It has been over 21 days since I started to keep my trading journal as a blog. I’m glad to report I didn’t miss one trading day without blogging, commenting, taking pictures and setting up contingent orders in my trading account
At first it was time consuming, took me about 2 hours to complete the task, now it takes me less than 1 hour to do everything I need to do at the end of the day. It has also helped me to establish the mechanics for my trading business.
It is taking less and less of my time on a daily basis. Sure, the market conditions are not the most favourable for this type of strategy, yet things will settle, and when they do I’ll be well on my way to reaching my financial goals. 1 hour a day goes a long way...
With time I plan on adding educational material to the blog, maybe a section or two about how to trade these strategies, money and risk management, psychology, etc... I’m still a student myself, but I believe in sharing the knowledge and it will be a great pleasure for me to do so. In the mean time, I posted the links to a few sites I used and continue to use to educate myself.
Cheers!
Gustavo
Saturday, April 4, 2009
04/04 EWZ Double Diagonal
EWZ went wild as soon as I placed the trade. It hit 1.5 st. deviation on the volatility cone within 2 trading sessions.
At this point a few things are worth noting: First the fact that P&L is not soo bad, we are down 8%, compare it with the MNX 45-day condor, and you will notice it is down more and the price is still inside the cone.
Second, there is a lot of potential profit on the table, so one could consider adding some up-side insurance. I have not done this in the past, however, I'll look at this possibility in a decision-tree to see if it makes sense.
As far as probabilities are concerned, there is 78% historical and 62% implied probability the trade will stay within the break even zone. For Monday, there is 91% chance it will be adjustment-free.
Bellow are historical probabilities, dashboard and risk profile charts:
At this point a few things are worth noting: First the fact that P&L is not soo bad, we are down 8%, compare it with the MNX 45-day condor, and you will notice it is down more and the price is still inside the cone.
Second, there is a lot of potential profit on the table, so one could consider adding some up-side insurance. I have not done this in the past, however, I'll look at this possibility in a decision-tree to see if it makes sense.
As far as probabilities are concerned, there is 78% historical and 62% implied probability the trade will stay within the break even zone. For Monday, there is 91% chance it will be adjustment-free.
Bellow are historical probabilities, dashboard and risk profile charts:
04/04 MNX 45-Day Condor
This was a rough week to start any trade, this MNX position took it to the chin, yet it is still standing! MNX went up, up and then up some more for the week, there is still a lot of time left on the condor, one could adjust it from here, I'm committed to keeping them simple, so will stick to the original trade plan and use 1.5x cashflow as the stop on the trade..
Probabilities are still looking good, with 30 days to go there is 92% historical and 78% implied probability of expiring within the Break even.
As far as the stops are concerned, I was looking at the risk profile and noticed a difference in P&L and the stop based on delta. If we hit a 30 delta on the call side, it is showing the P&L to be less than -1.5x the cashflow, only a 32 delta would hit the stop. I need to evaluate this with the market open to make sure these values are correct, in the mean-time I will use 32 delta as the risk profile is suggesting. There is 91% chance it will be fine Monday.
Bellow are probability, dashboard and risk profile:
Probabilities are still looking good, with 30 days to go there is 92% historical and 78% implied probability of expiring within the Break even.
As far as the stops are concerned, I was looking at the risk profile and noticed a difference in P&L and the stop based on delta. If we hit a 30 delta on the call side, it is showing the P&L to be less than -1.5x the cashflow, only a 32 delta would hit the stop. I need to evaluate this with the market open to make sure these values are correct, in the mean-time I will use 32 delta as the risk profile is suggesting. There is 91% chance it will be fine Monday.
Bellow are probability, dashboard and risk profile:
04/04 GLD Calendar
Sometimes, you snooze you loose.. GLD moved back down for two days in a row and threw away the small profits we had. Something inside of me was telling me to take profits on this trade. I stuck to the plan, for better or worse. Now we`re back to where we started, however, there is time decay working in our favor, based on TOS we recover about 1% for every day that goes by, so the weekend alone will recover the trade.
As far as probabilities are concerned, there is 54% historical and 45% implied probability it will expire within the range.
NOTE: I`m thinking about adjusting this position back to the 89 calendar. I want to avoid over-trading and stay objective, so I`ll run a decision tree on it. It will be something similar to what I did for the XLE double-diagonal
Bellow are the historical probability, dashboard and risk profile charts:
As far as probabilities are concerned, there is 54% historical and 45% implied probability it will expire within the range.
NOTE: I`m thinking about adjusting this position back to the 89 calendar. I want to avoid over-trading and stay objective, so I`ll run a decision tree on it. It will be something similar to what I did for the XLE double-diagonal
Bellow are the historical probability, dashboard and risk profile charts:
04/04 OIH 36-Day Condor
OIH was behaving wonderfully well last week, then it took a triple-spresso shot and went nuts Thursday and Friday.. Well, let me put it this way, I took OIH instead of RUT for th 36-day condor, this trade is still on the board, if I had taken the RUT path it would be gone a while back. The pre-trade study paid off in this case.
Let's talk probabilities: with 10 trading sessions to go, there is 87% historical and 78% implied probability we'll expire under the CALL-side B/E. That`s great considering this trade started out with about 68% chance.
As far as the stop, there is 95% chance of it staying fine Monday.
Bellow are the historical probability, dashboard and risk profile charts:
Let's talk probabilities: with 10 trading sessions to go, there is 87% historical and 78% implied probability we'll expire under the CALL-side B/E. That`s great considering this trade started out with about 68% chance.
As far as the stop, there is 95% chance of it staying fine Monday.
Bellow are the historical probability, dashboard and risk profile charts:
04/04 XLE Double Diagonal
Time Decay is helping this trade a lot! XLE moved up again last week, yet the position P&L improved (see dashboard). With just 10 days to go, probabilities of expiring inside the B/E range is still very good, we have 61% of historical probability and 55.6% of implied probability.
Stops are far away from price, and chances of hitting the up-side stop Monday are small, over 98% chance it will be fine Monday.
Bellow are the historical probability, dashboard and price profile pictures:
Stops are far away from price, and chances of hitting the up-side stop Monday are small, over 98% chance it will be fine Monday.
Bellow are the historical probability, dashboard and price profile pictures:
04/04 RUT 52-Day Condor
The probabilities still are looking great for this position. With 30 trading sessions to go, the historical probability is 98%, while the implied probability of success is 80%.
As far as probabilities of hitting the stop, there is 87% chance it will be safe Monday.
Bellow is the current profile, as well as the dashboard and probabilities:
As far as probabilities of hitting the stop, there is 87% chance it will be safe Monday.
Bellow is the current profile, as well as the dashboard and probabilities:
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