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.
Showing posts with label SPX. Show all posts
Showing posts with label SPX. Show all posts
Wednesday, July 29, 2009
Wednesday, July 15, 2009
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.
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.
Thursday, June 25, 2009
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.
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.
Monday, June 22, 2009
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.
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.
Thursday, June 18, 2009
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?
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?
Saturday, June 13, 2009
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.
Monday, May 25, 2009
Something other that RUT
I do have some other trades on, other than RUT. First is a WMT iron butterfly, started 5/19. This is sitting well, just need more time to come out of it. IV has been dropping rapidly, but is up 1% since I put on the trade, which isn't helping me. Profit at only +2%.
Next is TEVA, which has been in an amazing channel for months. The run up to 45.88 got very close to 46, which was where I was going to buy in a few 45-47.5 call spreads to cut the delta. Fortunately, TEVA pulled back a little from the day's high.
And I have one long vega trade on, a SPX double calendar. It started as a single 915 calendar on 5/20 when SPX was at $922, but one day later SPX went below 880. This was close to my lower expiration break even, so I decided to buy another calendar a bit lower at 850. I probably won't do anything with this trade until it hits one of the strikes. IV has come up 3% since I put on the trade, helping keep this trade in the game, although down 2%. Plan is when either 850 or 915 is touched to sell the opposite vertical.
Last is COST. I'm currently in recovery mode. That is, I'm trying to recover what I lost. This trade started on 5/19, and in one day, COST experienced a >2 standard deviation move in a day. Even though the move was up, because of the fast move, the volatility jumped up 6%, hurting the trade even further since a butterfly is a negative vega trade. I reacted by buying in 3 47.5-52.5 spreads. The trade is sitting at my max loss of -25%, but with deltas fairly low, I'm going to see if the IV settles down and let the positive theta do it's thing. The last two days has COST coming down a little, maybe working on filling the gap.
Next is TEVA, which has been in an amazing channel for months. The run up to 45.88 got very close to 46, which was where I was going to buy in a few 45-47.5 call spreads to cut the delta. Fortunately, TEVA pulled back a little from the day's high.
And I have one long vega trade on, a SPX double calendar. It started as a single 915 calendar on 5/20 when SPX was at $922, but one day later SPX went below 880. This was close to my lower expiration break even, so I decided to buy another calendar a bit lower at 850. I probably won't do anything with this trade until it hits one of the strikes. IV has come up 3% since I put on the trade, helping keep this trade in the game, although down 2%. Plan is when either 850 or 915 is touched to sell the opposite vertical.
Last is COST. I'm currently in recovery mode. That is, I'm trying to recover what I lost. This trade started on 5/19, and in one day, COST experienced a >2 standard deviation move in a day. Even though the move was up, because of the fast move, the volatility jumped up 6%, hurting the trade even further since a butterfly is a negative vega trade. I reacted by buying in 3 47.5-52.5 spreads. The trade is sitting at my max loss of -25%, but with deltas fairly low, I'm going to see if the IV settles down and let the positive theta do it's thing. The last two days has COST coming down a little, maybe working on filling the gap.
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