So pretty much Thursday didn’t happen? SPY rebounded and is poking at near all time highs after a pretty significant drop. RUT/IWM had a much softer bounce. The market for the first 4 months, has only gained 1%. The trailing P/E is 17.5x (pretty high) and from Fat.Pitch, if the market continues to trade at this P/E and anchors itself to EPS growth (2%) the market can chop for many more months. This should be a good period for the MIC trades.
I did use the bounce as an opportunity to even out the deltas a bit in the June trade. We’re just slightly delta positive with the next adjustment point at 1210 and 1265 respectively (RUT @ 1228). If we have more upside on Monday, I might sell a few more call spreads to get the delta closer to 0. Then wait for a down day to add more full trades.
The May RUT MIC is sitting pretty at 5.5% and we’ll likely be able to complete it around 6-7% early next week. Downside is actually welcome as we’ve got a lot of debit spreads and a wide range. We pretty much have no upside risk and we can manage anything but huge gaps down. There is some chance of a big month (8%)
The Jun MIC is sitting around a 1% loss but that’s completely normal this early in the trade and with this much volatility. By Monday it should be at 0. The most desirable situation is closing out May trade sometime early next week then having a second leg down which would give us the opportunity to enter more JUN MIC at better prices.
I currently use a ratio of 3:1 for puts to calls spreads. I might up it to be more like 2.8:1