Tag: BWB road trip trade

Mar 7

Good read below: Update from Jim Rickards

http://us10.campaign-archive2.com/?u=bab7d5ebc117a80098fe99529&id=ce073921d4

Fed Fischer just gave a speech at 1PM citing that “We may be seeing the first stirrings of higher inflastion,” the immediate short-squeeze ended and everything reversed. Let’s hope this is the start to the much needed pull-back. Patiently waiting.

I saw a bearish butterfly alternative on our Skype group today from Ron Bertino:

SELL -10 VERTICAL RUT 100 JUN 16 880/840 PUT @2.00 LMT CBOE
BUY +10 VERTICAL RUT 100 JUN 16 980/960 PUT @2.90 LMT CBOE

I liked the risk profile so I put a tranche on:

I have to take the over-bought levels as an opportunity though my other trades suffer. This adds theta and its got a June expiry so it gives us some good room to the upside.

Screen Shot 2016-03-07 at 2.23.48 PM

Mar 5 – Trade update and Historic run-up

My April trades don’t have that much more upside risk left. They’re all down @ about 5-5.5% on this record 15% move in 15 days. It’s actually a historic move and has broken a few records. A move to about 1100/1105 would bring another 1%/1.5% loss in the trade.

My plan is to add more theta to the trade and hedge the upside a bit with any pull back. I’ll do it in stages. If we get a touch in the 1070s, I’ll add some 1090 or 1100 call BWBs. If we get another touch in the 1060s, I’ll add more 1080 BWBs and so on. I won’t go too far out (probably 20 points above) and try beefing up the theta in the area and hoping for some decent pullback so we have a chance to break even or profit. If by Tuesday, there is no pullback, I’ll start figuring out how to deal with the theta and probably put on some 20 point out BWBs. A 5% pull back anytime in the next week would put us at a decent profit and allow us to re-adjust the trade or even just exit.

As someone posted in our skype group: All the way back to 1997, we have never had a move of this size without a single pull back. A similar pattern happened in 2013, we moved up 114 points on the QE business but that was as close as was found,and right now we’re up about 145 points. Truly a historic move. The RUT RSI is epic @ 91 and all indicators related are as extreme as you can get. The NYMO is now at 350. The all-time record is 375.

My trades are all down about 5% (15% w/ leverage). I expect an occasional 5% loss. Not worried about that. I am a bit frustrated and kinda demotivated by the challenges of the last 6 months. Starting in August, it’s been a silly environment that’s challenged me at every stop. From the Aug 24 crash, to the subsequent V reversal in October to the 22% fall from Dec 31 till Feb 11 and now I am dealing with a 15% straight rise (without break or consolidation). These challenges and dealing with larger money can suck the life out of you at times but to be fair, it’s been quite extreme environments that should train me to be a more astute trader. I am now looking over my plans to see if I faltered in how I managed the trades. I don’t know. I mean, I did use some technicals to my disadvantage and I guess around 1040 I would have added bit more upside hedges but nothing substantial was warranted. My play by play is that I was at -25 delta when Rut was at 1035. I added some BWBs and calendars, when it touched the 1040 area bringing it back down to the 22-25 delta area. I was satisfied, but then the last 15 minutes, we had a move to 1053 and my delta moved right to -25 delta again. The next day, I was convinced we were about as overbought as we could get and since I was hovering around the limits, I decided to wait for a pullback. The next day I got a little move down and put on a few more upside adjustments, again not much (enough?), RUT moved up again in the last 15-20 minutes to 1063 area. Super overbought. I haven’t really touched it since (a few additions). Now we’re at 1087 and down 5/6% with not a whole lot of upside risk left. Is my plan on waiting for some decent pull-back wrong or am I deer-in-headlights’ing it?? I think the odds of another sustained run is low and the odds of a decent pull-back eventually in the next 5 days is high. Without that much upside risk left, I believe the best is to wait. I mean we are at insane extremes. I continue to be patient as I was during the fall. Maybe this time it catches up with me.

