BWB road trip trade – Travels and Trades

Post Covid Crash update – May 5

Been a while, I should have kept posting through the whole event. I am up about 20% on the year which is decent given the events and given several mistakes I made. I’ve since revised how and what I do in my process and can only be thankful I ended up positive through-out.

Bizarrely, I was super in-tune with the whole virus thing back in late January as the first reports were coming out of China. By early Feb, I had got out of my entire standard equities portfolio (TAA –Tactical Asset Portfolio blend) and purchased 400 long puts ~ $1.00-$2.00 in anticipation of some volatility thinking I caught it earlier than the market. The market just kept going up and up and up until Feb 24. I had no real OTM trades on and had built up some long-vol portions but the nuances of en-cashing was where my regret lies.

On Feb 28th, I started cashing out of those 400 long puts which took a beating through the mid part of February. Had I kept them on till March 24th they’d have been worth millions. Just before that, on the 27th, with the VVIX spiking the highest since Feb 2018, I also started opportunistic OTM trades that got annihilated despite being hedged with Black swan hedges. A poorly timed entry, every indicator was flashing off so I should have waited for a bottom signal before entering but at the time I figured that the virus news would cause a more lengthy decline with several bounces in-between so I figured I could get in and out using vol relief on the bounces to capture profits. I was wrong. The mess lasted till Mid March and lost a bundle but was offset by my long-vol and BSHs. Though, I did take a pretty big temporary hit on mark-to-market throughout. Anyways, to go back a bit, on the bounce in early March, I picked up another 450 long puts at 1800 for $3.00 and I was going to convert into a BSH factory but the market collapsed almost immediately after I bought them (lucky). So I followed the trend down converting slowly into fully formed BSH and used them to hedge off the OTM trades. I was keeping that left tail popped up. By the end of it all, the combo was green and all was fine.

In Mid March, I started using OTM calendars on bounces as an income capture. As well, to offset the long vol hedge that was incredibly negative theta positive vega until I got a signal to encash, I started selling 5-7 DTE puts in ES after-hours at ridiculous prices whenever they came up and used that against my long-vol (calenderizing the long vol hedge that was 90 DTE). This all worked out really well and I was able to capture some really ridiculous pricing. I saw 1000 SPX puts going for like $10 I am pretty sure.

By April, I started doing BWB ATM trades on dips for large credit (usually they are $4 debit!) with 40 DTE. On bounces, I’d add symmetric flies. I’d rinse repeat this in a nice ratio to maintain decent profile and am still doing this now.

I’ve become a fan of using trend indicators for risk management and that’s where my interests lie right now. In this environment, I’m setting my portfolio to be mostly locally concave with respect to selling premium (ATM income trades) yet my overall portfolio will be global convexity (long vol). I won’t sell asymmetric risk rather I’ll own it by using some BSH type factories and some usage of OTM strangles and I’ll sell more defined risk upfront with ATM type strategies. It’s the environment we’re in and with the credits (removing upside risks) in the BWBs, it makes management much easier.

Since I am doing my own blend of things I can probably start posting more risk profiles and trades so I’ll start doing that.

May 14 (Update 2) – STT, Long term base portfolio and travel plans

Yesterday at about 2803 I was able to sell puts for my factory and in one single day I am now able to form a BSH for profit (free + some). I got 30 units (90 short puts) on within 8 hours. Epic.

I also started the equities portion of my long term portfolio as my base (I did a combo from allocate smartly that has a historical of 10.4% annual with a max draw down of about 6.1%). Good base portfolio. Today I got the treasuries/bonds portion on 🙂 good timing. I will now let that run itself without messing about. I had it on at 2940 area but didn’t like the timing re the heavy portion in SPY so I closed it at the highs 2949 and now just re-opened. It was more like a mulligan, my plan isn’t to mess about with it and I won’t from here on in.

YTD is now 15% (3.35% a month) and that’s on actual total equity. Nice!

I am going away for my next portion of the summer/spring vacations. I’ll be starting in Montreal for the party millions event and I’ll make my way to Ottawa to meet with my programmers in development office and then take in the Iliza show (for my wife). After that it’s on to Toronto to check out the start of my new house build there and then make my way to Moab for a glamping style wedding and after that…. Vegas for the WSOP!

