Today was a great day, we had a down-day and the being slightly delta-negative paid off on all my Iron Butterflies.
For the MNX Iron Butterfly we have reached the 12% ROI mark, and I'm working my way out of the trade. Note one have to be smart about this, taking too many spreads out of the table can expose you to unwanted delta risk
For both the RUT and SPX, we're back at B/E and still some time to go. I imagine RUT and SPX will be positions that I'll have to hold until the very final days of expiration, let's see how it goes.
Detailed positions:
06/30 RUT Iron Butterfly
06/30 SPX Iron Butterfly
06/30 MNX Iron Butterfly
Tuesday, June 30, 2009
06/30 RUT Iron Butterfly
I did a butterfly roll at the closing hour on the RUT position, once again, it flattened my deltas and brought a lot of theta back into the picture. The butterfly roll closed my short 490 CALL and sold 2x510 CALLs.
The trade is back at B/E, now let's see how it behaves Tomorrow. My theta:delta ratio is 12:1, so there is a good chance it will be more profitable Tomorrow. Bellow are my adjustment points.
The trade is back at B/E, now let's see how it behaves Tomorrow. My theta:delta ratio is 12:1, so there is a good chance it will be more profitable Tomorrow. Bellow are my adjustment points.
Position's history day-by-day:
06/30 SPX Iron Butterfly
SPX hit 930 early in the day and executed my butterfly roll. I moved one of the Short 895 CALLS and rolled into the 930 CALLs, it gave me flat deltas and a lot more theta to work with. In reality, I would have done this adjustment at Yesterday's close, but I was too focused on the live trade and didn't pay attention to SPX in the final hour.
With Today's price movement, I have 24:1 theta:delta ratio, so Tomorrow will be more profitable than Today, unless we have a huge price movement. Bellow are my next adjustment points.
With Today's price movement, I have 24:1 theta:delta ratio, so Tomorrow will be more profitable than Today, unless we have a huge price movement. Bellow are my next adjustment points.
Position's history day-by-day:
06/29 SPX Iron Butterfly
06/25 SPX Iron Butterfly
06/24 SPX Iron Butterfly
06/23 SPX Iron Butterfly
06/22 SPX Iron Butterfly
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06/30 MNX Iron Butterfly
I started peeling off spreads on the trade. At the end of day Today it was up around 12% ROI, however, one needs to be very careful when taking this type of trade "off the table". This position is hedged in many ways, so, when you take one spread off, you need to make sure it won't mess up the delta on the position.
I've seen one of Dan Harvey's mentoring video, where the student gave up his entire profits by not being careful when exiting the trade. He got caught up in a price swing and ended up dancing in the wrong side of the market (buying tops, selling bottons sort of speak)
Case in point: Taking one iron butterfly right now will immediately leave me with 35 deltas, so I need to also sell the long CALL contracts to balance this delta back to neutral. Doing so during wide market swings may cause you do lose money in a flash. Because MNX was swinging wildly in the final minuts, I was extra careful not to go in and start carving out spreads. In the end, I took only one iron butterfly off, it left me with flat deltas. I plan on continuing to exit the next few days.
I've seen one of Dan Harvey's mentoring video, where the student gave up his entire profits by not being careful when exiting the trade. He got caught up in a price swing and ended up dancing in the wrong side of the market (buying tops, selling bottons sort of speak)
Case in point: Taking one iron butterfly right now will immediately leave me with 35 deltas, so I need to also sell the long CALL contracts to balance this delta back to neutral. Doing so during wide market swings may cause you do lose money in a flash. Because MNX was swinging wildly in the final minuts, I was extra careful not to go in and start carving out spreads. In the end, I took only one iron butterfly off, it left me with flat deltas. I plan on continuing to exit the next few days.
Position's history day-by-day
06/29 MNX Iron Butterfly
06/26 MNX Iron Butterfly
06/25 MNX Iron Butterfly
06/24 MNX Iron Butterfly
06/23 MNX Iron Butterfly
06/22 SPX Iron Butterfly
06/19 MNX Iron Butterfly
06/18 MNX Iron Butterfly
06/17 MNX Iron Butterfly
06/16 MNX Iron Butterfly *New*
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Monday, June 29, 2009
06/29 Daily Summary
Nothing major happened Today, SPX made new highs, but it wasn't followed by RUT or MNX, trading was range-bound for most of the afternoon.
I had an automatic adjustment on the SPX Iron Butterfly but the adjustment wasn't enought and I ended up the day more delta negative than I wanted. Also, by the end of the day I cut a few deltas on the MNX Iron Butterfly to keep it in line with the theta.