I may even add some bearish butterflies if we touch 1090 🙂

Mar 3 – All Trades Update

The touch of 1073 had me a bit stressed out. My gamma is positive and the loss on a big up move is quite static though significant. We’re now up 14% or so from the Feb 11 bottom (that’s like 2 weeks ago!). Everything is over-heated and I am trying to exercising patience in this up move while still managing risk. I did the same thing on our down moves and it worked out well. These moves are quite historic and really difficult to deal with. The great thing is that the Rhinos I bought back in the 950s were so cheap so that on the up move, it didn’t hurt as bad as it could have. Still from my year ATHs, I am down about 10% on equity and mostly from the move up from 1040 to 1070.

Right now the RUT has dipped to about 1067 now and unfortunately that’s still higher than yesterdays close which was painful in and of itself. I feel that I should throw on a few call BWBs despite waiting for 1055 vs 1075. I wanted to adjust at 1055 and the price of the BWB at that point was about 18.80-19.20 so if I am only paying an extra 70-80c then I’ll take it. I am bothered by the fact that SPX etc is weaker today but RUT continues its strong push up. Even if the expected fall to alleviate extreme NYMO (in SPX) comes to fruition, will RUT fall hard as well? Today, SPX was down what nearly 0.5% and RUT was making new highs at 1073. That’s concerning. So I am thinking I should probably be more prudent with a half upside adjustment.

I looked at the historic pricing of the BWB in OV for the past few days and I’ve got an order in at about 19.90 which I consider a decent price. I went a bit more closer to ATM with this since I have somewhat a market opinion.

1080 BWB pricing

19.75 @ 1062
19.70 @ 1061
19.45 @ 1058
19.20 @ 1057
19.40 @ 1058
18.50 @ 1050
18.05 @ 1048
18.00 @ 1047

1080 Call Calendar Pricing (for comparison)

9.25 @ 1047
9.65 @ 1051
9.95 @ 1062

Mar 2 – All Trade Update

April

    I’ve removed most of the 1050/1060 call calendars from my April trades which helps with the maximum upside risk. I am waiting for any pull back to the low 1050s to put on a 1030/1080/1110 call BWB. I might put on a more ATM BWB as well to increase theta. Right now, re upside, I’ll take my chances since I’ve got limited upside risk. With RUT at 1062, we’re at the 200% fib extension which corresponds with a 50% retracement of the down move. This is about 120 RUT points (12%) in the matter of 10 trading days. Incredible. I find myself amazed at market moves lately both in currency and in equities. Historically this up leg on the RUT should pause retrace some. This is a giant move. If you follow Lockes BB strategy, we’re at the 120 point bounce “What the hell are you waiting for, put on some bearish butterfly” stage right now which is very rare.

    Unfortunately, all April trades are down into negative P/L territory but any pull back to the 1030s would put us profitable. My plan now is to wait for any pull back to add some call BWBs, a few ATM BWBs to increase theta and to perhaps roll up some of the bottom BWBs.

    These past 60 days have been incredibly frustrating. Massive down moves and now I am dealing with a massive up move. 12% since Feb 11? Really? Annoying.

    March

I’ve got no movement here except I removed some call calendars. Waiting for better opportunity. Deltas are negative but fairly low and with low gamma. Waiting for better opportunity. I am glad I got out of nearly all the March trades last week but now what is remaining is losing $. Any pull back to even the low 1050s would be helpful. Upside is limited risk but still can lose some more $. I am more apt to be patient right now with this strong of an upmove. IF it happens to keep going past 1070 without a pull back, well I’ll take that risk.

All Trades Update

The NYMO is at extremes. The NYMO daily is above 280 and the intraday hit 91. The internal was weak and the NYSE UP to down volume was low (3.65). All previous cases happened in the bear 2008 and all gains were eventually erased (but it could take months). Another thing, Spy was up 2% and TRIN was above 1. 73% chances it closes red next day. Thanks to Cobra for that information. On the contrary, bullish percentages are very strong and the ascending triangle suggest more upside. Could this be a repeat of the 2014 Oct rally? I don’t know. In my plan, I always hold off on upside adjustments if NYMO is in extreme extremes like this and I wait for a pull-back to adjust. I did get burned in 2014 but that was with strictly MIC trades.

