Tag: bearish butterfly

Feb 17 – Trade Plan

The market has been on a tear going from 950 to 1015 in just a few days–>That’s about 6%. Typical bear rally and sort of expected, however, it is getting to be a bit difficult to navigate with our trades. Early yesterday, I removed several bottom end bearish butterflies and a few debit spreads that I had on as hedges during the crazy volatility. My delta was too negative and I had to adjust. I am trying to be patient with adjustments as this is a high volatility environment but I can’t afford too high negative deltas. Today, another big gap up, I had to remove some lower end BBs and other hedges. Now at 1:30pm, RUT @ 1010, I am looking to put on 1040 call calendars to hedge the upside even farther as we have the 2pm Fed minutes today. If there is any mention of a hike delay, the market could continue to scream on. It’s approaching over-bought on all short term metrics but we’re still oversold on the longer term. Tricky and I have no clue where it’ll go. So my plan now is to add call calendars, remove the remaining “additional” hedges I had on, and get a bit more balanced while still erring to the side of caution with negative deltas. If we get whipsawed, we get whipsawed. My Deltas are too negative.

The march trade has gone through such a difficult period and I am happy to get out with small profits or even break-even within the next 15 days. It was initially put on with RUT @ 1150 we proceeded to see a 200 point fall (20%+) to RUT @ 950. We went from 1160/1120/1070 Rhino butterflies to 960/920/870 butterflies and all of Rhinos in-between. During the first part of the fall I did remove some BFs and managed the trade according to plan but at around RUT 1040, I deviated and had started putting on Bearish Butterflies and debit spreads as a hedge to additional downside as a temporary measure until I could get rid of more of the higher Rhino BFs at a better price. I thought the down move was limited to about 1030. This strategy continued on as it kept falling, on the bounces, I bought BBs and got out out of compromised Rhinos and on the dips I remained patient. This ended up being messy but put the trades in break-even range throughout. I won’t do that again, I’ll now just remove the entire compromised Rhino when its time and put on a newly positioned one. Easier to manage and way less stressful. Lesson learned.

Feb 12 – Been a while

It’s been a while since I last posted. I will have to change that starting now. The market has been a bit of a bitch but for the year, I am slightly positive with a lot of potential in the trades I am in now. I am extremely happy with that result and felt like the last 6 weeks were my best weeks in trading in regards to risk management and overall trading skill. I feel great about it. I am managing quite a bit of money and the stress of management sometimes can overwhelm but I kept my composure throughout the entire run of volatility and followed my plans to the “t”.

I took the big bounce today as an opportunity to remove most of my “edge case” rhino’s (ones that are a bit past the shorts) and flattened my T+0 lines. I feel good about the positions and we’ve got at on of room on each side with little upside risk and about 5% room to the downside before adjustments. I probably don’t have to do to much for the rest of the month.

I entered some April trades as well, but I positioned them lower to give myself a lot of downside room re the volatility as of late and the upside has little risk as well since the cost of the Bfs were quite low (~$2.30 as compared to the regular $3). The last 6 weeks were stress and some of my earlier positions were obviously compromised but we have ended up in a position of great T+0 flatness and a slightly positive result for the 6 weeks. I can’t ask for more then that and I am loving the potential in the remaining March trades. I am eagerly awaiting the upcoming theta release and am looking to close around 21 DTE (another 2 weeks) for a nice profit!

Throughout the volatility I used bounces to purchase bearish butterflies as a hedge to the Rhinos. This worked really really well. My BB hedges are up more then the Rhinos and I am starting to unwind these.

Jan 7 – Trade Plan

What a brutal sell off to start the year. RUT is down 9% this week and SPX is a little over 8%. Yesterday was fine. Most of the trades were in our tents and profits were good. Today was a different story, the huge move and increase in volatility had the trades under water and, for many trades, outside the tent. The fills were horrendous and I resorted to shorting some ES/F, buying debit spreads and bearish butterflies to hedge the positions. I managed to close out a few higher BFs at a loss. The Rhino and RT trades can handle a lot, and they handled the 5-6% move this week fantastically but when it dipped below 9% and volatility increased, we started having problems with our P/L and with the trades themselves. That said, we’re positioned well into tomorrow and we would welcome a stall and decrease in volatility to get the trades in a good place.

Tomorrow, I’ll continue to add March Rhino positions with the great prices we’re getting and they’ll naturally be negative delta which will help hedge the other trades. My slight concern is a massive bounce which causes issues for the Rhino. I’ll also continue to add bearish butterflies and debit spreads as a hedge. The problem is not so much the big moves down but the fact that they’re occurring over night and there’s not much you can do about them when they already occur.

All in all, these trades are way easier to manage both emotionally and technically over the M3 and Weirdor trades. I was laughing (literally) yesterday when the market was down 5% for the week and my P/L neutral to up, however, that changed today and instead of laughing I was crying a bit 🙂 The increased vol and the terrible pricing on fills and the subsequent effect it had on P/L was a tad stressful.

Jul 29 – Trade Plan

The protector Alpha is up 3% for the year vs SPY ~1.3%.  We got hurt a bit on the last whipsaw. I had reluctantly rolled my 211 short puts to 213.5 when the market was at around 213 for a loss having missed the big upswing and thus losing on intrinsic value. The market moved very quickly and I just couldn’t stay up on it (overnight gaps etc).  THEN the market decided to suddenly reverse falling to 206 leaving our 213s with no extrinsic value. Talk about whipsaw. I then rolled to 211 to get a bit of extrinsic now it’s on its way up again. I do believe this is a bounce into fed Wednesday and that we may stall or reverse hard but I’ll be sure to quickly roll if we come near 210.5. Not a great environment for rolling the shorts.  That and the big loss NEM had (was actually -15%) has put our PA account at just about 3% for the year.  Leveraged 7x = 21% or just about 3.5% a month for the year. This is better than expected given the market this year. This is a bullish strategy and has its place in our portfolio. It does well when the market does well yet is completely hedged on the downside. It’s not the big returns you’ll see in the market neutral options strategies but it’ll help in big bullish years. Maybe those years are behind us in the next 5 year time span? I don’t know.

My balance moved up 5% yesterday after the fall in volatility. Again, it shows how the mids and stated option pricing moves around so much in high volatility environments. It’s like the volatility was just sucked out of my accounts yesterday. It wasn’t delta losses or actual losses, it’s just that when the volatility floods out the MID pricing gets tighter and more accurate especially in the SPX.  This can affect your stated balance (AND margin calculations quite a bit). Any new traders utilizing portfolio margin should be aware of this. You can go to bed with PM stating 100k liquid only to wake up having it show -100k and be forced into liquidations.  It’s happened to me in my early days running MICs. You end up buying back risk at a premium during the first 15 min of market open. Not pleasant.  There are tricks to reduce margin during these 15 min but that’s a subject of another post.

Some early results:

Aug Bearish butterfly: Up about 15%

Aug M3: Up about 8%

Rock Trades: up about 4%