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.