Wow, what a day. Forgot what one of those were like. Had to be alert and paying attention for the first two hours as RUT proceeded to fall about 30 points and stretching its daily Bollinger band the most it has in 18 years. Just a few days ago Rut hit 1274 and quickly fell to touch 1216. That’s a big big fall to happen right at the end of the May trade and as well at the start of the June trade. Difficult and stressful but opportunity arises from the debit spreads (we typically make our 7-8% when we’re in the window of the jeep (the window gets bigger with debit spreads). After the first two market hours, I was out having sushi and sake most of the trading day and unfortunately was on call with mr. market.
Overall, I am happy with how the adjustments went but had some difficulties getting fills and things moved quick. I had to work for my money yesterday. Obviously could have done way better in fills and ideally as it hit 1234-1235 I could have gotten in my debit spreads but I couldn’t get decent fills and it fell quickly to about 1229-1230 and I patiently waited to get fills on 20 point wide debit spreads for both the May and June trade. When it rebounded to 1231-1232 I got filled at meh prices but at least I didn’t pay for those when it was at 1228 or even 1216 later in the day. It’s part of the game. Quick falls = premium prices paid for adjustments. They are necessary though. I perhaps should have bought back puts on the put credit spread instead. Either way our delta hit about 33 so it wasn’t too bad. Further in the day, I got another alert when it hit 1225 and logged on my phone to see it fall all the way to 1220 (and touched 1216). I had to do a smallish adjustment around there which I am sure I over paid for but, again, the adjustment was not on the low of the day, so I can’t really complain. It could have been worse. The call spreads are all removed now for our RUT May trade. Risk is only to the downside and as long as there are no big gap downs, it’ll be relatively painless to manage. Time decay is large right now so we should reach 6% by Monday and maybe even 7% by end of trade. Time will tell. Consolidation in the market would do us wonders right now! The trade is sitting at just below 5% right now (we had been around 5.5%). Yesterdays fall does give us more potential in the trade, with only 14 days left, and the risk being on the downside, we can add puts/debit spreads on a big fall and benefit from the big time decay if it bounces or stays neutral. The trade for May now has more potential than before but we’ve taken a little hit yesterday as volatility increases the prices on what’s left.
The June RUT trade is down about 2% as expected, we just put it on and the volatility increase raises the prices on all the legs. As time goes on the volatility (which is directly linked to extrinsic value) will start to deflate. Completely normal. As mentioned, it gives the trade a bit more potential.
The SPX trade is neutral. It did well. I put on the bottom legs on a big drop a few days ago so it really wasn’t affected.