomorrow is July expiration. What that does is jack up the vols (premium) of the July options, and tomorrow nearly all of that volatility will be gone. In buying a calendar, you sell all that front month volatility and will buy it back tomorrow after the vols have fallen. Normally, falling IVs are bad for calendars, but that's when the back month vols fall. In this case, the front month (July) will fall a TON, and the back month (Aug) will only fall a little.

Here's my trade as I put it on. I've also modelled an ATM straddle, which gives you a rough idea of what the market is pricing in for a earnings move. It's currently priced at $3.33, so the market thinks that the price of IBM after earnings will be within $108.40 +/- $3.33 (3%), or roughly 105 - 111.70. You can see that my break evens are outside of this range.

But with a horizontal (time) spread, you need to take into account volatility, and even more important, volatility skew and what will happen after earnings. That is, the difference of the vols from the short month to the back month. If you look at the IV of a far out (time) chain, such as Jan 10, you'll see that it's roughly 29%. You can expect the front and back months to lose some vol to approach that figure. Because it's expiration tomorrow, you won't see the front month go all the way to 29, but it's currently in the 60's and you might expect it to come down to 40-ish, shedding about 20 points of volatility. Similarly, the back month is slightly inflated due to earnings, so it too may come down, but not nearly as much. Maybe a couple points. Some stocks will have the back month come down a bit further, as much at 10 points or more in IV. So, how do you figure out what the trade will look like after expiration? thinkorswim has the tools to do so.

In the simulated trades page, to the top of the trades on the right, click the wrench, then click on the More drop down. Doing so will allow you to change the volatility of each month separately. In this case, I modelled a -20 point drop in the front month, and a -2 point drop in the back month. I also moved the date forward one day. You can see that my break even points are pulled in a bit, mostly from the -2 point drop in the back month. Be careful when doing this trade on stocks that you expect the back month to drop much more than 2 points, as the breakevens will be pulled quite a distance in. In this case, it still looks good...within the predicted range from the ATM straddle.

Since putting on this trade, IBM has climbed from $108.40 to $109.50, stressing my upper break even after pricing in the ATM straddle. IBM and the market was flat all morning and is now making a little run up during lunch here. It's possible, that at close, a simple 110 calendar could be a better play. Only time will tell.

Big move up, VIX low but up. TOS contingent orders.

Today seen a 2 standard deviation move in several indexes, spurred by better than expected earnings, especially in INTC. RUT closed up 3.8%, NDX up 3.3% and SPX up 2.9%. Even though SPX had a steady climb all day, the VIX was only briefly down setting a 10-month low, then also climbed steadily the rest of the day.

Upon the suggestion of Mark S., I decided to buy a little volatilty by buying a slightly bearish SPX calendar. When SPX was around 928 today, I bought a 900 put calendar. The upper break even is around 948, right around the early June resistance. VIX rose a half a point after putting on the trade, helping a little. Here's how it looks (just a simple calendar):


Next, with the huge move up, I was thinking it was a good time to sell some call verticals, to compliment the puts I had left over from a RUT high prob iron condor. I had previously covered the calls and wasn't excited about reselling any (rolling) with the market near its recent lows. But today's move up, I took advantage of it. Here's how it looks before and after. Note that when I re-sell some spreads, I typically only sell half of the original contract size. If we keep trending up, this trade won't fall off a cliff. I can essentially go all the way up to my short strike and still not take my max allowed loss (-20%). In fact, if we were to go there today, it would only be a 10% loss, but I'd pull it off 10 points before the short strike, or only a 6% loss. One good thing about this 'adjustment' is that I've now doubled my theta. The puts are currently worth about $0.45 and I'd probably pull them off at 0.15 to 0.20.



I've saved the "best" for last. NDX moved up just short of 50 points today. Considering my NDX double diagonal had short strikes +/-100 points from ATM, we covered a lot of ground today. Here's how the position looked at yesterday's close. Not bad. Not centered, but not down any money.

With the big move, I decided to move up the put spread. This wasn't really in the plan. (Uh oh, plan the trade...trade the plan.) The put spread was nearly zero theta, so it wasn't doing me much good. So I rolled up both the long and short puts up 75 points. Here's the new risk graph at today's close. Note that the current price is right at my short call strike, 5 points away from my adjustment point.

