It’s been a very challenging 5 weeks. It started with the Aug 24 correction which was followed by weeks of big 5-10% moves in the RUT as we approached the ever important fed announcement. On Fed day, the RUT tags 1194 only to correct back down to 1078 (nearly 10%) in a matter of 5 trading days only to now bounce about 4% into Monday. Managing theta based market neutral trades through these kinds of moves is a test of patience and resilience.
On Friday, the RUT was down 1.7% and closed the day up about 1.4%. This AM it looks like it’ll open another 1% higher. That’s a 4% move to the upside in a matter of hours. Quite impressive. Likewise, the SPY futures tagged 1885 on Friday and is sitting at 1957 right now. That’s nearly 75 points in a handful of trading hours.
The extreme upside movement will give some problems to our October trades. My plan is to close a bunch of 1060 BFs and get my T+0 line as flat as I can to the upside and start closing down the trades throughout the week. The upside move is pretty extreme and quick but that’s usually the way. It was touching lows and now its going to blow past 1120. When it’s this close to expiration it can cause some issues on the upside with a sagging t+0 line as volatility floods out. I don’t like adjusting near the open, but I think I have to nip this in the bud and make sure we’re not exposed on the upside for any further run. The RUT is one of the lagging indices and probably has more room to run.
The November trades will likely have a bit of a sag in the right side of the T+0 line that we’ll need to fix. Nothing major.
Hopefully the Protector Alpha can start catching up again, it’s been underperforming the last month.