Friday, July 30, 2010

07/30 Daily Summary

Nice recovery on the AUG trade this week! I’m looking for the exit to be honest, am very likely to start peeling this trade off as soon as Monday given the wild ride it was, getting out with near 10% of return is awesome!! Nothing like managing the storm, staying in the game and bringing home the bacon in the end :)


Anonymous said...

Hey Gustavo, great job - nicely recovered!
Question, When do you buy back your longs from the following month i.e. on a down move now - when would you buy back your Sep Calls and how do you determine this? Delta value, extrinsic value or something else?


Gustavo's Trades said...

Hi there, thanks!

I guess you mean sell back the longs I got as part of my up-side adjustmnet. What I do, as part of my evening evaluation is to look at the trade and its profile to identify where I think it might be getting in trouble (up or down).

Depending on the point of adjustment, I then decide what I want to do based on the greeks.. Meaning, should I sell the long call or buy a put? This will depend on what are my goals: cut delta, cut gamma, keep theta running, etc..

Sorry, but there is no clear cut rule I can say I always use. I follow a few guidelines, but in the end this is where you need to be trading it for a while to get a feel for it. Sometimes you're right, others you're wrong, but that is also part of the game.

All that being said, I will usually consider selling those longs carefully, because they open my exposure to Gamma, specially in this case, where I already did a cut and roll to the up-side, the down-side spread is further out, if I sell all my longs it will look like a condor with a high gamma exposure.. When your gamma is too big, it doesn't take a lot of movement to wipe out your profits, or to drag you too deep into losses..

I hope this helps a bit, sorry it was not a clear cut answer (aka rule)