RUT has moved about 110 points and that’s at the extremes of what it normally does on a bounce.

To qoute Vbrandy from a recent skype group chat:

RUT moved -17.44% from Dec 29 in 14 trading days
Had an 8.22% bounce in 8 trading day most of which was first 3 days
Fell -9.08% in 8 trading days
+11.81% in 12 trading days

Because of all those reasons (massive overbought, high volatility environment etc), and the fact that it only hit my adjustment points after 3pm, I did not do any upside adjustments today. This is overheated. I still have some March trades on but I’ll wait till Friday or Monday to close on any modest pull-back. I don’t have too much upside risk in March still this took away some sig. profits. I was going to close most of it around the open of the day but held back and was going to wait till end of day as planned…doh.

My April trades are suffering big with this up move. I will have to adjust to the upside within the next day or two if it continues with strength. I’d like to give it till Thursday/Friday. I’ve got 1060 CC’s, 1050 CCs and 1000/1050/1080 call BWBs hedging now and those soon won’t be effective. THis will alleviate some of the upside issues as well as they start to lose as it continues up past the strikes. So yeah, these will all need to be removed soon and replaced if it shoots much past 1055. The odds are good that I’ll get a better adjustment point but still, this is stress. I can’t handle too much more up, maybe a touch of 1058 or thereabouts before I really have to adjust. I fear that this may go to the next RUT upside target of 1070 and I just can’t handle that move without an adjustment. Tomorrow I will be monitoring closely. This environment is pretty hellish.

As a completely unrelated trade, I did initiate some bearish butterflies at RUT 1052. I know this adds negative delta, but this is a completely unrelated trade. I bought several May and April 1020 BBs.

March Unwind – Nearly there

Today was a much better day for unwinding the positions and the subsequent P/L. I have about 15% of the position(s) left. I’ll probably close most of it out tomorrow. They are fairly benign right now–> Really flat. March expiration is finally approaching an end. How relieving. All in all, I am profitable for March (will know by how much once I finally close everything). I was trading quite large since December (a total of about 100-150 units of 5/-10/5 rhinos) and went through a 20% down move in the RUT followed by several 8-12% bounces. So, having had big money on, I got to experience some of the worst conditions while having the stress of a large position. A nice stress test. I mean, since Dec 31st (when I put it on at RUT 1140) it’s been pretty much the worst environment for trading these things, but they ended up doing OK. My maximum balance swing related to equity was about 12-15% in total and always during the highest volatility days. Of course, I am utilizing portfolio margin, this is why I mentioned the swing relative to equity. A few days after a high volatility day, RUT at same price, my balance would be right back to normal. Those are the effects of volatility on option pricing. Anyways, I can deal with that and I pretty much have a skin of steel now. I never felt totally uncomfortable through all of this despite the volatility and that’s a big change from the old modified iron condor days–>especially Aug 24 (I was extremely uncomfortable that day)! Glad I don’t trade that anymore. It must be a very challenging year for condors (well all trades are having difficulties, I see a lot of M3 traders doing poorly right now).

I did learn things I probably won’t do again, first and foremost, I will always close the Rhino structure if it gets challenged rather than trying to hedge it. As well, I’ll probably use upside BWBs as adjustments as opposed to calendars. I didn’t like how the call calendars reacted these past few weeks and I’ll be backtesting some of this later this week.

The bearish butterflies were a beautiful trade this month. They did fantastic. I just closed out most of them for a big profit. I had continued to put these on as hedges all the way down. What I’d do is put them on patiently after every modest bounce and I’d always get fantastic pricing on them and they were resilient on the way back up.

Other than that, I am waiting for a good day to get into the May trades. I didn’t like the pricing on Friday.

EDIT: I closed off my 1040 call calendars for 10.35 today when RUT was at 1040. I paid like 9 something for them at like RUT 1015…really?? I made $1 on it? Not exactly a great hedge to the upside. Anyways, I really got to look at calendars. Right now, I am just going to start using BWBs. It could have been because I put the calendars on late in the month.

