Sunday, May 15, 2011

What I have been up to?

Ok, it has been a long while since my last posting. I feel guilty for leaving the blog catching dust lately, but at the same time day-to-day workload has increased a lot and when I come home I barely have time to say hi and it starts the dinner, bath and bed routine with the kids.. :)

Needless to say, I had to adjust my trading routine to adapt to this new reality, so I have limited my trading to a few strategies on stocks instead of the NDX Iron butterfly, mostly these are no maintenance trade, except for watching the stocks to make sure they don't bite the dust..

I have what I consider long-term positions on GLD, KO, PG, WMT; GLD is mostly a hedge against inflation in my portfolio, we're looking to get back into real estate so I may move away from GLD and go into brick and mortar rental properties :)... KO, PG and WMT are what I consider stable plays and I'm using two strategies on them: Cash-secured Puts and synthetic covered calls.

I'm also reading the IBD newspaper on a daily basis and watching for breakouts among the IBD top 50 stocks. So far I have two break outs: COH and ORCL.

All and all, the portfolio is stable and seems to be a good fit to our busy life.. I refresh the positions once a month by rolling to the next expiration cycle. My stop loss is to close any open position if the underlying stock falls over 8%.. So far they're doing good and I'm keeping a "sane" balance to life and trading!



Anonymous said...

Hi Gustavo
I'm glad your current trading schedule is working out for you, financially and timewise. I am trying to keep two rules in mind with my trading
1. If my trading research is taking away time from the family, it's time to take a break
2. If my position is causing stress that's effecting my free time, it's time to close the trade

Fortunately the wife and kids tend to need more sleep time, so I have some alone time in the morning to drink coffee and try to learn about options.

I had a wild ride trying to do an NDX trade this month. I tried to style my position after your NDX butterflies, with a bit of a bullish bias, as I had a more bullish opinion several weeks ago. By last Thursday my position was up about 12% but I was too greedy to close, and I lost most all the gains on Friday. I was stressed out about my position all weekend long (see rule number 2).

Fortunately I closed my position this morning before the major bleeding began, and didn't lose anything for the month, except a little bit of pride and commissions maybe.

My theta trading lesson for the month: sell early, be satisfied, and stay out of opex week

Best of luck, and keep in touch.

Gustavo's Trades said...

Hey Dave, thanks for sharing your comments. I agree with you the key is to find the balance and being able to identify when you're pushing yourself too hard and need to take time to regroup.

I've been trading for a while now and there is nothing more frustrating than letting a winner fade on you.. No matter what strategy we use, when you're up a good chunk and close with almost nothing it sucks big time! I've made a rule on my butterfly to take it out at 10% sharp! I've realized that one too many things I had the profits and the gamma exposure would simply wipe out my money. An option would be to scale out of the trade to keep the Gamma as small as possible.. but I just don't have the patience, I rather just rip the band aid sort of speak..

Now the long positions I have are a lot more balanced and I feel like I can take a much more hands off approach. Believe me, it is working big time for me! Of course my gains are not even close to the butterflies, but at least I get the satisfaction of staying in the craft and being able to run my work demands and family demands..

Well, I wish you the best in your next butterfly! As long as you capture that lesson, you gained something!


Anonymous said...

Hi Gustavo
I've been watching the market lately, imagining what your old dashboard would look like with all the standard deviation moves up and down.
I'm not trading this month. We're taking the kids to Florida next week, and for once I followed the rules and stayed out.
Which is a good thing because I have no thoughts on where we are going next.
Best of luck to you.

Anonymous said...


I'm just starting or read your blog and notice a few years ago you seemed to be following Sheridan mentoring Income trading strategies. It looks like you went through the mentoring program I believe.

Seems you're not doing the double diagonals and condors anymore. Do you think Dan Sheridan's strategies still work over the long run/in current environment? Would you endorse the program? Reason I ask is I'm considering joining but would love to hear from a person such as yourself that has gone through it.


Anonymous said...

Hi Gustavo
I don't know if you are still paying attention to income trading or not, but I figured I would send you what I've been up to.
I still pick through your historical data to try to find adjustment ideas.