Here's my planned adjustment point, if we reach 1405. Simply buy a Aug 1400-1425 call spread. This will be done with a contingent order, so I don't have to worry while at my day-job.
And speaking of contingent orders, I got a tweet from jcvictory who wanted me to cover this topic on the TOS platform. He specifically asked about locking in profits, but I'll start with the adjustment first. Let's do the call side. I know that when NDX hits 1505, I want to roll my short 1500 call up to 1525. So I start with a order to buy a 1500-1525 call vertical.

I click on the Rules "Day" and in the new dialog box, I change the order to GTC, then in the section where it says "Submit when at least one of the following conditions is met" I put in NDX, MARK, At or Above, 1505. Then up towards the top, where it says Price Rules, I change the "Limit Linked to" MARK. What this does is, when NDX trades at or above 1505, it will submit this order, with a limit set to the mark (mid-price of the spread) at that time. If this order is on a very liquid options, you could leave it at mid. But if you have experience with the vehicle, you may know that you'll never get filled at mid-price. You may need to give the market makers some edge. I'd NEVER pay the ask for 99% of the spreads out there (except for the extremely liquid options where only one or two pennies separate the mid and ask). For a RUT vertical, you may need to give in a nickel or dime. In the case of NDX, there's typically around $0.80 between the mid and the ask on a ATM vertical. So, because I want a fairly good chance of getting filled, and I may not be around to baby-sit the order, I'll cave in around $0.20 of that $0.80. So, I'm wiling to pay $0.20 more than the mid-price of this vertical. Again, the amount all depends upon the liquidity of the options and how the spread normally trades. So, I take this $0.20 and put it in the "LIMIT Offset" area. Now if you look at the order description, it will tell you that the order will wait until 1505, and then put in an order set to the mark (at that moment) plus 0.20.

Hit Ok to that Order Rule box and you're back to the normal order entry. At that point, you can confirm and send.

Now, jcvictory asked about profit taking, or "locking in profits". Well, there's a few means of doing that. One is to be at your computer, decide that you currently want to get out, and work the order manually. Another is to put in a LIMIT order with a sales price that gives you your profit target. (A simple case is: you bought a calendar for $1.00. You want to exit with a 20% profit. You simply put in a calendar sell order with a limit of $1.20...maybe plus a couple pennies to cover your commissions.)

But the more complicated case is say, I'm up 15% on this trade. I'd like to stay in longer, but if the underlying moves, I don't want to go under a 10% profit. If my 15% profit sinks to 10%, exit the trade. How I would handle that is to look at the risk graph, determine at what underlying prices would correspond to my 10% points, and put in a contingent order, trigged on the underlying price, and again use the LIMIT LINKED TO MARK feature. You can again "cave in" a few cents on the mid-price, as appropriate.

Let's use an OEX calendar to simulate this. Looking at the risk graph, I'm up $224. I don't want to go below a $175 gain on this trade. By moving the price slices, I've determined that this would occur if OEX drops below 434.10 or above 446.75 (excluding all volatility effects). See the graph below.

Armed with that information, I put in a OEX calendar sell order, go into the Rules, and set the conditions that will trigger the order (below 434.10, above 446.75), change the LIMIT Linked to MARK, and then maybe cave in a little on the mark price. In this case, since you are selling the calendar, you want to cave in negatively. That is, you want to sell it for a little under the mark (mid-price). For a calendar, depending on the vehicle, you may want to not cave in at all, maybe a nickel on most vehicles, and something like a dime on a vehicle not very liquid. Use your own judgement and experience here.
I hope that covers what you wanted.

NDX Double Diagonal

My plan was to open up a new MNX double diagonal around today. Instead, I decided to save commission costs and open up a NDX instead. Today was my first ever trade in NDX. I got filled right at the midpoint instantly on a 4-legged trade...I guess I should have held out for more! Nothing fancy here. Will manage the same way as the MNX. Will roll up/down shorts to next strike when I get to 1505 or 1295.

Here's how the MNX double diagonal is looking. We had a low of 139.49 today, with the lower adjustment point at 137.00. Very, very close. We closed at 141.15, so the adjustment point is only a 1.7 daily standard deviations move down. It could happen at any time, and that's why I have a contingent order set to trigger at 137.00. Simply buy a 137.5-135 put vertical a few cents above mid price.

