Wednesday, November 3, 2010

11/03 Daily Summary

Today was wild action during the FMOC, I didn't watch it and sure am glad the position didn't go trough any contingent order. By end of the day, during my lunch hour I looked at it and decided to jump in and move my short calls up a level, the Deltas were approaching 65 which is my warning light for doing the jump. Because we don't have too many days left to go, I figured it is better to jump on the adjustments right away so I can still get the time decay. I also expect vols to drop now the announcement is over and therefore didn't want to stick around with positive vega exposure and little theta on the position.


Anonymous said...

Hi Gustavo,

You cut and Rolled but didn't add theta? You used to add another Iron Butterfly when you Cut and Rolled - Is this something new in your plan?

Gustavo's Trades said...

You are correct DZ, my next step is to add theta, I'm looking at the best way to do so, and my challenge right now is being able to do it in the morning before work starts. I will have an early morning meeting (7AM and more meetings from there)...

I usually add the theta after thinking about the trade for a while in the evening, to sort out how to place the new butterfly. I also like to cut and roll the next day after hedging in the afternoon, but Yesterday I was not comfortable with being too exposed to up-side, so I cut and rolled sooner (by end of day), this turned out to be good for me as we had a huge gap in the morning.


Gustavo's Trades said...

One last comment, the key reason I didn't add the butterfly this morning was that Yesterday I still had theta to reach the goal prior to expiration week.

After it moved over 2185 the theta is not enough, so I need to add a butterfly to the trade.

I guess what I'm trying to say is that there isn't a hard rule, one has to always look at the greeks and make decisions based on it.