Thursday, May 6, 2010

05/06 NDX Iron Butterfly – MAY/10

This morning I had a gut feeling I needed to cut and roll my puts. So I evaluated the risk profile and saw that it made sense to do it (see attached picture). So I started doing so, I was able to pre-emptively roll 2 of my short puts, but got a glitch on Internet connection and ended up not moving the 3rd one. So, left it alone with a contingent order to hedge the position at 1935.
I evaluated cutting and rolling and it made sense as it improved my position in all aspects except it exposed to a bit more vega, since I had the contingent order to hedge I wasn’t too worried about the vega for a short price space (from 1945 to 1935). Then the market proceed to roll down and never stopped.. I wasn’t watching, and I think my current P/L is not very accurate as it reflects the wild swing we had in the last hour of trading. My game plan is to cut and roll the last short put and keep the trade hedge to see where it stands Tomorrow.

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