June 20th I sold an iron butterfly x 2 in SPX. Puts: +1200/-1275 and Calls: -1275/+1350. I received 41.10 per butterfly for total credit $8220. Max loss $6780. My goal is to earn a simple $700, and definitely be out before option exp week. I will close the trade if down $1000. I planned first adjustment points if down $500.
I chose SPX because I've been following it longer and feel like I have a better sense for support and resistance. I've been a little nervous by how NDX has moved lately.
I chose the butterfly because I felt like there was strong support at 1250 with the 200DMA also nearby. I also felt there was pretty solid resistance in the 1300-1310 range so I expected it to slow down in time for adjustments if SPX hit this level.
Originally the trade was delta negative by $20 or so. I left the delta unbalanced because I thought if the SPX declined, volatility would increase, and I wanted to lean into this pain a little bit by being delta negative. I may have been too unbalanced, because the SPX rose to 1298 by June 22. By then my delta was negative $60 and I reached my adjustment point. I bought a call vertical +1310/-1350 for 10.90 (was just 5.00 two days earlier) which cut my delta down to $30 again. Fortunately (or unfortunately based on the timing) one hour later the SPX pulled back.
If I hadn't adjusted I would already be out of the trade with my goal reached. But the whole purpose was to develop a plan, trade it safely, and meet my goals. So I give myself a bow for staying true to my plan. For now I'm just sitting, trying to collect a little theta, and hoping for a little drop in volatility.
Let me know what you think.
You can email me at dswilson if that is easier.

Gustavo's Trades said...

Hey Dave, I see you took a break early Jun and came back around the end of month.. Regarding your trading and adjusting point, I would feel the exact same way you did: Adjust as per the plan whenever it is time to do so. I can't tell you how many times I had this back and forth of the market make me push an adjustment just to see it fade the levels and leave me sitting with an adjustment that cost me money..

The goal for the income trader should not be guessing direction, but managing risk exposure. This dictates we make purchases to reduce risk and will invariably leave us in scenarios like that. As a trader your goal should be to move past the "if, woulda, coulda, etc" and focus on the "this was my plan". Anyhow it feels better to have the plan and follow it, than trying to "wing it" and have the back and forth of the market throw you in the self-blaming mode.

I've been trading a much longer term approach, still check the market daily, but with a lot less time on my hands I read the IBD paper every day and once a week check my cash-secured puts and synthetic covered call trades to make sure they're doing ok.

The good news is while the market took a big hit in the past few months (now recovering) my portfolio moved a lot less. The goal for me was to reduce volatility and the need to make daily adjustments, and so far it is working well. I'm up for about 3% since March, not a lot compared to what an Iron Butterfly could do, yet I'm happy and with a good life-balance in place.


Gustavo's Trades said...

Matt, let me answer your questions about Sheridan Mentoring. Please note these are my own personal opinions, I am not affiliated, nor get any $ from Dan Sheridan and his Mentoring program.

That being said, the mentoring program was a great decision I made a few years back. I started in June 2008, right before the big melt down. I was trading Iron condors since January of that year and had basically NO RISK MANAGEMENT. Think about this for a minute: I was trading 80% of my hard earned money on Iron condors without any money or risk management.

I started watching the free web seminars Dan offers on the CBOE site. Just from the free webinars I learned I needed to have money management in place (read: not lose more than 1.5 of my capital, have a balanced allocation and adjustment strategies). I also learned there was So much more to learn... I then signed up and watched the videos until my eyes were bleeding (I literally had a small vein in my eye pop because I watched soo many web-ex sessions). This was a huge value for me, watching previous mentoring sessions, learning from pros, etc..

2008 Melt-down happened, and when it did, I already had money management. Instead of losing 80% of my money in a bad condor, I managed to close down my positions, reduce my size and focus on learning during the storm. I closed the year 8% profitable. :)

To date, I still go to Sheridan Mentoring and listen to their recordings when I drive to work. I learned from them how to create the portfolio I'm trading now (long term positions with cash secured puts, etc) and feel confident that whenever my schedule changes and I am ready to dive back in iron butterflies, calendars, etc I can quickly catch up with the web-ex sessions and be back on the income trading business.

It was a worth investment for me. This varies from person to person! I had a friend who signed up at the same time I did, and he stopped trading a few months after. For him it was mostly a waste of money. So it really depends on your ability to stay in the game, the persistence, the resilience, the love for the game of trading and investing.

If you are looking for get rich quick, this is not the site/program for you... If you are looking for getting better every day, learn from your mistakes and work on the craft, then it is probably worth checking out.. I would always start with the free webinars at CBOE, this was a good introduction for me.