Trades – Page 22 – Travels and Trades

Oct 8 (Oct M3 and Protector)

I am all out of the October M3 trades. That’s it. All out. I think we ended up neutral to yesterday. The next M3s will all be longer term with exits around 21 DTE. The planned capital will be lower and the profit target will be as well. Easier trades and they’ll be tracked here.

I am getting frustrated with the protector and am more and more tempted to just shut it down and take the loss. It’s riding around -5% for the year mostly to due with difficulties paying for the hedge and equity correlation issues. I’ll give it some more time probably.

Breaking it down, since the beginning of the year the alpha equities are down about 2.5% compared to SPY 3%. The gap was a lot wider before. The hedge is down about 2.5% as I’ve been whipsawed a little and fell behind in paying for it.

Oct 8 (Nov M3 Update)

The trade is still flat. It’s about 5 points outside the tent and I usually wait a day or two and for it to be about +10 outside the tent before rolling any BFs. We added put credit spreads yesterday to even out the delta and help with the Vega. If we get over 1158 by 3:30 EST today, I’ll add more and look to roll BFs tomorrow.

Again, this trade has been through a 7% down and a 7% up and its flat. That’s good. We’ve got about 20 days before we’ll close it and the idea is that it’ll fall within the tent at some point within the next 20 days and we can start looking at profits.

Oct 8 (Oct M3 + Protector Trade Update)

I’ve made the positions more or less benign going into fed and tomorrow. Not a great result overall as the market stuck around 1152-1154 area most of the day which was the worst place it could have been to start closing the trade down. We just never had any luck with the market and these Oct M3s.

The protector Alpha had another bad day with Ebay falling 8% (on no real news) and UHS, HCA falling 3% with only little corresponding positive offsets (GCP and EXC sitting at +1%). Just not having any luck with this protector portfolio right now. It’s weighing everything else down. Eventually it will work out but it’s uber frustrating.

Oct 7 (Oct M3 + Protector Update #2)

I’ll be exiting or at least taking risk off, throughout Thurs/Fri. With this 1.5% 20 point up move on the RUT, the trades haven’t moved anywhere since last week really and we’re just not making any headway. It’s just too much up (7%) and too close to expiry. I could have gotten fancy with it and added some tents in the front, but that’s outside my trade plan. The idea was to manage upside risk by keeping it relatively neutral and that means that we really aren’t making anything and in fact losing some profits as the moves are quick and the volatility drop was large. The mini pull back yesterday did give us a little bit of Friday’s profits back but todays “up” move took those away. It is what it is. The trades did fine through the moves but not even close to as great as we were on Friday when the trades were under the tent.

Re Protector Alpha: I increased exposure in equities to replace ALFA and I sold a few more puts to try and catch up on the payment of the hedge (which is behind now). I rolled my 199s and 198s to 200 on the dip today (good timing) and sold some extras (also good timing). Most of the equities did well or better than SPY today which was nice to see.I’ve got 205 December long puts that I have to start thinking about rolling to next year. Over the course of 3-6 months, we should be OK and any correlation and/or whipsaw effects on the hedge should be evened out. Sucks that we’re sitting just below a 4% loss on the year. Not much else to say here.

Oct 7 (Rhino M3 Update)

I am close to adding the second tranche @ 1150. When RUT is 10 points over the long strike of the first butterfly you add a second tranche at that point it’ll be fully entered. On the upside, we’ll add OTM call calendars if the RUT should continue upwards. On the downside, we’ll roll the BFs when our delta reaches 250.

Oct 7 Trade Plan (Nov M3)

I had to adjust this today to deal with the sagging T+0 line from the extreme up move since last Friday.

I’ve added 10 (1140/1120) put credit spreads to flatten the T+0 line. Trade is slightly positive at the moment, which is to be expected when it’s nearly outside the tent. The longer out M3s are trades really designed for the time in the month when the trade falls back within the tent. It usually happens and that’s when we will hit our profit targets and pull out. As the month goes on, we continue to manage the risk and leave an opportunity for the trade to profit within the tent.

We put it on on Sept 23rd when RUT was at around the 1145 mark. It then proceeded to fall to about 1075 where we added some 1060 BFs. It’s now back to 1150. THat’s a nice 7% down and 7% move in a matter of what, a week?

Oct 7 – Trade Plan (Oct M3s and Protector)

I had to adjust the October M3s as RUT hit 1145/1146 area. Not something I wanted to see as the upside on these are weaker. I sold 1100/1080 credit spreads and rolled up some of the bottom longs. Of course, about 5 min later the market rolls over to 1138 but the adjustment is down about 1200-1500 right now. Not terrible and I had to do it this close to expiry. The delta and T+0 lines were not in a good place if the move should continue. One of the better technicians I follow expects the RUT to expire in October and around 1190. I take that only modestly into consideration but I do believe there is room for this to continue on. Any more significant up and we’ll have the same sorts of mechanics that we had in October of last year.

I am so happy to soon get out of this trade and move on to December and finalizing November.

One of the 24 equities (though more heavily weighted) I have in my protector portfolio is ALFA which is a great little ETF that follows filings of out-performing hedge funds. I did not realize it hedged itself by going market neutral when the market is below its 200DMA at end of month. Fuck. So I was hedging it since Oct 1 when it was already hedging itself. The ALFA holdings triggered the hedge on Oct 1st and since then has not been participated in the rally. This is one source of my correlation issues. I’m fixing it by replacing it with a normal equity but I will leave it as part of the portfolio since its self hedged. A due diligence error on my part. Though it may end up fine if the market rolls over or stalls around the 195 area.

Oct 6 (oct m3)

The OCT M3 trades caught up a bit today (recovered about a third of the loss in profits on Monday). They are looking OK and they are all profitable. I did some adjustments to reduce Vega and increase theta. It is reasonable to probably close these down at our Friday profit highs if we don’t have any extreme 2SD moves in either direction. I’ll probably reduce them to fairly benign positions by Friday. Well really, this is what I started to do already. I have already cut down gamma and start rolling up some of the bottom puts while rolling down some of the top puts thus reducing both upside and downside risks (reducing gamma) while still maintaining positive theta and negative vega.

Oct 6 (New Trade: M3 Rhino Variant)

I’ve put on a variant of the M3 which is started a bit farther out in DTE (usually 77 days till expiry). It’s the same concept as an M3 except it utilizes a broken wing butterfly instead of a call. The trade is a bit more rule based as well. I’ll be entering a normal M3 around 67 DTE and an M3 Rhino about 77 DTE and I’ll be closing them around 21 DTE to avoid gamma issues and to make trading much easier especially in a large account.

You can see the risk profile is almost identical to the original M3. The management is slightly different though. On the upside we use call calendars and call BFs and on the downside we simply roll the BFs back.

I’m expecting to have much more consistent results going forward with these further out DTE trades. They won’t be glamourous but they’ll be stable and consistent with lot less stress. I trade a big account and managing several theta based trades 7-10 DTE is challenging and I am tired of it.

Oh: Kudo’s to Brian Larson for creating this trade variant of the M3.

Oct 6 (Nov M3 Update)

No adjustments still. Though I don’t think adding some verticals would hurt. The T+0 line is slopping just a bit to the upside. May do an adjustment tomorrow. The trade is holding it’s own.