Lastly, I was able to buy the remainder of my RUT iron condors 580-590 call verticals for $0.20. This leaves me with all the puts and therefore fairly long delta. With the move down over the last few days, this position is down only about 4%. I'm hesitant about re-selling some calls...not without a day or two of upward movement first. And if I do resell, I'd only sell about half of the original amount at no more than a 10 delta on the short strike.

Closed July Trades

Started out the day in some SPX calendar pain, at the lower breakeven. I couldn't take it any longer, as I was out of Morphine, so I closed it at a 25% loss. I also closed out of my RUT butterflies for a combined 10% gain. Finally, I legged out of my 550-560 call spread from my July iron condor for a dime. I actually had two high prob RUT ICs on. You may recall that one was down -10% on the first day due to a bunch of errors, but ended up +6.6%. The other went much smoother and closed up +9.0%.

I was also able to buy back half of my August RUT HP IC spreads for $0.20. Not bad since I just opened up this trade on 7/1 and sold them for $0.74, capturing 73% of their value in 5 days.

Lastly, I was a little concerned about my short vega on my MNX double diagonal. So to help that out, I embedded a 145 calendar. Here's how the combined position looks:

I also plan to increase my position in this MNX double diagonal, at the appropriate strikes in the next couple days.

Starting Aug early: RUT IC & MNX DD

First some old business. I closed out of my RUT 420-430 credit spreads today. I was able to buy them back for 0.10. I still have some call spreads on that I recently (less than a week ago) resold. Those would be the 550-560's that I sold for $0.50 and are now priced at $0.80. Ouch.

My RUT double butterfly is still hanging in there. Since I sold half of my spreads earlier, it's taking its sweet time to make more money (since I cut theta in half). Also, as we've been moving up, I've been adding back month (August) long calls to cut the negative delta. This has increased my trade's vega, which isn't helping since volatility keeps dropping. Yesterday this position was up about 14%, but with the move up today, I did an adjustment and am down a little since yesterday. I'm holding out for 3-day weekend time decay and would like to close at the end of tomorrow or very early next week. The market has been fairly calm and I can't expect it to stay that way for much longer. So today I stripped off a 490 short call and moved it up to510 to collect more ATM premium as well as cutting my negative deltas. Because I moved it closer to the money, my theta increased as well.

Now on to August trades. This has got to be the earliest I've opened up a trade in years. My normal timeframe is 28-40-ish days before expiration. Today is 50 days before expiration and I put two trades on.

First trade is a plain-Jane RUT high-prob iron condor. I put about half of my (recent) normal size trade on, in an attempt to time-diversify my trade. I've been doing this for the last few months, but my first "tranche" would normally be put on next week, in the 42-day range. But I thought I would move it a bit further out, and hopefully capture a little of the holiday weekend time decay. I'm short the 430's and 580's. This morning I got a great fill at 1.48 credit (at the market's current mid-price), but even as RVX dropped, somehow the mid-price climbed and climbed through the day, and my great fill didn't look great any more. As of close, the mid-price was a whopping $1.67. I think some of that may be widening of B/A spreads, as the natural price is $0.95, so the mid to natural is a gigantic 0.72, or double that for the condor's B/A spread. We'll see what the price is mid-day tomorrow to get a better feel on if I've been had or not. Funny thing is that I tried getting this trade on all day yesterday for this same price and couldn't do it. So I was happy when I got filled this morning. Anyway, I added some downside insurance (extra 410 put) and I've been concerned with the upside, if we ever punch through the equivalent of 950 on SPX, so I added some cheap extra calls too.