Feb 26 – Updates

This move up from 950 to 1040 (~11%) in the space of ten trading days has put a damper on both the March and April trades. Especially the 4.5% move in the space of the last 2 days. I am back where I started about 10 days ago, break-even for the year. I guess it’s not a bad result considering the moves and volatility. Just 3 days ago right when I was taking off my call spreads, I was up significantly (5%-6% of equity) and now I’m hovering around $0. Is what it is and the market sometimes does not makes it easy. Any pull back in the next 2-3 weeks will benefit the April trades and we’ll be right back up. I haven’t checked yet, but most of the pain is definitely in the April trades and March theta has offset some of the negative deltas as of late.

April Trades

    So for the April trades, I am just about at my delta limits and am looking to buy a modest amount of call BWBs or call calendars to bring the deltas down just a bit. NYMO is extremely over bought, the RUT is sitting at heavy resistance near its Oct and Sep lows, it’s moved nearly 100 points and the volatility in the market is high = I will be a bit more patient with adjustments to the upside. Though it’ll hurt a bit if this turns out to be an Aug 2014 style run to the upside. Any move down to RUT 1035 today, and I’ll be putting more of them on, if it runs from here (1038), I’ll be slower to add as I await some exhaustion and for Monday/Tuesday to see where we stand.

    March Trades

This has been some terrible timing for our 21 DTE removal of trades week. Sitting quite health last week to have a 4.5% move right into our most unpreferred area of both the Bearish butterflies and the Rhinos that remained. I had kept removing trades through the last 7-10 trading days but not enough to prevent some pain. I’ve got these deltas under control for now and it looks like I will wait till Monday/Tuesday to get the rest off. Taking off those damn call calendars at RUT 1008 after it touched into the 990s was a huge regret, especially now, that RUT is at 1039! That hurt a bit.

Frustrating week.

March Unwind Update (Feb 25)

Being 22 days to expiry and having this relentless up-move is just plain bad timing with how the structure of the March trades are. I’m giving back some profits in the exit, no doubt.

I got rid of quite a bit today @ 10:30 and I was going to get rid of more at 2:30 but the up move and being negative delta, has definitely hurt and I still have a lot on. I can’t believe I closed 1040 and 1060 call spreads yesterday @ around RUT 1007-1009 only to be at 1030 right now and now I am actually too delta negative…whipsaw and probably over-adjustment. I should have closed the equivalent number of Rhino’s at the same time, hindsight is 20/20. My thought process with the call removals, was that I was positive delta, we had just fallen from 1014 to 995 area and on the bounce to 1007, it was a good opportunity to get rid of some of the call calendars to put me close to neutral or slightly negative. I’d then start to remove Rhinos towards EOD and on Thurs/Fri. What ended up happening is a very swift move from the 990s to 1030s in the course of 4-5 market hours (4%?). Frustrating.

On the SPX side, I closed the entire SPX Rhino @ 1.80 credit (I paid 1.60 debit). We got a great price for it and it was bearish leaning so it was a good time to get rid of it. IT was a trade recommended by Brian Larson back a few weeks ago.

March Unwind – Update

Yesterday, when we had a bounce to the 1005-1010 area in RUT, I started removing some of my call spreads since I was slightly delta positive and I like to keep it slightly delta negative. The market moved rapidly against me up to about 1023 area and I couldn’t get fills on any of the Rhinos at a decent price since it was a catapult upwards. The up move was quite bizarre, especially in the SPX with an almost -2% day to a positive in just minutes. The frustrations of removing trades 🙂 I am not terribly delta negative but still, I could have gotten much better prices had I been able to remove some of the complimenting Rhinos. Today, I’ll start removing Rhinos, and I’ll aim to be out of most of the trades by Tomorrow AM. Tricky market–always a challenge.

My April trades are pretty heavily delta negative and I’ll look to start adding either some call BWBs or some calendars to get them down a bit.

Not much else…we have some data at 8:30am, I am hoping it gaps us down a bit so I can get rid of some of those Rhinos!