Trades – Page 12 – Travels and Trades

Sep 22 – Rhino M3 Trade Plan

The market hasn’t been friendly the past 2 days but I somewhat mitigated about 70% of the potential move if I had followed normal guidelines. I had hedged some of the trades with calls and reverse harvey’d some of the RUT trades. All in all, it was more neutral with just a bit of upside risk into FOMC. The result, in RUT, we probably went from 5% to about 3% in P/L. In SPX, we went from about 7.5% to about 6%. Not terrible given that we’re at 52 week highs in the RUT. Todays market close was very strong for RUT which hurts the trade a bit since we’re not the right hand side again. Still! We’re profitable and at 52 week highs. Can’t complain, it should set up the next trades well for down or less than 4% up moves 🙂

I was able to remove about half of the SPX Oct position and secure some profits. The SPX monster trade is now up ~60-62k (the max it was up was about 70/75k) despite this large rally post FOMC. The position looks good, has decent theta, though outside the tent, but any pullback would bring some great returns. The upside has not much risk left. I removed the 2175 Call calendars today at 2:30pm as they were at the money. I won’t add any more but I will Reverse Harvey on a pullback. We have that debate on Monday which could bring some small volatility to the market if Hillary bombs. With limited upside risk, I am not in a huge rush to adjust but I’ll keep my eye on the screen and work to RH the position.

Plan: I am looking for a pull back to RH the upper longs and continue to peel off the trade at profit. Ideally, we get some sort of pull-back in the next week.

All of the November positions are now back to even with the big up-move. Expected. Will need to upside manage those trades soon if we continue up. They aren’t at any adjustment point yet but they aren’t far away either.

Before the FOMC, I managed to get filled on several 1240/1200/1150 December BWBs @ an average price of 2.40! They were 87 DTE I think, but still, great pricing. Makes the upside management easier, and it’ll be easier to profit.

I am considering backtesting a more conservative version of the Rhino that I’ll start cheaper at around 88DTE, do a few more units than normal (more leverage), reduce the P/L target and close earlier than 31 DTE. The cheaper price in the BWB should allow for easier upside management, and the cheaper price and length to DTE will make the trade a lot easier to manage. If I can get a 6% P/L target and leverage that up, it’ll make the trade a lot easier and resilient.

Sep 19 – Trade Plan

The market may be range bound until the big two meetings on Wednesday (FOMC and BOJ). The gap up today was a bit of a pain to see but the market has now moved back into range and the pattern might even be suggesting a 3 step up that is bearish, further the double bottom intraday failed, again bearish, at least for today. Breadths are on new lows as well. There was apparently a new comment by a Fed with a different more hawkish tone?? I haven’t confirmed. Maybe we retest 2120 and relief really from there into FOMC?

I am contemplating exiting most of the SPX OCT trade as we’ve hit a solid 6% profit target and any outsized move in either direction would negatively affect the trade. We’re 32 DTE.

I checked the Rhino results over at Capital Discussions and saw that it’s single digits for the year. It’s at 6.92% since Nov where I think I’m at about 15% where we expect 5% a month. I am still ecstatic about the result. Almost somewhat giddy. I am being serous. Why? Because this period was the most difficult set of months for the Rhino to profit. This concurrent set of weak months are not matched in backtesting through to 2008. There’s been no worse time. It’s about as bad as it can get (short of some unhedged Rhino’s going through 9/11 or something). Let’s break down the year starting Dec, 2015. Keep in mind, From Feb 9 to Sep 1, we’ve seen a 34% move in RUT. I’ll always tell someone that this trade will not make money in a 34% move over 6 months 😉

Dec 2015/Jan 2016

The massive down move from Dec 02 through to Feb 9 was extreme (1204 to 946) = 22% down move. Rhino’s can handle these decently so long as the move isn’t a 5-6% gap overnight. It did handle it decently. My expectation is that a break even to slightly positive result is doable depending on when it happened in the cycle of the trade. If it was right at the beginning, you’d be hurting, if it was in the middle and you were diligent with rolling the structure down, you could have gotten out for a decent profit. That said, getting fills and rolling structures down could be very difficult to deal with especially if forced to do it in a fast moving market. I actually was slow to pull the trigger a few times and hedged with bearish butterflies. A mistake in my opinion. I ended up treading water around break-even until Feb 9 bounce. The bounce initially set up a lot of profit but the subsequent fire storm upwards took most of it away. From that point till about August, I was only slightly positive. When you see the following months, you’ll know why!

Verdict: Likely both months are break-even to slightly negative in reality. A No-emotion mechanical trader would make profit following the rules. I would make profit now. I didn’t at the time!

Feb 2016

The big bounce from 946 to 1100 was extreme and quick. It was almost unrelenting and I’d expect any trade in this environment to do around -2% or worse. It’s not an environment that you can do well in. The market moves ahead of your tent into a zone that is, at best, break-even to slightly negative. Theta kills and if you aren’t diligent in upside hedges, then you’ll get a losing trade. Remember human factors, the market is bouncing off of a huge low, you expect the bounce to retrace to test the lows, or at least do a partial retracement after such an aggressive move, the factors that caused the fall haven’t just disappeared have they? If You leave the trade on too delta negative expecting to do you upside adjustments on any reasonable pull-back and it never comes. You’re now down.

Verdict: Likely a -2% month

Mar 2016
This is another 4-5% up month. Again, VIX low, shitty prices on BWBs and a fairly big up move. I’d predict a break-even month. Maybe 1%. the 4-5% up move isn’t as much as the previous month and probably good enough for a very slightly positive result. Any trades entered would be at poor value (high cost for the BWBs i.e. @ 3.3-3.50 a pop) and these trades are affected by more up moves as you paid more for the BWBs.

Verdict: Likely a 1% month

Apr 2016

This is a 5-6% up month. Vix is Low, BWB have Shitty prices, and a big up move into May. I’d expect a break even month

May 2016

A challenging V-whipsaw month! The market moves down about 6% into May 17. IF you were lucky, you closed off some May expiry trades into expiry (unlikely you held that far into expiration). If you had June ones, they had 31 DTE by May 17, likely didn’t close those either. Maybe you hit profit target by May 17, doubtful, we paid way to much for the BWBs re the low VIX environment. The market then rebounded huge and any trades initiated or started around May 1-May 17 are now under water. The move was very aggressive.

Verdict: Likely a negative month..maybe some trades hit profit target and were exited?

Jun 2016

Nice decent decline into June 26, likely you exited some towards the end of the month or on the rebound post Brexit. I’d say possible to profit a few percent here if not 4%. If it wasn’t time to exit (very likely), you’d lose most of the profits on the way back up on the 12% or so bounce

Verdict: 2-4%

Jul 2016

Low vix grind up market move of 8-9%. BWBs very expensive, no pull backs, no relief, huge up move. If you’re slow to adjust upwards, you’ll get killed. I got killed in this move. I lost my Aug and Sep expiries by this low vix melt up that last through most of August as well. Very difficult month to make anything.

Verdict: -2%

Aug 2016

Low vix grind up market of 5%-6%. BWBs very expensive, no pull backs, no relief. If you’re low to adjust upwards, you’ll get killed. I got killed in this move. I lost my Aug and Sep expiries by this low vix melt up. Very difficult month to make anything.

Sep 2016

Not over yet, but we haven’t had a 5% up move, so that’s a positive 🙂 Oct and Nov expiries are all in the money profitable. Market has some volatility, pricing is good, we’re back to a more normal month since February. Possible to make some good % profit here.

So all in all, this year has been a challenge for the Rhino, done typically, it hates big up moves, it’ll get out of the tent and the trade all of a sudden becomes a challenge. How do you make money in front of the tent?? You really can’t and if you paid a high price (typical of Low VIX environments)..the BWBs will quickly lose value and you’ll be negative theta. Each cycle experienced a 6% up move and the entire 7 months from Feb-Sep experienced a 34% up move. The common-denominator to loss in these months are the viscous up moves experienced in each and every cycle (short of the Jan one which was in and of itself a huge challenging down month).

I’m ecstatic about the positive result because I know it’s about as bad as it will get over a 6-7 month period, I am not saying that some black swan event won’t come and be worse in a single month, I fully expect that, but I will likely have full hedges always on soon for any event that’s 8-12% overnight gap or flash crash. The point is, the market environment can’t keep going up 6% each cycle and when it stops doing that,this thing will fly. On the Brexit, when the market fell 5%, my balance skyrocketed almost 35% (it was huge, like 300k or something). A return to volatility and a return to mean reversion in 45 day cycles will equate to outsized gorgeous returns. Looking forward to it.

