July 2017 – Travels and Trades

Results from PC3

Here was the backtest results for the PC3 original adaption which sold a static amount/value of NPs at a delta regardless of actual cost of BSH. It of course did well in up years (and handled Aug 24 well) but during Sep 2014 it did poorly (The only negative month). Adjusting this to just enough NPs to cover cost of BSH was also backtested but I don’t have the results on this computer. It did better during markets like 2014 Sep/Oct.

Just look at those results.

I managed the STT separately once launched. I’d do the standard adjustments which are – rolling if close to structure, adding ICs to flatten deltas in down moves, adding PDS alone, or adding in PCS (harvesting as well) on big up moves against profit bubble.

Jul 21 STT + BSH Update

Since April/May, I was working on combos (known in the group as PC2 and PC3 (Patricks Combo) where the 2 represents 2 BSH and the 3 represents 3 BSH. The results from those backtests are mind bogglingly good re consistency and no-loss. Due to a silly assumption/mistake, I miscalculated the margin requirements on them and had assumed it much higher than it actually was. So instead of a 4 maybe 5% return on 65% of the account where 35% is dormant, it’s actually more like 9-10% on the 65% within 40 days in the trade. Due to this false assumption, I had put them on the back burner and went down various other rabbit holes re variations of the GA/VM trades, TTT trades and LTE STTs. I am excitedly re-examing the combos and after further testing I will put them live as the base trade for my accounts. I probably have 1-2 more weeks of testing left.

The reason I bring this up is that I am underwhelmed by the live results since January. The STTs are doing great, they have been since January. The BSHs were poorly paid off up until April and I am down on a big set of them right now. Further, I had big losses in the old Rhinos till March/April. Lately I’ve been having a really tough time paying off the other BSH funding due to the constant grind up and poor timing of “pay off” strategies after the RCs are removed. I always have 1:1 RC to BSh but that only covers half the cost. Suffice to say, its extremely slow profit lately. The trades all still like SOME volatility and some down moves and we’ve not gone down more than 2.8% this year. I got a brief taste of big profits a month or so ago on that big down day but since then its slow and grinddy and underwhelming. I think a lot of people are experiencing the same thing with STT+BSH combos. Just slow, profitable, but slow. It’s not like this with the combo trades and hence why I am very relieved that I can reinvestigate and start ramping it up. The backtest results for the last 3 years were incredible (I showed some of my friends back about 3 months ago).

All that said, I am in a mixed mood, I am meh on the slow results but I am looking forward to combo trades that work in all environments and that will cut out the issues I have with the BSH performing underwhelming to the STT(which doesn’t quite producing good returns). Along with that, I am slowly moving towards the BSH factory. The goal is to end the summer with a complete BSH factory that not only pays for itself but produces income. This would leave with with three things BSH Factory + Combo Trades + STT LTE where each one is producing income and requiring less opportunity/timing. I guess patience. But it seems like a lot of that lately.

We left Stockholm yesterday and have arrived in Gdansk. I’ve got 5 days here then we hit Poznan and Berlin.

Jul 19 – Trading Plan STT + BSH

A confluence of resistance is at ES 2475 (Yearly and weekly resistance pivots) and there’s a 77% chance of a new high according to Cobra so I gather that’s the target. Typically once it touches the yearly pivot it’ll move go down to the yearly support. IMO it’s not the time to add long positions. We have the confluence of resistance and we always have big pullbacks in Aug,Sept or October of 5-10%. W/ Vix at 9.8, it doesn’t feel like risk is being priced properly. I have only about 25% of margin used right now as I removed lots of Sept PCS and with the VIX at 9.8 I just can’t justify getting into new STT positions just yet. It doesn’t makes sense from a margin perspective either. If the market doesn’t move down at all, it could be a slow summer of returns for me. I’ll be looking at adding more GA trades and maybe some mechanical combos of the STT trades. And like I said, on any decent pullback, I’ll add some STTs so I can get the account maximised. I’ll also be entering in new BSHs w/ RCs until I can get this factory fully formed.

We leave tomorrow for Gdansk and we’ll start making our way by car towards Arona, Italy, we’ll stop in Poznan, Berlin, Bamberg and likely somewhere in the Alps before reaching Italy. We will spend 7 days in the B&B and another 4 days somwerhe else and the family trip will be over. I then meet friends from Aug 11-20 for a small guys trip and on Aug 20 I play 7 or so poker tournaments in Barcelona and call it a summer!

Jul 14 – STT and BSH update

During the last few days, I took off a lot of my PCS for my Sept trades (2100/2000s 2125/2175s) and need to get on some PCS higher up (smaller quantity). I was hoping for a small pullback but I kinda have to get some on or else my theta and delta will be hurting. I was going to give it over the weekend (Monday) max but I am a bit uncomfortable with that. This market is at 9.9 VIX and doesn’t seem like it wants to stop going up, however, it’s at/testing ATH and usually some pull back should occur..when I am conflicted I usually do half the units now and half later..maybe that’s what I’ll do.

December and october trades are all doing well. Oddly, BSHs are expensive right now (the way OTM options are holding their values) despite VIX being low. As well, I am trying to complete my BSH factory by buying some puts but they are holding their value too.