In preparation, I’ve closed off most of my older STTs, cleaned up the account and prepped ONE. I have on some Aug, Sep and Oct with margin available for another 100 or so units if we get another vol spike/decline. The Aug is acting as a hedge to Sep and Oct but also has the most theta of all three months. October is now profitable (+11k) as predicted it would be by end of week.

May 14, 2019 – Trade Plan (STT BWB + BSH)

I ended up closing out my Jul 18 and Jul 31 STT remnants at a pretty awesome profit. I am left with August, September and October. The Aug and Jul ended up acting as moderate hedges to the Oct/Sept expiration which actually put my balance higher through the modest volatility events last week and put it right positive in the past two days. I am on target for a 20-22% H1 2019 and will end June at around 17%-18%. Exactly as predicted and planned.

That’s the beauty of running these in expiration campaign style. The older ones protect the newer ones and everything just meshes together perfectly. The older ones will hedge the 3-8% drops as you fall right into their built up profit zones and anything greater than 8-10% will be likely covered by the BSH OR you’ll have time to roll (if it was a slow grind) either way you’re good and only dealing with modest drops in P/L. Feels like a beautiful well oiled machine now.

I am not straying or considering much else in terms of trade types for the main portfolio. I want a clean year of just STT+BSH and I want to be a master of just one main trade type. I doubt I’ll deviate much other than finding more efficient ways to adjust.

All in all a good year so far.

May 8 – Trade Plan STT+BSH

Interesting few days. The VIX spiked 40% yesterday on a 2% down day. The relatively binary event on Friday is causing some funky skew which is affecting existing trades and makes new ones attractive to put on.

I slammed on trades through the last few days with the lowest amount being yesterday (the best time of entry) and now I only have a bit of dry powder now and definitely not as much as I wanted. My P/L gain from April to May was fairly slow which makes me wonder if I should be less always on and more selective and patient so I have more dry powder. The problem with that approach is that your yearly returns can be more variant. If we have low vol years, they’ll suffer. It’s also difficult to know just when to put them on. I’d probably wait for a force index trigger. If we got 4 force index triggers a year and those trades made an average of 10-12% on PC with a much lower than average MDD then it would make some sense to look at this.

Here was an interesting article re yesterday:

https://www.zerohedge.com/news/2019-05-08/vvixtermination-what-was-behind-yesterdays-historic-volatility-move

If I got on several units yesterday, I’d be very happy with the entry. The P/L today would already be quite high and they’d be resilient AF due to being put on in an already skew/vol rich environment and you’d have less BSH costs. Tough to figure out. I will look at the number of times force index triggered (to see if it’s a reasonable number per year on average) and then backtest all those dates as entries and see just what the returns are and annualize them. Basically what I am saying, is if we start entering lower vix environments like we had in April, I wonder if I should be mostly dry powder, rather than continuously raising UEl etc I should just take lower P/L targets and go mostly cash waiting for an opportunity. Now I’ve entered into an environment where having some more dry powder would be fantastic. I can accept risks for starting 20 VIX STTs if VIX goes to 30. I am cool with that because the effects are less pronounced than when you go from a very low vix environment and you get double whammied with skew and vix changes. The effects of the first 10 VIX points is a lot more pronounced on new STTs than going from 21-31.

My newest October ones put on throughout this event are down about $500 a unit. Normal. Time is always on its side. As time goes on, the profit hump builds up and the trades gets naturally more delta negative and less and less vega negative. This means vol effects it less and less as it goes on while we’re getting natural protection from the negative deltas increasing each day. So give it another 12 calendar days and it’ll be profitable all things equal (including current vega and skew conditions). You’ll see that the most exposed time of any STT trade is the initial week or two from initiation. Once time goes on, you’ll get less and less affected by things. For instance, My Aug/Jul31 are not affected, in fact, I harvested them last week when Vol was low and they’re unaffected short a bit of a drop in the overall T+0 but with any relief they’ll be closer to the profit tent and that’s when you get the big pops in P/L. You’ll notice that the most profitable times are when we have a larger fall followed by a cessation and subsequent vol relief. Why? because you’re sitting right in that sweet spot.