For tomorrow, should we keep moving up, I will execute some butterfly rolls to move my short CALL contracts on both the RUT and SPX Iron Butterflies. The MNX iron butterfly is not quite at a point where I need to move the short CALLs, so if we move up on MNX I'll add long AUG CALLS to bring the delta back down in 1/2.
New positions this week:
I'm thinking about adding a 50-day Iron Condor for Aug/09 Contracts, I might do it on the small side. This should probably be something I do on Wednesday (if I decide to do it)
Here is a summary of each open position:
06/29 RUT Iron Butterfly
06/29 SPX Iron Butterfly
06/29 MNX Iron Butterfly
I had an automatic adjustment on the SPX Iron Butterfly but the adjustment wasn't enought and I ended up the day more delta negative than I wanted. Also, by the end of the day I cut a few deltas on the MNX Iron Butterfly to keep it in line with the theta.
For tomorrow, should we keep moving up, I will execute some butterfly rolls to move my short CALL contracts on both the RUT and SPX Iron Butterflies. The MNX iron butterfly is not quite at a point where I need to move the short CALLs, so if we move up on MNX I'll add long AUG CALLS to bring the delta back down in 1/2.
New positions this week:
I'm thinking about adding a 50-day Iron Condor for Aug/09 Contracts, I might do it on the small side. This should probably be something I do on Wednesday (if I decide to do it)
Here is a summary of each open position:
06/29 RUT Iron Butterfly
06/29 SPX Iron Butterfly
06/29 MNX Iron Butterfly
06/29 RUT Iron Butterfly
There was no change in P&L Today, at these levels, I was expecting the trade to be slightly profitable based on last Friday's estimations. However, the difference is so small that it doesn't botter me as much as the SPX discrepancy.
I have orders to execute butterfly rolls on the short CALLs if we move above 515 and 520. The reason to move these short CALL contracts is that they have very little time-value on them, and they are hogging the deltas.
Position's history day-by-day:
06/25 RUT Iron Butterfly
06/24 RUT Iron Butterfly
06/23 RUT Iron Butterfly
I have orders to execute butterfly rolls on the short CALLs if we move above 515 and 520. The reason to move these short CALL contracts is that they have very little time-value on them, and they are hogging the deltas.
Position's history day-by-day:06/25 RUT Iron Butterfly
06/24 RUT Iron Butterfly
06/23 RUT Iron Butterfly
06/29 SPX Iron Butterfly
Something weird keeps on happening on this trade. The risk profile is not accurate, could it be a function of the SPX's wide spreads? Thoughts? Anyone? I hedged (or thought so) the position around noon Today, and when I looked back at it after it closed, the deltas were big once again. I have orders to execute butterfly rolls to move my Short CALLs if we move higher Tomorrow.
The P&L took a drop Today, if you look at the risk profile from last Friday (see link at the bottom), it was estimating the trade to be profitable at these levels.. I'm certain I don't want this type of scenarion in a live trade, so I'm staying away from SPX on live iron butterfly positions.
Position's history day-by-day:
06/25 SPX Iron Butterfly
06/24 SPX Iron Butterfly
06/23 SPX Iron Butterfly
06/22 SPX Iron Butterfly
The P&L took a drop Today, if you look at the risk profile from last Friday (see link at the bottom), it was estimating the trade to be profitable at these levels.. I'm certain I don't want this type of scenarion in a live trade, so I'm staying away from SPX on live iron butterfly positions.
Position's history day-by-day:06/25 SPX Iron Butterfly
06/24 SPX Iron Butterfly
06/23 SPX Iron Butterfly
06/22 SPX Iron Butterfly
06/29 MNX Iron Butterfly
I almost cut my deltas at 149 Today, was thinking about doing that when MNX was trading at 147 (first hour of the day). I even posted an adjustment in twitter and the blog. After spending some time thinking about it, I decided to stick with Friday's plan. As it turns out, MNX went to 149 and backed off to 138.3. At the end of the day all I had to do was bring the delta back in line with my theta. I still have orders to cut the delta if we're at 149.50.
I'm looking forward to some down-side movement so I can cash in the trade. The sooner the better.
I'm looking forward to some down-side movement so I can cash in the trade. The sooner the better.