I also removed my first round of VM (Golden Arches) trade for a profit (480 a unit). The second round went negative pretty quickly but are starting to recover now.

Jul 13 – Trading the STT and BSH

I am solely in STT and BSh trades at the moment. They are not as exciting as the older Rhino trades because they kinda just make money there isn’t much variance per say. The one cool thing I guess is that I am doing it in quite the volume. I think I’ve got about 600 units on right now total. That’s something interesting I guess.

I had a contact at IB for putting on orders via the floor but to be honest, I just haven’t used it much lately, I found I was getting fills easily enough myself at various times. I tend to scale in to each trade over a few days. One time I got quotes from them and I was getting better fills w/ units below 50 then they could get me so I just haven’t used as much as I would. That said, when I get bigger in size, I think I either need employees or I’ll need to use the floor 🙂

I got into a bunch of longer term Dec STTs most recently and I have a lower profit target on those (they take up a lot less margin) and are even more benign. I’ll probably start doing this, 150-180 DTE w/ 2x less margin requirement but I’ll aim for a 350 profit target per unit.

I’ve finally started the BSH factory but I’ve only managed to get on 50 units of that so far. It’s profitable as I sold the 50 units worth of puts at the very bottom of the last months range. Eventually, I’ll have to put on 500 units worth. That’ll be tedious and we kinda need more than one down day.

As for how the year has gone so far, it’s been slow re P/L OVERALL but exciting for P/L of the STTs alone—>Very exciting. The STTs did fantastic but the P/L from those were countered by losses in the first sets of BSHs which weren’t fully financed and bigly (no trump pun intended) affected by the losses on the old 2016 Rhino’s I had on until April of this year. I don’t trade them anymore. I just trade STTs and BSH.

Let me get into more details, I started the year off by trading some units of STT and BSh from January 5th when the course was released but not in size until April. All the STT trades did great and were profitable and still are into this month. Almost makes me giddy how good they do. However, the profits from Jan-April/May were offset by the losses of the remaining Rhino’s I had on that were started in Late 2016. They did terribly, by April, we were finally finished w/ those damn Rhinos and they had a larger loss due to the insane Trump up-move. Difficult market to manage the Rhinos. In one account, they lost about 88k while the STTs did about 130k (for the first ew months of 2017). Included in this were the poor performance of my BSH hedges and the financing. I quickly learned from waiting too long to get financing on and the community developed better ways of paying for them (RCs put on the same time) or BSH factories. I use RCs now but am working on the BSH factory. Ideally I just have BSH factories and the STTs. All that said, the last 6 months we’ve got very profitable STTs that were hit by older Rhino legacy trades and by poor financing of BSHs in early part of the year. The future is bright as we perfect the management of the BSH and STTs. I love how the STTs have done so far and I wish I hadn’t had the Rhino losses from last year nor the poor financing early on. Ah well, things are building up quickly re P/L now.

Jul 13 – Where have I been?

I started traveling May 30 and have been on the road since.

We started off in Lisbon Portugal and spent 9 days there. It’s a top 3 place for me for sure. It was very hilly which was a bit tough with a newborn in a stroller but we made due. We stayed right near an awesome little park that had a small confectionary like restaurant that served coffees in the AM and beers in the PM. Loved it. Spent a lot of time there. Everything was so cheap, like 1.30 EUR for a beer 🙂

After that we rented a car and drove down to Faro for 5 days. It was OK, too touristy for me, felt like one of those british tourist destinations that you see (Malta Paceville, Ibiza, etc) but we had to go there to catch a bus from Faro to make it to Seville. I just couldn’t get a rental car that would allow us to drop it off in Spain, so we had to bus it. After Seville we made our way down to Marbella by rental car. Marbella was pretty cool, like the Monaco of Spain Lots of expensive cars and wealth. I ended up playing the Marbella Pokerstars tournament. That didn’t go well, I busted K8 on a 6788 board to a 9T. Normally I could get away from the hand but it went down like this:

Everyone folded to me on the button, I raised first in, small blind and big blind both called. IT was checked to me on the flop 678 and I bet 1/3rd pot. Call call. The turn brought the 8 which gave me set with K kicker. It was check/check and I bet 1/4 pot. The BB check raised me and I pushed. The ranges here are pretty big for all of us. So I got attached to the hand and busted. Ah well.

After Marbella, we made our way to Madrid, spent 8 days there. I wasn’t expecting much from Madrid but ended up liking it a lot. The airbnb was decent but the lady was super OCD and really annoying, writing us every few hours with instructions for the most mundane things. 2MM LBGT folks came in for world pride day and I think Madrid is considered the capital for the community. Was interesting and neat to see. After Madrid, we trained down to Barcelona and spent 8 days there, not much of interest happened there.

I am currently in Stockholm now. We rented a house in the outskirts (country) for two weeks to chill out a bit. It’s only 20 min by train to Gamla stan. As always, I am constantly in catch-up mode. Either w/ trading or my business.

Next on the list is Gdansk, Poland and we’ll probably drive down towards Arona, Italy. I am going to play in the Barcelona pokerstars championship event end of Aug and that will conclude my European trip this year!