February 2016 – Page 2 – Travels and Trades

The March Unwind

I started unwinding some of my March trades today by peeling off the lower Rhinos and Bearish butterflies. I was surprised to see how fast my deltas got negative again. I was at limits on all the March trades yet again. I ended Friday quite comfortably but today I surely was not.

I tried to peel some off in the first 5 minutes when the RUT was @ 1018 but that didn’t last long and the RUT proceeded up to about 1026 area. My plan at that point was to wait for a slight decline or until 2:30pm to do an adjustment. I got a little pullback, RUT fell down to the 1021 area and I started peeling off my lower bearish butterflies (910s, 920s) and my lower rhinos (910s) and added some 1060 call calendar hedges as a temporary hedge as I start to peel the entire structure off bit by bit in the next 5 trading days.

All in all, the March Rhino trades will probably go down as some of the most challenging trades I’ve done and will likely ever do. I entered them on Dec 31st at RUT 1150 and experienced a 200 point fall starting almost immediately on Jan 4th down to about 950 only to have it rebound several times by 7-8% in between. That’s volatility I guess. My result? Profitable. Happy about that I guess, but I found myself dreading trading a bit because of the wild swings. One big take away was my risk management, I thought it was the best I’ve done despite some over adjustments and also lack there of through-out.

April Trade Updates

Below are three sets of Rhino trades for April for three different accounts of mine. There are multiple tranches in each and the risk profile is a combination of several. I am not going to do any upside adjustments to any unless RUT breaches 1035 with authority.

I started also putting on a new type of hedge trade called a “Space trip Trade” developed by Ron Bertino. This is essentially what ends up being a free hedge for large down moves but can also be an income trade in portfolio margin accounts where it takes very little margin. If the market stays neutral or falls, it’ll profit. The upside has little risk (-$600) and a 17% fall would produce 24k in about 4 months. The idea is to put on multiple tranches of this with both time and price diversity. It takes time for the profit hump to build and entering these periodically and @ different times and market positions, we should be able to get a nice hedge for our ATM trades like the Rhino and also produce some income on them as well. As time builds, we can remove our upside risk by rolling up the shorts a bit.

Here is what I have on below:

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.

April – Rhino #1

Here is the risk profile of one of my April trades. Nice and flat with some room to the downside. It’s not a typical Rhino since I’ve entered different tranches at different times (though relatively close). I’ll be removing tranches if we pass about the shorts to keep the risk in check. My first tranche is 990/950/900. If, at 2:30pm, we’re at 940, I will remove this BF and add another positioned below.

Dublin Trip

One of the reasons for the lack of posts was a business trip I had to take to London which was followed by a “guys” trip to Dublin. Pictures below.

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.