Adjusted TEVA

TEVA hit my upper breakeven intraday Friday, so I decided to do the adjustment I mentioned previously. I bought some 45-47.5-50 butterflies, effectively rolling my 45-47.5 credit spread up to 47.5-50. You can see the before and after overlaid in the graph below and how I moved the upper break even up a bit, as well as cutting my deltas.All other trades are doing well, although the run up prior to closing on Friday pushed SPX past my upper calendar at 915. A few points higher I may need to close my 850 calendar.

I also opened up a new high prob iron condor on RUT, short Jul 380 and 580. This is much earlier than I normally would start this trade (normally I don't start until 1-2 weeks from now), but I put on a fraction of my normal size and did this to just add a little time diversification.

No more WMT monthly "earnings"

A big thanks to Ernst from http://www.thetapositive.com for pointing out that WMT is no longer going to release monthly same-store-sales reports, and move to just a quarterly earnings announcement. Therefore, I no longer need to fear the first week of every month when I have a WMT trade on.

From WMT's previous monthly report on May 7, 2009:

Policy Change for Reporting Comparable Store Sales
“At the start of this fiscal year, Wal-Mart revised its approach to providing guidance for sales. We went from providing guidance for monthly sales to forecasting a guidance range for our U.S. businesses for the full 13-week period,” said Tom Schoewe, executive vice president and chief financial officer for Wal-Mart Stores, Inc. “Moving forward, we will no longer report monthly sales. We will provide comparable store sales results on a 13-week basis, along with guidance for the upcoming 13-week period. And, we will release this information during our scheduled quarterly earnings calls.

Closed OXY and HES, surviving COST

On May 6th, 22 days ago, I sold two bull put verticals. One on OXY and one on HES. The entry was based on fellow Sheridan student-turned-mentor, Jay Bailey's new 20-day high/low. The exit today was based on capturing 75% of the credit I received, which turns out to be 12.4% on OXY, and 8.7% on HES, after comms. I sold 9 such verticals this month. I've previously closed 3 - one scratch (got chicken and pulled the plug early), one of a -14.6% loss in 2 days, and one for 8.7% profit in 7 days. Of the 4 remaining (MA, ICE, GS, EWZ), all are currently profitable from 2.8-8.8%. ICE and EWZ are close to my profit targets.

COST did a wonderful thing today...earnings caused the stock to drop right around my short strike of my butterfly, and as expected, IV dropped. In this case, it dropped 8% since yesterday, from 37% to 29%. Yesterday's vega was around -35, so 35 x 8 = $280 gained from IV dropping due to earnings released BMO. I'm still sitting at a loss, but only $-110 instead of $-564 just 5 days ago.
Next up is TEVA. I've recouped some of my losses, now at -8%, but TEVA hasn't had a pullback yet and is sitting near the upper breakeven on this uneven butterfly. The last two days have closed lower, but not where I'd like to see it. Below is my current analyze page, and below that is an adjustment I'm considering. I'd buy 5 butterflies, which would essentially roll out 5 of my credit spreads from 45-47.5 up to 47.5-50. It would cut my delta in half, increase my theta by 50%, move my upper breakeven 0.50, and only raise my lower breakeven by 0.20. Overall, a pretty good adjustment. We'll see what price action tomorrow brings us. If it's a down day, no adjustment will be made. I'll probably adjust if TEVA hits my upper BE.

My WMT butterfly is sitting nicely for the moment, currently up 8.7%. This one concerns me, as WMT and other retailers release same-store-sales reports every month. They occur around the end of the first week of the month, and I've gotten really screwed by these (see Jan 8, 2009 gap). They are like earnings reports every month. Option income traders don't like trading around earnings. Option spec traders yes, income no. The next report is due one week from today, Thursday 6/4 BMO. I'm thinking I might want to be out of this trade before then, just to be on the safe side, or at least substantially reduce my position. The problem with waiting until next Wednesday to do something is that IV typically rises several points between now and then, which is not good for a butterfly - short vega trade. May have to considering doing something tomorrow afternoon, like banking the 10-ish%.

