Friday, March 11, 2011

3/11 Daily Summary

Today I didn't see any recovery in the morning and decided to just exit the position. I was sick to my stomach to take this big loss -33%, it is a double-hit for 2 reasons:

1) It was way over my average win, and beyond my plan to control the losses and keep then to 1.5x the average win, this trade took 2 big hits with overnight gaps, the first time around I survived, the second time around no, I took the hit.

2) I had just started increasing in my position size. This is a double hit, as this is one of my biggest positions since I started tracking on the blog, it will certainly set me back by quite a bit.

All and all, I have to regroup, it is disheartening to be set back that much. I will have to do some hard thinking and figure out what to do from here. For now will take a break over the weekend, and do some hard thinking..



Anonymous said...

Hang in there Gustavo.
I took a big loss last November when my position in RUT got too close to expiration, and I lost control of my gamma exposure. I exited when I realized my position was nothing but a coin toss from then on. Turns out I would have been fine, but I still think I made the right choice.
Things I did afterward to rebuild confidence:
a. spent more time with my family, and enjoyed every minute
b. practiced on historical data
c. discovered your blog and learned a lot more
d. restarted trading at lower amounts
I haven't quite recovered from November but I'm getting there, and I'm a better trader for it


LJF said...

Im a newbie and trade the MNX flys. I also got caught with the gap down on Thursday and I condorized on Friday, down about 20 percent for the month. I came into Friday, like you, with no theta and almost a 2 to 1 vega over delta. Here is where I a gave up a few % points, I should have
started exiting Thurs. afternoon no matter what because I was dead on Friday unless my concepts are wrong. Unless the market crashed the vega was coming in or not going up at a normal rate due to the weekend. There was really no chance for my position to recover but was probably only get worse yesterday.
Also since your plan is to add another fly your position on the downside, is it more beneficial not to roll the long puts and only the short puts thereby increasing your vega on a continued downward move especially when you start out in a low vol month, <20. I look forward to your answer.

Gustavo's Trades said...

Thank you Dave!! I really appreciate your support. I took your advice and spent the weekend with my son, didn't even look at markets. I'm taking it easy instead of jumping back in with a "revenge" or "fearful" approach..

I think that it is better to sit it out and come back once you have yourself back in the game than it is to just push through..


Gustavo's Trades said...

Hey LJF, sorry to hear your position was in a tough spot as well. Hope you got out prior to this big melt down during expiration week.

On your question, I do roll the long puts when I'm still in a situation where I want to recover or add theta to the trade. If I was simply on a full-on defensive play, then keeping the long puts is a good option as it controls your gamma exposure and also cuts your down-side risk.

Here is a kicker: TOS has changed their margin requirements, so whenever you have an un-balanced iron butterfly it gives you a huge margin requirement and locks down a lot of your capital.. Think 3 times or more your original trade..

This is something else that hit me this month: dealing with new margin issues. I may continue to trade this position only in a portfolio margin account because of that.