Anyways,

A tally of the main account:

32.5 Jul 31 units w/ a very long runway and harvested lower puts –No significant risks or vega (but taking up margin!)
150 Aug units w/ a very long runway and harvested lower puts –No significant risks or vega (but taking up margin!)
42.5 Sep units that were affected by the drop (dropped to break even PL with loads of theta)
60 Oct units that were significantly affected by the drop (dropped to -500 a unit)

Travels: San Diego

The first leg on the trip was San Diego but it wasn’t easy to get there. We went to our flight at about 3pm only to find out that there was a massive storm in Houston that grounded all flights. They told us we’d be delayed by 4-5 hours. Cool enough, we went home only to find out at about 10pm that the flight was canceled until the next morning. The thing was, we had a connection in the AM and the system wasn’t seeing that we’d miss it (we landed at 10am but the connecting flight departed at the same time….10am). Suffice to say, they barely sorted on the phone and we had to take separate flights (Ash with 1 and myself with 2) but with an 11 hour stop over! When we got there. it was chaotic but we were able to get on an earlier flight altogeher and also got a 450 dollar credit. Not bad.

We arrived in San Diego at 7pm and all was good!

This ended up being a cool shot of us in old town San Diego. A touristy little area.

Thought this was a cool building. Supreme Court as far as I can remember.

Candid shot of our walk downtown

Emma and I doing a selfie

Center of San Diego

Candid Isla shot on the “weeee” as she calls it

Down by the harbour

Epic bar, I think it’s the oldest one in San Diego. That’s a bunch of beer taps above.

Drinking some beers

Famous vegan restaurant in San Diego. Cool design inside. Was supposed to be a metal music vibe

Delicious vegan sandwich

Some more delic. Vegan food

K-Bomb being silly

A joey is in the pouch

Emma posing near the flamingos (did you know they eat shrimp to get their color?)

Safari (Ethical and not a zoo). Super cool shot.

On our way to LA!

May 1 2019 (STT BWB+ BSH trades)

Just got back from my 3 week west coast trip. We made our way from San Diego up to Portland. It was the first trip since I started trading that I didn’t have stress or issues in the market. A true testament to the new strategy. I could do everything simply from my phone and I barely had to load up ONE. It was beautiful. Refreshing. Man what a nice feeling!

My trading tasks would basically entail looking at market 3x a day and either add new Bubs fresh, raise the UEL or harvest the lower longs. I knew based on my summaries before I left that I needed to slowly raise my UEL on existing trades (Aug and Sep). So I knew ahead of time I’d add a pos UEL bwb in those expirations by a specific amount. When we had a red day, I’d get ‘er on. We did and that was that. I also wanted to get on more new ones which I was able to do finally today. I also harvested my lower longs as they decayed and that removed risk. So yeah, essentially, it was a breeze. I just put on some BWBs whenever we had some red days or vol pop and I harvested the lower puts up and that was it. Stress free. Due to some skew issues the vol collapse didn’t net much in terms of P/L but it’ll come soon.

Today I am putting on some Oct BWB trades now that we’re -0.80% after the fed. I got on some BSHs earlier, now I am putting on the corresponding BWBs with this nice little vol pop of 9%. I just put on 40 units. Might get another 10 on if I can. PC is about 200k per 10. Good to go. About at 1.1x PC and not much left to do for another 2-3 weeks 🙂

High VIX – All loaded up

I pretty much reached the end of my risk tolerance in adding new trades. I have loads of HS3 and STTs on and I have all the shorts I’m allowed to have re the factory. Not much I can do now but wait for things to form on the factory side. All my HS3 and STT are POS UEL so I doubt I have much adjustments to even consider there. Should be a relatively easy few weeks re time spent on trading. A waiting game.

My Mar STT are all drawn down as expected re VIX being at 18 and skew changes. I have 282 total BWBs on total over course of 4 weeks (average of 65 a week) which represents a planned capital 1.25MM. My Jan/Dec are fairly neutral as I did tons of roll ups, but still have loads of theta in them. They are slightly drawn down from the highs as all the T+0s are falling re volatility.

