Wow. So the market opens up and gets to about -1.7% then proceeds to close at about +1.4%. This is why you wait till 2pm to adjust 🙂 At 2pm, most of our deltas were just fine. The market was hovering around 1093 and all is good. We were at ATHs for each of the trades. The market then starts screaming around 3:15pm up to 1113. This huge rise so close to DTE puts pressure on our upside deltas and as volatility is falling out of the trades, our T+0 line starts sagging on the right side of the graph. I had to make a flurry of adjustments to get the deltas in line and to protect from a potential gap up on Monday. The Trades are still at all time highs for the P/L but they’re a bit vulnerable to a big up move on Monday.
Tag: m3
Oct 2 – Nov M3 Trade Update
Nothing to do today. The trade is showing that it’s up 8500 now. We’ve got tons of range on each end. Probably won’t have to do much for the next few weeks and we’ll let Theta do the work for us.
A high value day
Days like today happen every so often especially when we’re about 12-17 days from expiry, all of your time decay based strategies suddenly increase in value. I notice that most of the ‘time decay’ you get closer to expiry happens in spurts and does not occur consistently day to day. Days like this are sometimes called a high value day amongst theta based traders. Every month I find myself pointing it out to my wife and showing her the increases in P/L across he board on one single day. I try to explain it as market makers having to start getting rid of the time value in the options once we start approaching expiration day. I gather its when they think its more of a ‘risk on’ environment than risk off. Perhaps this means that the next week or so will be positive or at least less volatile? This happened with my MICs and now today I saw it happening with my M3 and BB trades. I’d be chugging along at a pretty static P/L and then in one day, all of a sudden, it’s worth a lot more. Anyways, interesting.
All of the Oct trades are up a good amount of money and its probably time to start winding them down and getting in Nov and Dec M3s.
Oct 1 (November M3 Trade Update)
Not much to say. Trade requires no adjustments. Yesterday night the futures ramped up hard (about 1%) and today we saw all of the gains dissipate and the RUT is hanging around 1090 again. The trade is up ~5k on 250k planned capital. Being farther out makes this trade quite resilient. I am eyeing up an early entry on December M3 (77 DTE) we can get the BFs for about $7 and we can do a 30 lot with 1 call. Large downside protection and we can scale out of the BFs as time goes on and if we have any upside issues.
Sep 30 – November M3 Update
The November trade requires no adjustments. It’s sitting nicely and with profit. Should be quite resilient to the downside for the next few weeks. We’ve got a lot of room for movement. On the upside, we’ll need to watch our negative delta and with any collapse in volatility that line will sag and we’ll need to adjust.
Oct M3 (2nd Update)
Ok. Wasn’t as bad as I thought. According to optionvue the trades are at about half of what they were last week (so it appears to be about ~2% up) for the month across the board. Theta is kicked in full throttle being 16 DTE so we might just be able to eek out a 5-7% result by next week. We’ll see.
Sep 29 (Oct M3 Trades)
I got all the adjustments in to get these things under control after the 9-10% fall from last week. They’re all mostly still up some cash (as of 2pm) and they have potential to make some more but we’ll need some market cooperation.
Edit: Ah, yeah another 15 point fall to end the day 🙁 From the speed of these falls, It would appear the world is ending sometime soon? No idea if the trades will be up money right now. This month has been a never ending struggle and will continue to be but our Theta is strong and if we can get just an ounce of calm or a bounce to reduce the volatility we should be OK. Right now though, we’re not moving from where we were.
I am not into managing these trades into expiry and I am looking forward to farther out trades. This market is nuts right now.
Oct M3 (Update)
The October M3s got crushed today. The little bit of catch-up we had since Aug 24 has been brought back down for the time being. To give an idea, on Sep 21st, the trades were up about 4% and now they’re up about 1% ish.
I mean, given that this occurred about 17 DTE (close to expiry) and we moved nearly 100 points (9%) in 6 trading days. I guess it’s not a bad result. It’s just frustrating as I had made some headway with the Aug 24 crash that drew me down and the protector is doing awful during the last few weeks.
I think I have to move to farther out M3s and close ’em before 21 DTE as I’ve mentioned before.
As for what we can hope for re the Oct trades, well, managed well, we can close them at target but it’ll take some market cooperation. It was a pretty bad day but I adjusted well I think. However, I do have some upside gamma trend issues if a bounce is >2% which I need to fix tomorrow.
Nov M3 (Update)
The NOV trade required no adjustments today. It’s now below its short strikes and I may need to roll them back tomorrow if we go any further down. Delta are all fine, Greek trends are all fine. The trade is up ~3.5k
Trade Plan – Sep 28 (October Trades)
The RUT is at the August 24 lows (1098-1100) and SPX is at 1894 right now. That was a nice 9% drop from its Friday high. The OCT trades are still profitable though despite the drop. However, at this moment, they aren’t as profitable as they were and our catch-up from the Aug 24 fall is now stunted a bit. I mean, the volatility is packed in there thus reducing the price of the BFs and we’ve had to make several adjustments. Some of which were on the upside early last week and of course, I’ve obviously had to adjust on the way down towards the end of the week. Likewise, today I had to adjust pre 2:30pm because all of our delta limits were exceeded by a large amount. I did most of the adjusting on a little bounce to 1106/1107 where I sold a bunch of 1150 BFs and added in place a bunch of 1080 BFs. That should hold until we get to the planned adjustment point at 2:30. Looks like we’ll have to move around a lot of things. I don’t love the positions right now while we sit on a major area for RUT (previous lows) and having the volatility be so high. Who knows, if things go our way, they can still do good for a close probably sometime next week.
It looks like ES (SPX futures) will test the 1875 double bottom. We’re extremely oversold on most indicators so it should test and bounce but who knows.
The November trades are all doing great. They’re all up $.
As I get out of Oct trades and as things stabilize, I am looking to do more long term capital efficient M3 (double sized with same risk potential) but starting them 65 days out and closing before 21 days to expiration. The double sized aspect will offset the closing of the trades before 21 DTE where you’d expect a lower profit potential. A few guys I’ve seen, trade the M3s further out and close them before 21 DTE but they accept a lower profit target. They have very little stress as gamma is quite tame and it requires a lot less adjustments that far from expiration. My thoughts is to make up for the profit potential by doing a capital efficient double sized M3. Again. the double sized M3 still has the same total risk level as a normal
The protector alpha is not doing great right now. It’s had some correlation issues these past few weeks but that should fix itself over time. The stocks have still done better overall than RSP.