04/02 Portfolio Update

Plan the trade and trade the plan

I'm not saying that it is easy, specially on days like Today, with major indexes movng beyond 1 st. deviation and with several gaps at the opening. Nevertheless, I believe that Trading Well is a matter of having a good plan and study for each and every position. For every trade I place, I make sure to have:
1) A pre-trade study of price action and volatility
2) A pre-trade plan of action, with pre-defined profit targets, stop losses and adjustment points 3) A day-by-day monitoring system and methodology for setting up contingent orders to adjust positions, take profits and protect my capital

By having these things in place, I`m confident with myself and that I`m trading well. I have adjusted to the current market environment by reducing my $ exposure, by diversifying the timing and instruments I`m trading.

Now let's look at each position and see what happened Today.

1) RUT 52-Day Condor:
Notice that Voladility didn`t drop at all Today. RUT moved almost 1.5 st. deviation, and RVX didn`t move anything. Should things settle down the RVX can drop and bring the p&l back up. There is about 93% chance we will stay away from the up-side stop. Let`s see what Tomorrow brings.

2) XLE Double Diagonal:
Profits dropped by a little Today, nothing major, and still very far away from the closing points. Another one that has great probability of staying through the weekend.

3) OIH 36-Day Condor:
OIH still inside the volatility cone, Today`s move gave back the 2% we had, but didn`t cause any major loss. Notice that the CALL insurance will start to become less effective as time passes, bringing the stop closer, right now the stop is about .50c from the short strike. Still great chances of making throught the weekend.

4) GLD Calendar:

GLD gave back the profits it took so longer to acumulate, this doesn`t make me very happy, however, on the bright side, there is a great chance we`ll stay the weekend and get these profits back up next week.

5) MNX 45-Day Condor:

Being a young position, it hurt a bit more to get a bigger day, yet it is still inside the volatility cone and P&L not out of control. Volatility has fallen since the position started, however not Today, so should the market settle, it might drop and help P&L. There still great chances (93%) the trade will be around Tomorrow.

6) EWZ Double Diagonal:

Ouch! Such a dramatic move a day after I entered the trade, luckly it is a double-diagonal, so I expect it to recover faster if EWZ stays put for a few days. Nevertheless, let`s monitor it very closely.

04/01 Portfolio Update

The market moved up Today, but not by much. I was completelly detached from intra-day volatility and price movement, the longet I get used to trading with contingent orders, the better for me. The portfolio certainly improved Today, specially the XLE double-diagonal.

I entered a new MAY/09 Position: EWZ Double Diagonal.

1) RUT 52-Day Condor:


2) XLE Double Diagonal:

3) OIH 36-Day Condor:

4) GLD Calendar:

5) MNX 45-Day Condor:

6) EWZ Double Diagonal:

04/01 EWZ Price Study

First let me start with the volatility & price action study. You can see from the picture bellow that EWZ had very few 2+ st. deviation moves in the past 30 and 60 days. The number of 1.5+st. deviation days could be a bit lower, but given the recent market volatility I'll accept.

The second thing is the 5-day Vol Spikes, you'll notice it is following a wave function pattern, this to me, indicates there is not a strong trend in place. Also, there are not too many big spikes on that chart, which indicates on major swings.


So, once I liked EWZ as a candidate, the next step is to look at a possible trade. Here is the Double-Diagonal profile. It yields about 27% in the center and has over 58% probability of expiring in between the B/E.

Historical deviation suggests that there is 88% chance the trade will stay within the no-adjustment zone for the next 3 weeks, therefore cashing out my target profit.

Historical probability also suggests there is about 74% chance of staying within the B/E for the duration of the trade.

03/31 Portfolio update

Today was a great day for the overall portfolio! The market didn't move much in any direction and the positions earned $$.

Here are my comments, dashboard and profile chart for all positions:

1) RUT 52-Day condor:
Behaving well within the expected zone, RUT has been jumping around, but the Condor is very wide and can take up to 1.5 st. deviation on the Vol Cone. Notice the recovery from being -7% a few days after the trade was placed.

2) XLE Double Diagonal:

XLE behaved well Today and earned an extra 1% recovery, there is still some $ to earn, but the adjustment I made a while back by adding to the trade is paying off very well.

3) OIH 36-Day Condor:

The longer OIH drops, the more money the trade will make. Unfortunatelly the adjustment took a big chunk of the profits, the bright-side of it is that it forced me to re-think all adjustments and condors, I'm a lot more confident in trading the 36-day condors without cutting spreads. I backtested over 5 years of 36-Day condors and it is giving me the confidence I need.

4) GLD Calendar:

The trade is losing $, not sure where the issue is, I think it has to do with the 94 Calendar I added right after I put on the trade, I highlighted the volatility chart on the dashboard. The peak is where I added the 94 Calendar, and now that the volatility is dropping, it is hurting the position. It is still under the profit zone, so I'm giving it time. Sooner or later time decay will kick in.

5) MNX 45-day condor:

The new baby on the block. Not much to report, except that I'm very confident with the study I made before getting this trade on.

03/30 Note about contingent orders

Unless otherwise noted, I display the levels where my contingent orders should trigger on the risk profile for every trade. This way I avoid to repeat redundant information every day. I'm keeping my postings shorter to have enough time to continue backtesting and researching for trade candidates.

Keep in mind a few simple rules I follow for my contingent orders:

1) Rule #1: ALWAYS have an order in place. The market can do anything anytime, having capital preservation is essential for every trader.

TOS Contingent Orders Guidelines:
a) I use OCO orders with limits set for mark + small increments (mark - when selling), I always have an order to buy or sell on the bid or ask in case none of the previous orders were triggered.

b) I use a time trigger: Most of my orders are set to start half an hour after the market is open. This allows me to avoid the opening madness. Yes, there is 30 min. risk in case of a price gap, but the feedback I have from a lot of experienced traders is that they avoid that first 30 minutes, and so do I.

c) Use time increments on the trigger: I had a situation where all my OCO orders were filled at the exact same time. It happened that the underline was moving beyond all 3 orders, and because I didn`t have a time interval between them, they were all filled.

d) Avoid GTC orders, unless they are for closing a trade with the target profit. I had a scenario when a GTC contingent order to shut down a position was trigger at the exact time the market opened and caused my limit to be super-high because the opening prices were all over the map the minute the market opened. That`s the reason why I have a time trigger as described on (b)

03/30 MNX 45-Day Condor

Started this trade Today, after performing VIPES it looked like the best candidate Today. My plan is to trade it just like a High Prob, I've sold short strikes with delta around .8 and will place my stops if PUT delta gets to -28 or CALL delta gets to +30. Otherwise, simply collect profits.

Trade Plan, Dashboard and Profile bellow:

03/30 GLD Calendar

Still not bringing profit, the trade has 10 days and I'm starting to wonder if staying with it is a good idea. Will bring it up with Dan Tomorrow.

Dashboard and Profile bellow: