Trades – Page 20 – Travels and Trades

Nov 11 – Trade Update

The market touched 1200 on Friday and we’ve pulled back to 1178 and now are sitting in the middle @ 1185. We’ve seen a lot of the P/L come back into the trades which is nice.

All of the trades are doing well. I’ve done some adjustments to protect on the upside and I think we’ll have a solid Nov/Dec. I am looking to close out most of November trades on any pullback into the 1170s. I’ve already took off about 10% of the bottom butterflies to flatten the T+0 on the upside when we hit 1182 today.

OV issues have been an extreme headache but I found an old VM with 7.66 installed so I’ve been using that to model the trades. All in all, things are looking good.

Nov 5 – Update #2

It appears that the optionvue models have actually been spitting out inappropriate deltas for the past few weeks. They’ve been giving higher than the normal negative deltas and would have resulted in some unnecessary adjustments. There was a big problem with the modelling. It’s apparently fixed and I’ve updated my software, but it seems “off” still and my confidence in the modelling is slightly shaken. Hard to trust. I don’t think any of the adjustments had cost me too much and it’s not bothering my Rhino trades but it is bothering my M3 trades. Today was a down day and our trades should have seen some profits but it was actually the opposite. This is likely due to the drastic change in option skew and also perhaps some of the modelling issues. That and the recent 115 point run up and the drastic change in option skew has made this month quite challenging to end. This is now 3 months of challenges in a row 🙂 The OV problems are all over the internet boards and everyone is chatting about them. The president Len Yates released a statement yesterday.

Nov 5 – Trade Plan

The market pulled back a little yesterday and allowed me to do a few more adjustments to flatten out the T+0 lines to the upside. The M3 and Rhino trades don’t love big up moves like what we’ve seen in the RUT during the past 25 days (9% up). Usually, the most you can hope for is slightly positive to break-even on those types of months. The NOV positions are all still up money but I await a more decent pullback to get them closed out at profit targets. They’re doing well considering and as we’d expect in the current market conditions. When RUT was at 1140-1160 we were rocking but at 1190-1200 they’re just mediocre, especially since the 50 point move occurred closer to expiry. This sets up opportunity for December and January so I just wait it out with patience. A mediocre month during a big up move usually leads to out-sized gains in the months following.

The December trades were profitable but now are just hovering around slightly negative to break-even. All as expected. I think these trades are setup great going into the next 40 days.

The January trades are mostly entered and also setup perfectly. I entered a lot of them with RUT at highs. They naturally have a bearish bias so they should do well with little upside risks present. Even if we top out at 1240 (see below), they’ll do great.

The RUT usually moves an absolute maximum of 160 points (the most extreme) and we’re 120 points into that. That puts the top at around 1230-1240. However, More often and usual, the RUT moves about 120 points before reversing and that puts us at 1190-1200 which is where we sit now. My plan? I am being as patient as possible with adjustments and trying to get the T+0 line flattened on pull backs. If the RUT pulls back to 1150 area, we’ll probably exit most of our November trades at profit target. If it continues up, we’ll eek a bit more but they’ll be more in the 1-5% range.

Yesterday I attended the Locke community coaching seminar and had taken some notes that reminded me of some things.

1. Using BWB or BFs as upside adjustments (sort of like the rock trade) instead of put spreads. I had actually done a few like that this week but had not back-tested it extensively. Someone in the Locke community has and the results were apparently fantastic. This is on my list to do (verify). Essentially, you add a front-running broken wing butterfly or butterfly in front of the market to hedge or flatten the T+0 line, and to reduce vega and theta issues. Mostly though, it works very well for reducing Vega. This will do better if you think the market is going to hang around there or only go up a bit more. A put spread would do better in a larger up move.

2. The other adjustment that I don’t actually do much but was mentioned is the stretch adjustment on the M3. Essentially when adding a put spread, you can also roll the upper long forward to get it closer to the market. I usually only add put spreads and roll in the bottom (capital reduction) or top long (flatten t+0). I hadn’t rolled out the top long before (get tent closer to market) and will be reviewing this in the upcoming days.

I haven’t posted screenshots in the past few days as I awaiting Option Vue to fix the crazy issues they’ve been having with volatility modeling.

Nov M3

This trade will benefit greatly off any pullback and will probably hit profit target at 15-20k. If it sits, we’ve got some theta and we’ll likely pull it off at 6k profit. If it goes up, we’ll adjust more probably by adding a BWB ahead of the market. That’s not standard but I can’t see it going much farther than 1210 on this go and for that it should be better than a Put credit spread. In either of the three cases, the trade will be profitable despite a 9% up move in the RUT.

Dec Rhino

This trade was up about 11k but now sits around 3k which is as expected for the environment and the time in the trade. I am extremely confident in the trade and believe that given the huge up move, this trade will hit targets in the next 3 weeks. For now, it’s about patience.

