Wednesday, August 12, 2009

08/12 MNX Iron Butterfly

MNX pushed to the 163 level after the FMOC meeting. It pushed me into rolling the last 160 Call I had short. Now I have an order to roll the 162.5 if we break the 163 level and reach 164. At those levels, I'll have to roll these calls in order to keep them out of the money and maintain a decent gamma risk.
Prices failed really hard in the final hour, rejecting the 163 level, I'm hopping this is a signal we'll move lower back into the range Tomorrow. Right now, we have a theta to delta ratio better than 1:1, and I hope MNX stands still for the rest of the week.


Gene said...

Hi Gustavo,

On a trade like this where there are so many adjustments and changes to "buying power"/margin. What is your ROI calculated from?

Also, where can I find that volatility cone / ROI / Std Dev software you're using for your pictures?


Gustavo's Trades said...

Hi Gene, it depends on how the trader preffers to calculate ROI. I use the original position size. If I make adjustment that add size (in $ or margin), I keep the same P&L goal or stop loss.

By doing it this way, I can keep a consistent capital allocation and yearly Return. It is important to know however, that you need to have a reserve in margin in order to make all the adjustments.

I keep at least 3 times my allocation, if you have a portfolio margin account, this becomes a lot easier to do. So, the KEY here (and in any trade for this matter) is to keep your positions small enough that you can handle adjusting/increasing it in size..

There are other non-directional option strategies that you can adjust without increasing your margin too much, but that's not the case for the Iron Butterfly.

As far as the spreadsheets, I posted a couple of entries on those. Here are the links:

I need to do some housekeeping and add those to the menu. Hope to have some time this weekend.


Gene said...

Thanks Gustavo.

Really helps.

Gene said...


One more question (for now).

Noticed you included a Long AUG 160 Call iniitially. Don't see a comment about it. Was that to hedge off some delta?