And now for something totally new (to me), I put on a MNX double diagonal. My plan is to do this mid-week next week (around 43-days), but was again hoping to benefit from the holiday weekend decay, so I put some spreads on today. MNX shot up to nearly 150 today, and I didn't really want to start this position up near it's area of resistance. I wanted to see it punch through, or fall back a small amount so I had more room to the downside. And a slight pullback is exactly what happened, so I put the trade on. I went +/- 10 points from ATM for the shorts, and 10 points further out for the longs. Because the trade wasn't perfectly centered, I cut the deltas in half with a back month extra long call. This didn't hurt the theta much and actually got me closer to vega neutral, as I was short a bit of vega. Adjustment plan is simple...if I get 0.50 past a short strike, roll the shorts to the next (2.5 point spacing) strike. Repeat if necessary. Since this roll is just buying a debit vertical spread, I already have contingent orders set up to automatically do that for me. While MNX isn't very liquid, it does have penny-priced options and surprisingly tight markets for the low liquidity. In fact, I got filled 0.04 worse than mid, where the mid to natural price spread is only $0.13. And this is on a 4-legged spread. Even more surprising is that I was the sole day's volume on 3 of the 4 strikes. I call that a good fill.

Quick adjustments on RUT

So today was day 1 of the Dan Sheridan Options Mentoring Reunion and it was great. I was the first speaker, followed by mentor Dan H, Seth, Mark and Mark. Then talks by Tom Sosnoff of TOS and a Broker-Dealer guy and a market maker. And let's not forget seeing good friends/fellow students and meeting new ones, as well as a great meal in Greek Town in Chicago. Definitely a great day. Well, it turns out I'm sitting in my hotel room, the one I didn't expect to be in because I was planning on doing the 2.5 hour commute back up to Wisconsin. Dan Sheridan insisted that I stay in a hotel overnight, and since I only had two hours sleep last night, I thought it would be a good idea. Due to the long commutes both ways, I would have only gotten about 4 hours sleep tonight before having to turn around and head back down to Chicago. Definitely looking forward to tomorrow, especially on a few more hours sleep.

So today during the seminar, I made a couple of small adjustments. First of all, I entered an order to sell some calls on my high prob RUT iron condor. As previously mentioned, I have all my call spreads off, so in order to decrease my positive delta as well as increase my theta, I thought I'd sell some call credit spreads. The Jul 550-560's to be exact. After seeing the futures down, I wasn't too optimistic about getting a fill at the price I entered for my limit. Well, I got filled sometime during my presentation. I looked at the current mid and I got a pretty good fill. Of course, that was before RUT made it's big move up.

And due to the move up, and leaning fairly short deltas on my butterflies, I added a Aug 570 call to cut my butterfly deltas in half.

What can I say about my SPX now-double calendar? We moved up so much today (after converting it to a double calendar yesterday due to fear of the downside) that I'm now right at my original 920 strike. Unfortunately, my P&L is something like -13%. Yuk.

That's it for now. No pretty graphs tonight. Time to get some sleep.

Adjusted SPX and took profits on RUT Flys

I certainly needed that move up today. All of my positions were leaning long after Monday's big down day, so today's move up was a relief. Also, the move up pushed my RUT "double butterfly" up to about 10% combined gain, so I decided to take half the trade off to lock in some profits, especially before the FOMC meeting announcement. After doing so, my previous extra longs to balance deltas that were now remaining, were leaving this position a little negative delta. I though that this might be okay coming into the Fed announcement. I thought leaning negative was probably good, and if we go up, I'll be helped by the vols dropping. Turns out I benefited from both a slight move down off of today's highs as well as a post-announcement IV drop. At end of day, I'm up about 12% on the combined position. The individual flies are up 9% in 12 days and 16% in 6 days. I'm hoping to get out of the rest of the trade on Friday afternoon or Monday after enough time decay has set me up with 15-20% gain total. Below is before (blue) and after (purple) graphs on OV.

I also adjusted my SPX 920 Call calendar. Again, today's run up was a gift, but I was still concerned about the downside. I'm hoping that SPX stays in a range. I'd guess somewhere around 875 to 950, and my current breakevens are about 885 to 955. So I decided to roll down half of my position to flatten the deltas, increase my theta slightly, and lower my BEs a bit. Knowing my luck, I'll get whipsawed on this again and SPX will shoot up above 950 in no time. Of course, me saying that will hopefully prevent it from happening. As it stand, this trade is down about 8%. The current position is shown below.

