Monday, November 15, 2010

11/15 Daily Summary

If anything, these past two days have been a trial of my ability to manage the position and land it despite the turbulence! I am very grateful we didn't move much Today, this allowed the position to recover a bit. I closed 1 put spread at the end of day as it seemed wise to clean up the bearish exposure a bit. Now depending on where we go Tomorrow I may continue to exit slowly (if down-side) or simply pull the plug (up-side). I also need to remove most of the capital off the position as I want to add or start adding the next month's position. This has been the first time where I have an overlap between months.

I might be starting these trades too late in the cycle, I'll review to see if this may be causing me to come in to close to expiration and if it is forcing me to adjust without a lot more time to recover, as it certainly seems something is odd about the past few months being quite a workout to get some profits out of the position.


Manuel said...

Well if memory serves Dan Sheridan seemed to really stick to around 30 days out with his butterfly webinars and I think often did 35-25 as the window and really does not like to be in the last 14 days of any income trade. I opted to do my RUT at 35 days out and that has seemed to work really good for me in back testing and in my first three months of live trading butterflies. I like 35 days as I am usually out within the first 14 days and if I have to adjust by moving my butterfly I tend to exit in a 19ish day window. Finally given my experience level (i.e. lower than yours ;D ) I opt to just exit at 14 days left regardless if I am at a profit but not at target or at a loss but not stopped out unless I feel extremely confident in the market moving how I need it to.

Going back to the debit spread. I agree I think the good old puts and calls still need to be taken into consideration because while a debit spread can help in some cases it probably will not do well like in an extreme drop or rise in the market or in smoothing the P&L graph line.

I hope to get time and back test all my old butterfly back tests and use debit spreads instead of the call or put adjustments and see how they compare.

Gustavo's Trades said...

Hey Manuel, I think that I might be cutting just a bit too late in the trading cycle, will do a review of all my trades and how many days till expiration I've entered in the past to see if I find any significant trend there.

One thing I've noticed is that I'm pushing well past the 14 days for adjusting and managing the trade, not yet sure this is good or bad, of course I much rather exit in 3 or 5 days with my PL goal :)

I think the debit spread helped me a lot in this last week, and when I looked at the overall trade I think there is room to do the first adjustment with a debit spread, and the following ones with a long call and put. The drawback is that they seem to use more of your capital..

Let me know what your back test tells you! Cheers! Gustavo