Sep 16 – Trade Plan

SPX OCT Rhino MONSTER

P/L: ~60,000-70,000

Getting close to profit target of $120,000. Any good 1.5-2% move down will get it at profit target and I’ll close it up. Good trade. If we get lucky and the move happens a bit later on, the profit can be a lot higher. I’ll be pretty quick to lock up profits as we get into next week since we’ll be approaching the 30 DTE level.

RUT OCT Rhino

P/L: ~22,000

Getting close to the 37,500 profit target. Same thing applies as with the SPX one. Will start locking in profits and removing.

SPX NOV Rhino

Majority of our shorts are at the 2120 strike and we’re up about 7,000. I have to consider rolling the structure down soon. If we go towards 2100 especially.

RUT NOV Rhino

Majority of the shorts are at the 1200 area and any move towards 1190 will require me to roll the structure down @ a profit.

Sep 13 – Rhino M3 update

Did not expect a 2% fall today. Works well for the trades. If SPX slices through 2120 (we are at 2125 now), I’d expect a waterfall movement down as all new $ that bought the dip yesterday are trapped and it’ll likely magnify the selling, not to mention that it’s very weak price action. I’d then expect new lows probably targeting 2040/2050 area. I’d think that, less any black swan event, that it’d hold there and we’d bounce into the rest of the year. Just my 2c

More to come..

Sep 12 – End of Day

A complete reversal. Looks like my lotto’s are out of play…or maybe not. If the market had fell today, I’d have been forced to close them at whatever profit was there as leaving them on with any significant profit would have been gambling. Now, if we actually had a black swan or big 5-6% move, it’d be significantly more as time is ticking on them. Anyways, lots of potential market moving news out there (Hilary, North Korea, etc). A complete waste of time talking bout them but hey, whatever, it’s kinda fun.

Huge Ramble and verbal diarrhea below. Maybe someone can relate to them.

Today’s reversal actually wasn’t too bad on my P/L as I had bought some hedge calls yesterday towards close that paid off reasonably well on the reversal. Sort of internally thought that this would happen re three feds talking today but thought the down move was too harsh for anything significant (I was wrong). Still, Oct/Nov trades are all perfectly positioned. If we can sustain the up move to no more than another 3% we should be sitting very pretty with nice trades that will make the entire year. It’s possible the year ends up at 50% after the Nov and Oct trades, if we have any normal movement from here till mid Oct. If this market screams up to 2240+ then that won’t be possible and we’ll be treading water as we have been.

I am trying to explain to some friends (when they ask how my trading is going since Feb) why the results have been less then spectacular. It think all of us market neutral BF traders agree, it’s a very difficult market for market neutral trading, it really is. I think John Locke is negative 3-4% for the year on his core Bearish Butterfly, M3, V-Condor and Rock trades combined. It’s just a shitty market for these trades. Why specifically for the Rhino? Well, it’s the fact that the market has moved up significantly in every single cycle since February and this strategy really is a mean-reversion based strategy. It expects normal market action with normal volatility where somewhere in the cycle, the market falls into the tent enough to generate the profit targets in the plan. Of course, some months it won’t and you’ll do break-even or slightly negative but other months you’ll get lucky and do 10%. In general, it will do well in each cycle if the cycle moves 10% or less to the downside and 5% or less to the upside. THat’s a huge 45 day range potential for decent results! The crazy thing is, each cycle since Feb has had the latter requirement violated each time. Since February, the trade has not gone back to the tent long enough to generate the profit targets. It’s moved up 34% in 5 or so months. That’s an average of 6% a month or 8-9% a cycle! So, how could any of our trades end anywhere near the tent to where it generates a significant profit? In the Rhino, if the market moves outside of the tent on an up-move, and it sits 3% or more away from the tent without mean-reversion or a move back, the trade is pretty much dead. That’s if you follow it as per the guidelines and original intent of the Rhino. Of course, you could adjust the upside to generate a return via things like RH (Reverse Harvey’ing the upside) but there is trade offs, and to me, when we’ve had significant up moves, we are at risk of quick moves to the downside..and well..I’ve backtested the trade to death and I like it as it is, I don’t want to deal with downside exposure especially now, I mean, it’s kinda already too late 🙂 I believe that over time we mean revert and overtime volatility will come back into the market. If you turn the right wing weak area of the Rhino into a more income generating area, like RTT traders do, it’ll expose you on the downside significantly. I know some of the RTT traders did much better in this environment by reverse harveying but at the same time, these trades will suffer in a larger down move, in fact, I saw several talk about how they were at limits on Friday. If it fell another 3% on Monday, they’d suffer greatly. I prefer to keep managing the Rhino the way I manage it. Eventually it’ll pay off.