As for the high prob RUT iron condors, my "lost 10% the day I put it on" tranche has finally crossed into positive territory at 0.8%. I'm looking to get around 5% on this trade due to my earlier adjustments (locking in some losses). My other tranche is around 5.5% gain with a goal of 10%. Doing well. Because I have no calls left, this pair of trades are leaning quite long delta, around 80, with theta around 100. Now that the Fed announcement is done, I'm thinking on selling some calls (around 25% of the original position size). Probably something around the 550-560, and this would cut my deltas to around 50 and increase theta to 140. Selling only 25-50% of the original size keeps the whipsaw risk lower while improving the greeks.

Big move, not too big pain

Well now. Wasn't that a shock to the system? SPX moved -1.7 daily standard deviations and the RUT moved down -1.8 SD. So, what did that do to the trades? Well, first of all, I got knocked out of my CAT iron-butterfly-turned-iron-condor for a max loss. Below you can see my entry point and original breakevens, which were then extended down to about 32.5, which was broken again today. I bailed.


My SPX calendar at 920 got spanked a bit today as well. I can't show the TOS graph because the MM's messed around with the vols (and/or bid/ask spread) at the end of the day. About one minute before the close, my P/L said I was at about a 200% loss. Not easily accomplished in a debit spread such as a calendar. So I'll use OptionVue, and show the curve as of 30 minutes before close, showing me down 9% (I was flat as of Friday close). Also pictured is the proposed adjustment, taking half of the spreads off and rolling down to ATM. Doing so cuts the delta from about 50 to 20, and increases theta from 80 to 93, and doesn't increase the capital requirements for the trade.



The RUT butterflies are doing fair. And in absolute terms, I'm doing not much worse at today's close than at Friday's close, in total. Both butterflies were up about 9% combined as of last Friday, and short about 16 delta, and after today's big move down, I'm still up about 8% but long 50 delta. Getting a bit long, so I'll have to consider cutting that. Looking at the positions individually, my first fly, with a 520 strike was up 12% on Friday, but is now only up 5%. I wasn't really ready to close it out at 12% last week, and today moved down so much right at the opening bell, that I didn't want to take it off for single digit returns. On the other hand, my second Fly, opened just 2 trading days ago, is up 11%. For an adjustment, I may consider rolling one of my 520 shorts down to ATM (490). Just like the SPX adjustment, this cuts the delta and increases theta, but this time it increases margin requirements since I wouldn't be moving one of the longs with it. If margin is a concern, you could also move one of the long calls too, but you'd be sacrificing theta as well as not cutting the deltas as much.

On the RUT High Prob, I was able to buy back my 590-600 credit spreads for $0.12. With the RVX up as much as 4 points today, the calls really didn't go down much in price, so I couldn't get them off cheaply, or take other call spreads I have on in this trade. But since I originally sold these 12 days ago for $0.70, I captured 83% of their value quickly. Nothing much to report here, other than between the 20 point move down and taking off half of my call credit spreads, I'm now a bit long delta, at 70, with theta only 115. Since this trade is so wide (short 430 - 570 strikes), I'm not too worried. If we have a calm price action for the next couple days, I may consider re-selling some calls.

Catching the blog up

Didn't seem like that busy of a week, but I guess I have some trades to catch up on. TOS says I had 37 orders filled (and 182 canceled!) for the last 4 days.

Let's start with this week's closed June trades. Finally closed my calls on the High Prob RUT IC, but due to a bunch of excuses, I only pulled about a 2% gain on this trade. Not a highlight of my RUT HP trades. The really sad thing is that if I would have truly traded it like my "no-touch" non-adjusting condor, it would have returned my standard 10%. But I over-traded it. The big run up on 5/26, 6/1 and 6/2 had me running for the hills, or at least to cover some of my call spreads at a loss. Doing so locks in this loss and I didn't resell any spreads to make up for it. I also tried a Friday through Monday (actually Tuesday) hedge because I was afraid of a quick move up on Monday morning like we've seen in the past. Just goes to show me....I can't read charts, and the 80+% odds of this trade works better than I do. I should REALLY leave it alone. I'd make much more money that way.

That's the bad news. Now the good news. I also had a Low Prob RUT IC on and I hung onto that all the way until Tuesday, only 2 days before expiration. I covered this one quite extensively in the blog. I ended up with 14.4% return. Not stellar, but not chump change.

Now let's cover July closed trades. I'm sorry to report that all of my bullish put credit spreads opened on just this last Friday hit their max loss, roughly -14% on each. That's APC, EWZ, OIH and OXY. Closed in only 5 days. Yuck. Also had to close my GENZ bull put spread at max loss. This one lasted all of 12 days.