The shorts I sold last week (Dec expiration) are increasing w vol but also time is a magnet. So it’s fighting that. A week or two more and should be able to form those. A crash now would kinda suck though 🙂 I am actively looking into a rule where I’d take off. I got a great price on the Jan expiration that I put on end of week. All in all, will be a really nice start if we bounce at all.

My x4 are hurting a bit. Will probably roll them out tomorrow.

My Rhino is break-even. Needs a roll too. Looking at that now.

Poker and life

Getting ready for end of October and the study required, I am doing a 14 day no alcohol thing so I can focus, get as geared up as possible and get this studying done. Doing a bit of a health blitz which involves no alcohol, doing a regular niacin flush, slamming some vitamins, no carbs, and working out every single day in some form (I am doing a cross fit type class..I don’t like cross fit or the culture but I am too lazy to figure out an alternative as I go w/ my wife). I’ll be playing tennis and then jogging as well. Every day has to include one of these activities. I am also going to start up the mindfulness activities (meditation via primed mind) and just get to the best spot I can both physically and mentally. I want to make the best run I can at this thing over the course of Oct/Nov and getting ready for the PSPC in January.

If I can make a dent this year in tournament success, that’d be cool. I’d like to break-even with expenses in 2019 but keep having shots at 1MM+ payouts and that elusive final table.

I can’t get over the hand in the 2017 Bahamas main event. There’s 56 left out of 800 or so and my stack is above average. Good for probably top 30 and a reasonable shot at the final table. I get dealt AA. I raise, get three bet, I four bet (against the only other stack larger than mine at the table) and he shoves all in. I call with the best hand. His hand is AK. I am 94% favorite here. This is a massive double up opportunity that all but puts me at the final table. The blinds were 3/6k and I’d have had 720k stack (omg).

Since it’s an all in situation. They pause everything and call over the poker press, cameras etc..(i never found the video..odd). I stand there for 5 min with all sorts of pros behind me telling me omg you’re 94% favorite here. I’m all but counting the chips. So it’s really hard to explain but this is like after 4 12 hour days where you’re concentrating and so emotionally invested…when I see the flop KKT. I am absolutely decimated. One of the worst feelings I’ve ever felt and I know that sounds weird. But it was. I didn’t even collect my cash, I just wandered aimlessly around the Atlantis in a total weird ass state of mind. That was my shot. I hope I get another. Horrible luck for that point in the tournament and for the chips and position I would have been in.

Jul 13 – Trading the STT and BSH

I am solely in STT and BSh trades at the moment. They are not as exciting as the older Rhino trades because they kinda just make money there isn’t much variance per say. The one cool thing I guess is that I am doing it in quite the volume. I think I’ve got about 600 units on right now total. That’s something interesting I guess.

I had a contact at IB for putting on orders via the floor but to be honest, I just haven’t used it much lately, I found I was getting fills easily enough myself at various times. I tend to scale in to each trade over a few days. One time I got quotes from them and I was getting better fills w/ units below 50 then they could get me so I just haven’t used as much as I would. That said, when I get bigger in size, I think I either need employees or I’ll need to use the floor 🙂

I got into a bunch of longer term Dec STTs most recently and I have a lower profit target on those (they take up a lot less margin) and are even more benign. I’ll probably start doing this, 150-180 DTE w/ 2x less margin requirement but I’ll aim for a 350 profit target per unit.

I’ve finally started the BSH factory but I’ve only managed to get on 50 units of that so far. It’s profitable as I sold the 50 units worth of puts at the very bottom of the last months range. Eventually, I’ll have to put on 500 units worth. That’ll be tedious and we kinda need more than one down day.

As for how the year has gone so far, it’s been slow re P/L OVERALL but exciting for P/L of the STTs alone—>Very exciting. The STTs did fantastic but the P/L from those were countered by losses in the first sets of BSHs which weren’t fully financed and bigly (no trump pun intended) affected by the losses on the old 2016 Rhino’s I had on until April of this year. I don’t trade them anymore. I just trade STTs and BSH.