Position's history day-by-day
06/29 MNX Iron Butterfly - At Opening
Update: After wondering on this for quite a while, decided to keep the plan from last Friday. I don't want to be reacting to price action and change my plan just because we moved down in the first hour of trading. So adjustment back at 149.50
Based on this Monday's open, I've made a small adjustment to the contingent orders on the position, I'm basically tightening things at the top and bottom, now that we're around 10% ROI I want to keep as much of the profits as possible. Likely to exit the position all together Today based on a 10% in 10 days rule.
Based on this Monday's open, I've made a small adjustment to the contingent orders on the position, I'm basically tightening things at the top and bottom, now that we're around 10% ROI I want to keep as much of the profits as possible. Likely to exit the position all together Today based on a 10% in 10 days rule.
Position's history day-by-day
Friday, June 26, 2009
06/26 Daily Summary
Comments
Today was a great trading day. The US Stock market was quiet and the option trades received their time decay. The morning's day trading was also profitable, this is really great considering it was a specially challenging morning in the FOREX market, there was a lot of indecision in the currency market this morning. It seems that's the theme everywhere these days: Indecision.
For my Brazilian friends: I translated a new Brett Steenbarger's posting related to questions one should ask at the end of the trading day.
Here is a summary of Today's positions:
Today was a great trading day. The US Stock market was quiet and the option trades received their time decay. The morning's day trading was also profitable, this is really great considering it was a specially challenging morning in the FOREX market, there was a lot of indecision in the currency market this morning. It seems that's the theme everywhere these days: Indecision.
For my Brazilian friends: I translated a new Brett Steenbarger's posting related to questions one should ask at the end of the trading day.
Here is a summary of Today's positions:
06/26 MNX Iron Butterfly
Decided to not touch the trade at the end of day. MNX pushed a bit higher, but its 1-hour chart was showing real weakness at the top. As of now, theta:delta ratio is about 1:1, and going into the weekend this will allow profits to accumulate. It will be specially sweeter if we go down on Monday, otherwise I'm ready to hedge the position and keep some of the weekend's profit.
Position's history day-by-day
06/26 SPX Iron Buttefly
Added a Jul/09 PUT vertical spread (1x 850/830) to cut a few deltas and increase theta. Wanted to add more theta to the position. Noticed that Yesterday's risk profile was once again unrealistic. This may be due to how wide the spreads are on SPX.
Position's history day-by-day:
Position's history day-by-day:06/26 RUT Iron Butterfly
Added a PUT vertical spread (2x 470/440) to increase Theta and cut some Deltas on the trade. I want to maximize time decay over the weekend, I have plenty long AUG CALLs to sell if we start dropping next week and if we move higher the delta will be flat enough. 
Position's history day-by-day:
06/25 Daily Summary
Commentary and Updates: US Markets moved higher, logging over 1 standard deviation on most indexes and ETFs. I closed the RUT 30-Day Iron Condor with about 10% profit and had up-side adjustments made on all my iron Butterflies.
I'll start to include this summary post every day, this will make it easier to reach each position. It is faster to click on the links bellow than it is to scroll down on the blog to find them. I hope this makes it easier for readers (myself included). I'm also going to start updating each position with links to their full history, this way one can easily see what has been going on for each trade.
Details about Each Position:
I'll start to include this summary post every day, this will make it easier to reach each position. It is faster to click on the links bellow than it is to scroll down on the blog to find them. I hope this makes it easier for readers (myself included). I'm also going to start updating each position with links to their full history, this way one can easily see what has been going on for each trade.
Details about Each Position:
Thursday, June 25, 2009
06/25 RUT Iron Butterfly
RUT went to Break-even Today, provided it has been moving around right after the trade started, it is ok. I have a contingent order to hedge and flatten my deltas if we keep moving to the up-side.
Position's history day-by-day:
06/25 SPX Iron Butterfly
I was tricked by Yesterday's profile. Because I used the line at expiration, the perspective on my current P&L line looked as if everything was great on the up-side. When you look at the "at expiration" profit potential, then giving up a few hundred dollars is no big deal, however, if you think in terms of what my profit goal is, it is a big deal.
So, the position is hedged and I am now using the Day-step lines for evaluating where the risk is.
So, the position is hedged and I am now using the Day-step lines for evaluating where the risk is.
Position's history day-by-day:
06/25 MNX Iron Butterfly
MNX reached the 147 adjustment point, I cut the deltas in 1/2 and have the contingent orders to continue cutting if we keep moving up Tomorrow.
Position's history day-by-day
06/25 RUT 30-Day Iron Condor *Closed*
I exited the position Today with just about 10% ROI, the main reason was the fact that it took only 10 days to get the profits. So that's a great reason to exit!