That's the bad news. Now the good news. The SPX 930 calendar I opened last Friday closed today for 10.3% gain in 6 days. Kinda funny thing is that I was planning on adding to the position today, and that trade closed on a open limit order. Even funnier is that today's ATM strike is almost the same as the trade I close. Closed the 930's, opened the 920's today. So let's take that as a segway into the rest of the July trades and new July trades.

So here's the SPX 920 call calendar. Interesting to note is my fills. I originally tried getting filled on the 920 puts, but as soon as I'd put in an order, the mid would jump up $0.20. I tried it on the 915 put calendar too, and the same result. I let the trade sit for a while and the mid came back down to my price but no fills. I then checked out the 920 calls and found them about $2 less. The negative skew was a bit less than the puts. (Golden nugget there....check the skews for both the puts and calls and pick the one that has less negative skew.) So I put in a order for mid on the calls and got filled instantly. I decided to put in another order for $0.10 under mid and got filled instantly. I then put in yet another order for $0.30 under mid and didn't get filled. I let it sit for maybe 1 minute then moved it to $0.25 under mid and got filled instantly. Wow. Great fills on SPX!

Next up is the RUT Fly I started 6 days ago. I'm currently up 10%. Today I doubled the position by adding a 460-500-540 butterfly along with a Aug 600 call to help the short deltas. Below is pictured last week's position by itself, and how it looks with the combination fly.


I have two tranches of the RUT HP IC. One started on 5/29 which hit 10% loss in one day and the 2nd tranch started on 6/10. Nothing is happening on the 2nd tranch other than time decay, and I'm now just shy of 4% gain in 8 days. Pretty good for this trade. The 1st tranch I've managed to get back to about a -3% loss. As previously mentioned, I took half my calls off, locking in that loss. Yesterday I took the puts off for $0.20 (a little early) and today I decided to resell them for $0.60 (short 430 strike), as well as put the other call spreads back on for $0.53 credit (short 570 strike). This was to collect more credit to offset that previously locked in loss. The overall trade is now sitting at only -8 delta and +160 theta. Nice. I'm going to try very hard to not touch this trade again. Either I'm going out with max gain (~10%) or max loss (~ -20%) per my plan.

I've decided to not put on a RUT LP today. It's not that I didn't try. I just couldn't get filled close enough to mid (I caved in $0.05 - 0.07) and I tried nearly all day long. Maybe I'll try again in the morning, but I'm thinking the two RUT butterflies will replace the LP this month.

And saving the worst for last, CAT has made quite a run down, an 11% drop in the 4 trading days since I put on the butterfly. I decided to cut the 400 long delta by moving the entire put side down. I moved all the shorts to the current ATM strike and moved down the longs. I couldn't keep the 5 point spacing because of the lack of 1 point strikes below the 30 strike. So I went from a 32-37 put spread to a 30-34. This helps cut the delta even further. After this adjustment, I'm at +176 delta and +48 theta. Not a great ratio, but better than the 417 delta and only +21 theta before the adjustment. Before and after adjustment risk graphs shown below.


I wonder what tomorrow will bring?

New July Trades

Friday was a busy trading day. I started seven new trades.

Of the seven new trades, I did four bull put credit spreads, all based on recent 20-day high closes on Thursday. They were APC (short the 43 strike), EWZ (short 49), OIH (95), and OXY (60). Since the market opened a little lower on Friday morning, getting a good credit was easier.

I put two butterflies on. First one is an iron butterfly on CAT which has been channeling for about two months. Earnings is just after earnings, so hopefully the IV will behave in the front month. I was originally thinking about a calendar, but the 2 point negative volatility skew wasn't too appealing. It's most likely due to earnings in the back month, and that skew could possibly become more negative, actually helping out the calendar, but I liked the butterfly better. Not sure I made the correct choice, so we'll have to see how it plays out.

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Next up is a call butterfly in RUT, 470-520-570 for a $17.95 debit. I'm a bit concerned about the upside, so instead of adding a long to cut the delta in half, I went almost all the way to neutral.