Dec M3

This trade is doing just fine and is sitting in a great position. It’s got minimal upside risk if the market should keep on keeping on. It’s got huge range to the downside. All in all, a breeze of a trade. Since the start of the trade, we’ve added
8 (1170/1160) put spreads
5 (1180/1160) put spreads
5 (1140/1120) put spreads
5 (1170/1160 put spreads

Nov 3 update

RUT and the market in general are on a tear. The SPX MACD is over 3 and has only been that high twice since 1996. It’s extreme. The move up in RUT to 1194 has put most of our trades only slightly positive. It erases most of the gains for the month but the trades aren’t over yet. I eliminated most upside risk today but it’ll cost. I need to do more this week as some of the trades are now vega positive and need BF roll ups. I didn’t do today or yesterday as I want to wait a few days for the market to calm the eff down. I did add a lot of upside adjustments in the form of credit spreads and call bfs to allow for this wait. I’ll probably look to roll by Thursday and surely before the weekend. There’s lots of market moving events this week (loads of fed speak etc).

The 12-13 percent move in the last month puts our types of trades in a more of a break even posture. We just aren’t moving much these past few months re p/l, well, last week at 1140 we were crushing but now most of that is gone in the recent 40 point move up. But there is opportunity here at 1190-1200. It should soon exhaust itself as it is 120+ points off the bottom and in the past several years that is the max RUT moves. Ideally we have a bit of stagnancy or downward bias. Until then we just cover our upside risk and wait for profits. I guess patience is what is needed here.

Test

Oct 30 – Trade Update

Nov M3

Trade is doing well. I rolled the BFs forward today, added a call and removed some of the call calendars I had on as a hedge (not standard). I’m going to close the trade sometime next week and am aiming for about 15k or roughly 7.5% of planned capital.

Delta: -227
Gamma: -20
Theta: 1586
Vega: -2786

P/L: ~13,250
Target: 20,000

Rhino M3

Trade is doing well. I added in a call BWB on Thursday (1130/1180/1210).

Delta: -277
Gamma: -4.6
Theta: 692
Vega: -3024

P/L: ~11,423
Target: 25,000

Dec M3

Trade is also doing well. I haven’t had to do anything to this trade since inception on Oct 9th. Easy.

Delta: -181
Gamma: -2.8
Theta: 390
Vega: -1900

P/L: 8,516
Target: 15,000

Oct 28 – Update

A 3% up move in the RUT today with a 6% intraday swing. That’s giant. The trades were rocking yesterday and are now mediocre today. Makes sense, they like to be in the tent. I took some November off which was good. The extreme up move today did take a lot of the paper profits away, however they’re still all profitable though most are now sitting outside the tent. That’s OK. The 1190 area is just 12 points away and that’s where I’d expect major resistance and a pull back. I’ll adjust the December trades tomorrow to reasonable amounts to withstand a move to 1200. I’ll try to get that T+0 line nice and flat (if it doesn’t gap or run to 1190 too early) and at 1200, I’ll start to adjust enough to allow for a decent profit if the market should retrace back 20-30 points.

Today, I didn’t adjust until after the FOMC announcement and when the market fell to 1158/1160 area. Good timing but I only added 10 1160/1150 credit spreads to a remaining November trade and that was it. Nothing else was overly pressing. The deltas were good and they were just hovering around the edge of the tents. Especially the Decembers which were resilient to 1170 area. Obviously, and in hindsight, I wish I did add a few more adjustments to the Dec trades but my rules didn’t call for it. How could I expect a 2% run EOD 🙂

As For protector, I rolled my 207 puts in the protector to 208. I have 207.5 and 208s and the market run to 209 at the EOD has over-run my shorts. Protector continues to under perform everything and is down on the year.

Nov M3

P/L: 8,000

Dec Rhino

I took this at 15:30 and it had a P/L of 10,060 but I don’t know if that’s accurate. I’ll see what it says tomorrow now that RUT is at 1178. At 4:00pm it looks like pricing is whacky because it shows a 3800 P/L. Doubtful its that low.

Dec M3

Oct 23 – New Dec M21 Trade

The RUT is acting a bit strange. It’s stuck in a trading range while the other indices have broken out. Either the RUT catches up or leads them back down. The seasonality is strong and it’s likely we see it break out and test the 1190/1200 area where it will likely retrace. It’s struggled at the 1166 area and if we get a clear break of 1170, I see it going and testing the 1190/1200 area where it will retrace.

Based on that, on Friday, I entered a Dec m3 with 1140 strikes and setup a trade plan with the intent of converting it to a Bearish Butterfly if the market should break out and trade to 1190/1200.

The plan:

If the market reaches 1190 I will convert the M3 to a Bearish Butterfly as the Rut would have moved 120 points from trough to peak in 2 months and that is usually as high as it goes. It’s also a very significant resistance area and is likely to not break it on first touch. This would be a high probability trade. If the market retraces from this area, I will then convert it back to an M3 and finish out the trade.

If the market does not break out, I will treat the trade like a normal M3 for the duration.