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.