Let me get into more details, I started the year off by trading some units of STT and BSh from January 5th when the course was released but not in size until April. All the STT trades did great and were profitable and still are into this month. Almost makes me giddy how good they do. However, the profits from Jan-April/May were offset by the losses of the remaining Rhino’s I had on that were started in Late 2016. They did terribly, by April, we were finally finished w/ those damn Rhinos and they had a larger loss due to the insane Trump up-move. Difficult market to manage the Rhinos. In one account, they lost about 88k while the STTs did about 130k (for the first ew months of 2017). Included in this were the poor performance of my BSH hedges and the financing. I quickly learned from waiting too long to get financing on and the community developed better ways of paying for them (RCs put on the same time) or BSH factories. I use RCs now but am working on the BSH factory. Ideally I just have BSH factories and the STTs. All that said, the last 6 months we’ve got very profitable STTs that were hit by older Rhino legacy trades and by poor financing of BSHs in early part of the year. The future is bright as we perfect the management of the BSH and STTs. I love how the STTs have done so far and I wish I hadn’t had the Rhino losses from last year nor the poor financing early on. Ah well, things are building up quickly re P/L now.

Dec 16 – March Rhino M3 Trade Entry

Not much going on. Trades gained some value today. Nice little down day in the SPX and flat for the RUT.

I entered some March Rhinos

50 x RUT:1290/1340/380 @ 2.19
75 x SPX 2120/2200/2260 @ 4.00

A bit far out but I do like to enter around 88DTE anyways.

I’ve converted most of my Jan trades into more M3 like structures today with the drop. I worry about a slow grind up for the rest of the holidays so figured I’d jump in front of that with some calls and futures hedge. Low volume rarely gets sold into. I do expect some January weakness though.

Oct 18 – Rhino M3 Trade Plan

Been a while since I posted. I haven’t needed any catharsis so that’s probably why 🙂 What a great/fantastic two month period we’ve had…I mean the market (RUT) didn’t move up 7% in a cycle! Can things get any better? The last two months have made the entire year, I might even achieve the 7 figure profit in a 12 month period IF the next two-three months behave. Major Major milestone. When I say behave, I mean it goes down, stays neutral or goes up 3-4% max. That’s all that’s needed. What a journey. I started trading by investing in AAPL and BRK.B, frustrated with the lack of hands-on, I got into earnings volatility options plays via www.steadyoptions.com and eventually on to Modified Iron Condors only to experience the most dreadful trading experiences in Oct 2014 and Aug 2015. Learning experiences! I finally stumbled onto the M3 and BB courses via John Locke and here I am trading BWBs in my own way profitably and into 2017.

As my portfolio and trading size gets larger, I’ve been putting on more and more Space Trip Trades in an effort to hedge my portfolio by way of cultivating the STTs to the point where only debit spreads remain on the first set while cultivating the other expirations to the same point. My main concern is an 9%+ gap down overnight. I want to be protected in any flash crash and a gap down of any size. It’ll take some time to cultivate the STTs to the point where they are providing protection for both the ATM trades and the uncultivated ones still in process (in the case of a 12%+ move). Once, I have adequate hedging I’ll start to increase my size past what it currently is. I’ll probably be sticking to SPX with versions similar to the White Rhino and Jim Riggios 100 point butterfly. I really like the approach Jim Riggio takes. Sell volatility when vol is high and buy volatility when vol is low. Simple. I’ve changed my style a bit and I don’t use calendars and I will probably be doing versions of reverse-harveys for the upside rather than using call BWBs. It’ll be sometimes selling or buying iron condors as adjustments to the butterfly structure (depending on skew and volatility). I might have to call my trade something else, probably will end up calling it PEAK.

My November trades are all 10%+ and I have already started closing them all out by removing risk and unwinding the structures.
I’ve got Dec expiry on and I’ll look to put on some January as we get closer to the election (option premium will be elevated and the BWBs cheaper to buy). I might hold Dec but if I am anywhere close to a 6% profit, I’ll probably close them ahead of the election. They’re doing very well right now so it’s possible.