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Here's my one and only long vega trade. Another calendar on SPX. Surprisingly, it's fairly easy to get filled at mid prices on SPX. Of course, the markets haven't been crazy intraday, so getting mid is a bit easier. I'd hate to see what it trades like when things are hitting the fan. I put this one on with a tiny bearish bias. After all, this is a positive vega trade....how does vega go up? Price goes down. Hence the small bear bias.

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I guess I didn't write about my July RUT HP IC that I put on Wednesday, so there that is. I'm short the 430 and 590 strikes, plus I put on some insurance. I mistakenly added some extra long 590's instead of 600's (reducing my shorts, not adding to my longs). I didn't want to correct this after the fact, so I let it be.

Closing June trades

Time to do a little catching up with the blog. I've been doing little adjustments here and there, and closing out June trades when possible.

First up is my COST butterfly. COST has been a true roller coaster. At first I was -25% down (at my max loss) on May 23rd, then earnings came out on 5/28 dropping the vols and putting me only down 10%. It then was fairly calm until June 4th when COST made a big move down at the open and put me down 17%. I tried not to over-react and overtrade, and later in that same day I was essentially flat. I finally closed the trade 7 days later on 6/11 with a 12.2% gain. From -25% to up 12%. Nice recovery.

TEVA didn't work out as well. Three days after I put on this trade, TEVA went from totally channelling to climbing 11% in 3 weeks. I tried rolling some of the shorts from 45 up to 47.5. It helped slow the bleeding, but not enough to save the patient. I closed this trade out on Wednesday 6/10 for a -14% loss.

I had a bull put vertical (put credit spread) on MA. It's been a little rocky, but finally closed out on Wednesday for a 12.1% gain. This trade took a while, 30 days. I had 8 other such verticals on and they closed in 6-22 days, with an average of 12 days, so 30 seemed like eternity.

Out of my 9 verticals for the month, 7 were profitable, 1 took a loss, and 1 was a scratch. The winners averaged 9.8% return and the loser was -14%. I think the reason for the winning percentage is that all but one were bull put verticals and the market was running up hard. I'm not so sure how this would work if the market was a little more sideways.

My RUT high prob iron condor didn't survive the big runup too well. I still have some call credit spreads on (short the 570's). Last Friday I was concerned about what might happen over the weekend, so I hedged with a July call. It was very expensive and would completely save me if we ran up, but if we run down, it kills any profit. And that's essentially what happened. At one point I was up 7% and I'm now only sitting at 1%. I'm still trying to buy back the calls for $0.10 but not filled yet. I'll have to go back and backtest this trade to see what would have happened if I treated this as a "no-touch" HP like I would normally do, as opposed to all the adjustments that I did during the month.

I still have two trades on that I'm carrying to expiration. My SPX calendar and a RUT low prob IC. The SPX calendar, day for day, has never showed a profit. It's kind of an insurance policy and my only positive vega trade for the month. It started out as a single calendar at the 915 strike, one day later turned into a double calendar by adding the 850 strike, 12 days later taking off the 850 strike which then left me with the original 915 strike single calendar and a realized loss on the 850 calendar. My upper break even is at 940 and we've been riding that line for two weeks, with an excursion to 956 on Thursday 6/11. Yesterday I decided that I didn't want to take this trade off yet in case of a pullback. It seems that 950 is an area of resistance, and if we pull back some, this trade could turn profitable. In order to cut my deltas slightly, I added another calendar at the 950 strike. The June 950 still had over $8 in time premium, so it seemed like a good idea. In looking at it, it doesn't really cut my deltas much, but definitely moves the profit window over the range that we've been trading for the last two weeks. And with the strong resistance at 950, I guess I didn't want to be completely delta neutral, but rather lean a little short.


When I last wrote about my RUT low prob IC, just over one week ago, I had a tiny loss. That's turned around with the beauty of time decay, I'm up 15%, and because deltas are essentially zero, we'll let this ride out a tiny bit, and close out sometime next week.

Closed WMT +14.9%

Not too much to report today. I had a GTC order to buy back my WMT iron condor and it got filled right away this morning for a +14.9% profit in 18 days.

Most all my other trades are are fighting tooth and nail to be profitable. TEVA is hanging around my max loss (-21%) with nearly zero delta. I tried unwinding the trade again today, but the MM's didn't want to fill me at mid prices. There's some decent probabilities of getting back to breakeven on this trade, but it will take nearly all of the next two weeks to do so. My COST butterfly is flat (+3%) but is perfectly centered with low deltas. I just leave that positive theta flowing in. I've previously mentioned that I didn't like my RUT low prob curve with only the call credit spreads left on, so I did something silly...I sold a 480-490 put spread to cut my short deltas to nearly neutral.

Up next week is my "normal" ~36 day RUT high prob iron condor. Maybe a good time to do a double diagonal or two. The bad news is that most underlyings don't have August options out yet, and I don't want to do a July-Sept DD. A good looking candidate is MNX, so I'll look into that closer next week.

Have a good weekend.

TEVA bites me (again)

TEVA has decisively broke out above resistance today. I reacted by buying in some call spreads (some 45-50 and 45-47.5) and tried to exit the entire trade. I was delta neutral-ish when trying to close the trade, so I wasn't in a hurry. Or more to the point, I wasn't in a hurry to give the market makers a bunch of free money. Unfortunately, I coulnd't unwind the trade without caving in more than a nickel on my 42.5-45 call spreads. So I didn't take off the trade today. Mostly delta neutral, positive theta, and weekend time decay around the corner. As long as TEVA doesn't tank tomorrow, I can wait to get a better fill to close this trade (for a loss).

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This morning's excitement started with COST gapping down at the open. Two days ago it was at my upper breakeven and I did a small adjustment accordingly. Today's gap down and subsequent plunge to 46.25 (4.6% drop) caused me to go from delta neutral and no loss, to -17% and nearly 400 delta. I tried not to panic and wait a few minutes to see what was going to happen with the market and COST. The market was up, so I was hoping COST was going to follow suit. And it slowly kept climbing, preventing a need for an adjustment, climbing back to 47.87 for a close, putting back at no loss and only 80 delta long. Whew!
That's enough excitement for one day.

Rolled RUT LP IC, new GENZ trade

Today was the pullback that I was looking for, but not nearly as much as I would have liked to see. I guess a few more small down days is better than one big down day as far as IV is concerned. Overall I'm short a LOT of vega, so a IV rise wouldn't be good.

Despite the early pullback, WMT was up pretty strong. I was getting fairly short delta, but since WMT was near the upper end of its range, I didn't want to over-react and buy in too many spreads. So I only bought in a couple 50-55 call spreads, taking my delta from around -300 down to -180. Breakevens are now around 48 - 52.5, which is quite a range compared to recent price action. Despite this quiet time with WMT, its IV hasn't changed much, and in fact has gone up very slightly since I started the trade 15 days ago. No profit from vega here. I'm still sitting around 9% gain. I'd really like to see 15-20%, so we'll hang on a bit longer. Here's the trade after adjustment.

With nearly the entire market down today, I was surprised to see a couple stocks making new 20-day highs. Most notably was GENZ. Therefore, I opened a new 50-55 bull put spread for July, 0.50 credit. Nothing special in this vertical. Just shown for illustration. Exit or adjust when I'm down an amount equal to my credit ($250) (around $58.50) and take profit at 75% of my credit, around $69.00.

Yesterday I was pretty sure we were going to pull back a little, if not today, at least sometime soon. So for my RUT low prob iron condor, I bought back my put spreads for $0.40 (originally sold for $1.49). It seemed like the right thing to do, but afterwards, I wasn't too happy with the risk graph. The downside was great, but it didn't help at all if we went up further. See below, original trade and with puts removed.

So what I did during today's pullback is to roll up my calls by one strike. In order to do this, I simply placed a butterfly trade. I was originally short 540, long 550. To roll up in one move, I bought a 540-550-560 butterfly and am now short 550 and long 560. The resulting risk graph is below.

Again, I'm not very pleased with this after the fact. While I gave myself some room on the upside, the potential yield is kinda weak. In order to improve the situation, I tried to sell a put spread but I never got filled because the market was in it's seemingly "regular" late-afternoon rally, running away from my put spread offer. Pictured below is what I tried to get filled on before time ran out. I may try to do this tomorrow, providing the market doesn't immediately rally and force me out of the trade completely. Proposed position is pink, existing is green.