Closed RUT butterflies for 15.8%

Well, good news and bad news. The bad news is that when I was in the process of taking some profit of the table, I took off the wrong trade. I had two RUT butterflies on. One from 14 days ago at a 490 center strike and up nearly 20%, and one from 7 days ago at a 500 strike up around 10%. I meant to take off the 490 strike one (since we were on an ascending wedge most of the morning, and above 500), but instead I took off the 500's. After lunch, and when RUT dropped down to 490, I decided to take off the entire trade, for a total of 15.8% after commissions. Not bad for 14 days. That was the good news.

Among other good news is that TEVA came back down a little, and IV's settled down slightly in my favor, putting this trade only -12% at the close, and still short 129 delta.

COST has earnings tomorrow morning. I'm a little cautious, but didn't take any action on my existing trade. I have fairly low deltas on this trade and could tolerate a -6%/+4% move, or probably more when the IV comes out of the butterfly after the announcement.

My WMT butterfly is doing okay, up almost 8% in 8 days. Also my June RUT high prob and low prob iron condors are doing well, both up around 6%. The low prob has been on for 7 days now. The center of that IC is 495, so the recent price action has been good. Adjustment will be at 472.50 and 517.50, or probably profit take at around the 15% level.

As for new trades, I've been thinking about opening up a tranche of my July RUT high prob. Thinking about short 380-570, current mid is $1.57, plus some extra longs on both sides.

TEVA bites me

Well, didn't that just suck? TEVA moved up 1.6 standard deviations today. It's been trading in such a channel, but has now set a new 7-month high. But that's not the worst of it. The implied volatilities on my strikes got jacked around, each in the wrong direction. My longs lost IV whereas my short's IV was up. If you look at this position prior to today, and what the value should have been around today's close, I would have been down about $200. You can see this in yesterday's P&L graph. The upper marker, at 46.6, shows I should have only been down $205. As an interesting aside, OptionVue 6 shows that I would have been down around $375. You can see on the OV screenshot below that I would have been short 459 deltas at this point (TOS says only -310).

I didn't want to wait around long enough to get that high of deltas, so I started by buying in four 45-47.5 call verticals this morning at 10am, cutting the deltas roughly in half. Then TEVA continued a long, steady climb up, so I bought 3 more verticals at 1pm, again cutting the deltas roughly in half. At one point this morning, I was down around 25%, which is a max loss point. I was watching my P&L jump all over the place, obviously due to the leg IV's jumping around. It was apparent that the 45 calls were bid up with people covering like myself, but I don't understand why all the air got let out of my 42.5's. That's what really hurt this trade. The current position is shown below after things settled out. Deltas at -207 (TOS says -108...which to believe?) and P&L at a more reasonable -17%. You can see how the trade currently looks below.

I guess the plan is if TEVA continues up, I'll buy in more spreads, and look at selling some 47.5-50 spreads to get theta pumped back up. Or just throw in the towel with a max loss. We'll see.

I was also concerned with RUT's gigantic move up. My iron condors are both in great shape, but my 490 butterfly was a bit short delta, so I added a single Jun 550 call to help that out.

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.

Potpourri of RUT spreads

First off is my staple trade, the ~36 day RUT "high prob" iron condor. This one is sitting well. Next thing to do is to pull of the calls if I can buy the back for $0.10 after this weekend's time decay. Currently sitting around 5% gain. Goal on this trade is just short of 10%. This trade was started on 5/12 with the trades shown.
Next up is the Russell "Low Prob" iron condor. This was started only a few days ago, on 5/20, and is already approaching the first adjustment point: when it hits 472.50, I'll buy one July put to cut the deltas in half.

Love the RUT...next is the RUT double butterfly. First is one centered at 490 opened on 5/12 which I'm up 20% on, then another centered at 500 which is roughly break even, which means for the entire trade I'm up just over 10%. Not bad, but hoping for a little more. If the market heads down early this week, I'll cut some deltas by buying one 460-500 call vertical.