I’ve backtested the Rhino to death, and if you go back to 2007, it does extremely well, it’s extremely resilient and it generates an average of 5% a month. It struggles in run-away up markets but little else. No matter how you slice it, if you backtest the last 5-6 months, you’ll get similar crappy results UNLESS you were very liberal on your upside adjustments and didn’t follow the original guidelines (IE RHing the trade). So, when I go through this period with live trades, and I am frustrated with the break-even results (which is only really the last 5 months) and then I backtest and get the same type of results, while having had 70+ months backtested with fantastic results, well, that tells me it’s just the current market type. The trade will work over time but it struggles in times like this..I mean 34% UP in five months, how could I expect any better in the trade result. In fact, its so extreme, shouldn’t I expect to be quite negative during that period?

So the point of all this unedited jabbering, well it’s meant as a cathartic check for myself to remain patient. The next year will not be the same as this year, and if it is, well fuckn’ hell, I’ll just endure it. But I believe that the market goes through cycles and all cycles end. The point is, I have a trade plan, I am going to follow the trade plan and I will continue to trade the plan for years to come. I am confident in the trade. This applies to the Rhino trade, I am actively looking at other trades to compliment.

Here is a few of the trades I have on

1. The Monster SPX Rhino

This one is quite healthy. It’s got a P/L of about 34k right now. It hit 53k yesterday. If in 20 days we are sitting anywhere between the 2034-2142 area, it’ll be up between 130k-410k If it’s at 2070 area, it’d be up 410k! That would put my account up almost 50% for the year. Not a bad result for one winning trade in 4-5 months. See, it’s about waiting for some mean reversion and for some luck in having the trade end within the tent and this tent is very large..2040-2140 would generate a hefty profit. If the market keeps moving up and we get to the 2230 area or above, yeah I mean, it’ll do slightly positive (15-30k) and that’s it…and that is exactly what’s been happening the last 5 months. You just can’t win too much on relentless up moves.

Here’s my Nov RUT Rhino

You can see here..we’re about 2% out side the tent and well, we have no real profit potential if we go another 1% out. Of course, I’ll add some call BWBs to help hedge it but it’s likely we’ll just hit break-even if we sit out here and don’t move back in the tent. If you have 4-5 months like that, you have to ask yourself, what are the odds that the market moves up and away from tent and does not enter back into the tent enough to generate the profit target? It’s actually quite rare, it’s just a symptom of an extremely bullish market like this has been and some bad luck with timing. The last 2 down moves worth any salt since Mar lasted 2-3 days and were in such a time where we couldn’t yet close the trade.

Sep 9 – End of Day

Ah what a great day 🙂 It’s nice to be cheering and enjoying a beautiful market fall and even praying for a 3-5% gap down on Monday rather than being stressed out and at adjustment limits with collapsing P/L like I used to be in the modified iron condors days. Obviously, No disrespect or gloating intended. I’ve endured two hard corrections in my life where I wasn’t properly prepared, so I am allowed to say that. So no disrespect or gloating intended re anyone reading this that is long the market. I’ve earned it!

Like I mentioned a few times, I have some Sept Lottos on (specifically 100s of 1050/1100/1140s and 1060/1110/1150s from the Sept campaign that were worthless a few days ago. I had hedged them off the last 2 weeks with call BWBs etc that were all removed. It was cheaper to leave them then to pay commissions closing them. Of course we’re pretty far from 1150 or 1140 but if we got another 7% down before Thursday expiry, they could stand to make a LOT of money. I’ll definitely close most if we get an equivalent -3.5% move on Monday as we had today (it’ll make the Sept profitable) so its probably not actually likely that I’d hit the real big profits as they could, unless we have a mega gap down on Monday. Either way, neat.

All my other trades are doing great. The down move helped a lot. I wish I was a bit quicker removing the remaining upside hedges but it is what it is. I figured we may get back up to 2200 with SPX and 1265 area with RUT before a fall and I didn’t want to expose myself to a runaway up move. Balance. The same day i believed we topped out, I had bought some call BWBs for October. Bad timing but proper risk management. I only use my technical analysis for small things and finer adjustments within my overall parameters.

Ironically, I might actually have to roll down and adjust my Nov trades if we gap down on Monday, which is kinda funny given how much room there was just yesterday. I don’t remember the last time I did downside adjustments, not even Brexit brought me to that. They’ll all be profitable, so it’s welcomed.

Here are my Nov RUT trades which I don’t think I posted. The short strike is at 1200. So as we approach it, I’ll need to roll it down. I may also condorize it or add some call BWBs to help with an upside bounce. I won’t mess about with adjustments if we do gap below 1200 and touch 1190, I’ll be fairly quick to roll down the entire structure. I’ll give it 10 or so points since we’re far away from expiration but not more. If it gapped down the next day and you were at 1190, it’d be on the very slippery left side slope.

Sep 9 – Trade Plan

A pullback! Right on time. So I guess the 1260 area WAS the big resistance zone where we’d experience a pull back. Got that one right! It was the upper trend line and matched a few other technicals, plus the bollinger bands were historically compressed, made sense we’d experience a pull back here. I just try not to let it affect too many of my decisions as it could go anyway. I still put on my call BWBs for October yesterday since the position got uncomfortable on the upside.

I have a few Sept lotto’s left over and a 8% pull back would be epic.

C’mon 5% fall by Thursday 🙂

This is the first big 1%+ red day in a long time and it’s so nice to see volatility return. I hope we have a follow up Monday. It’d get our account nice and profitable for the year. There has been no mean reversion or respite from this rally in RUT. It’s made the trades uber boring and almost got me to the point of demotivation. But, volatility always returns.

Here’s my October RUT trade:

Here’s my October (Monster)

SPX trade:

Sep 8 – Rhino Trade Update

I added 5 x 1230/1280/1310 call BWBs to each of the Oct RUT RHINO trades @ 20.85

I have been toying with adding some 1170/1220/1260 BWBs in @ 4.6 if we have any move up to 1260/1265 area to beef up the sea of death area and for a play on an expected pull back.

Oil is rallying huge today! Nearly 5%. Bonds are taking a hit (TLT down 1.6%).

Oh and I added back 1 futures hedge per trade on the pull back to 1256 TF

Sep 8 – Trade Plan

Yesterday I had closed off some of my futures hedges at my pre-determined level of RUT @ 1260. So far it seems like a decent close. I don’t see us going much above 1260/1265 area as the upper trend line sits right around 1260 (but is rising hence the 1265/1270 possibility).

SPX Oct-D (Rhino)

No adjustments here.

RUT Oct-D (Rhino)

I have to address the upside risks here. I am going to look at some adjustments today at 1pm.

SPX Oct-M (Rhino)

RUT Oct-M (Rhino)

No upside adjustments required.

I have to address the upside risks here. I am going to look at some adjustments today at 1pm.

SPX Monster Oct-P (Rhino)

The monster trade. This one is doing well. I have a solid 8% to the downside before any issues and I’ve got that hedged off on other trades until at least Sept 15. No adjustments needed here.

Trading from the boat today

I closed off some of my upside hedges at rut 1257 which was close to 1260 where I don’t think we will break above sustained. I view it as major resistance. I may start looking at more Rhinos and even some bearish butterflies here once I get back in front of the computer.

I think all the trades for Oct and Nov are setup to put this year in a nice profit zone. We are quite over extended due to the maniacal up move from Feb lows (33%). Any 5-10% down move would make this year. I’ve been trading the rhino mostly by guidelines but at times I’ve been in and out of futures and call hedges and so far all of those have been profitable. It’s doubtful that I will use those going forward. They are mostly put on for events and from conclusions based on technicals. When I do put on a futures hedge, I usually replace by DITM calls soon after when I can.

More to come later.