Position's history day-by-day
JUL RUT 30-Day Iron Condor (day-by-day review)
I exited the trade with just under 10% in 10 days! Whenever I get profits quickly like that, I take my gift and head to the exit. Thank you uncle Russell! :)
Start: 06/15/09
Finish: 06/25/09
Duration: 10 days
Results: +9.49%
06/15/09 - Started the trade, spent about 20% of credit to purchase PUT and CALL insurance
06/16/09
06/17/09
06/18/09
06/19/09
06/22/09 - Closed 1 CALL spread and the CALL insurance
06/23/09 - "RUT took a hit on P&L, We need it to move back up for a recovery. I have contingent orders to cut the deltas if we reach the 480 level"
06/24/09 - "RUT gave the position a break Today. The volatility drop also helped to bring profits back up."
06/25/09 - Saw just over 10% in my monitor spreadsheet, proceeded to exit the trade.
Start: 06/15/09
Finish: 06/25/09
Duration: 10 days
Results: +9.49%
06/15/09 - Started the trade, spent about 20% of credit to purchase PUT and CALL insurance
06/16/09
06/17/09
06/18/09
06/19/09
06/22/09 - Closed 1 CALL spread and the CALL insurance
06/23/09 - "RUT took a hit on P&L, We need it to move back up for a recovery. I have contingent orders to cut the deltas if we reach the 480 level"
06/24/09 - "RUT gave the position a break Today. The volatility drop also helped to bring profits back up."
06/25/09 - Saw just over 10% in my monitor spreadsheet, proceeded to exit the trade.
JUL SPY Double Diagonal (day-by-day review)
This trade was fairly uneventfull. I exited once I had reached 15 days on the trade, when it started to lose profits I got on my way to the exit. In hindsight, it would be more profitable a few days later, but then again, it could as easily be going the other way.
Start: 06/03/09
Finish: 06/23/09
Duration: 20 days
Results: +4.79%
06/03/09
06/04/09
06/05/09
06/08/09
06/09/09 - "Today I allocated the remaining capital planned for Double Diagonals. I decided to add to the SPY position to keep my portfolio simple enough. "
06/11/09
06/12/09 - " The main thing to notice is that the Volatility has dropped by 12% on this trade, I'm checking the middle of the graph at expiration to see if the P/L there has collapsed or not, so far it is very good, only dropped by about 2%.."
06/15/09
06/16/09
06/17/09
06/18/09 "I took the finger off the trigger on the trade Today. I was itching to exit this position. Given the weekend is just around the corner, and we find ourselves in the middle of the graph, I'll let it ride and look at it again Monday."
06/19/09
06/22/09 - "This is the 3rd week on the trade, and the question I ask myself is: do I want to stay here? We're approaching the level where the adjustment point is no more than 1 st. deviation in the volatility cone, from that point on, adjusting is simply part of the expected law of probabilities."
06/23/09 - "We had this trade for over 15 trading sessions, the profit got up to 8% and when it started to drop back down I decided to close it."
Start: 06/03/09
Finish: 06/23/09
Duration: 20 days
Results: +4.79%
06/03/09
06/04/09
06/05/09
06/08/09
06/09/09 - "Today I allocated the remaining capital planned for Double Diagonals. I decided to add to the SPY position to keep my portfolio simple enough. "
06/11/09
06/12/09 - " The main thing to notice is that the Volatility has dropped by 12% on this trade, I'm checking the middle of the graph at expiration to see if the P/L there has collapsed or not, so far it is very good, only dropped by about 2%.."
06/15/09
06/16/09
06/17/09
06/18/09 "I took the finger off the trigger on the trade Today. I was itching to exit this position. Given the weekend is just around the corner, and we find ourselves in the middle of the graph, I'll let it ride and look at it again Monday."
06/19/09
06/22/09 - "This is the 3rd week on the trade, and the question I ask myself is: do I want to stay here? We're approaching the level where the adjustment point is no more than 1 st. deviation in the volatility cone, from that point on, adjusting is simply part of the expected law of probabilities."
06/23/09 - "We had this trade for over 15 trading sessions, the profit got up to 8% and when it started to drop back down I decided to close it."
JUL RUT 50-Day Iron Condor (day-by-day review)
This trade hit the wall super fast, the only thing on the bright side was that I only entered 1/3 of the position's size. Managing risk by a step-by-step allocation helped me in this case. I did not allocate the remaining lots and moved my capital into other positions that worked better for the month.
Start: 05/28/09
Finish: 06/05/09
Duration: about 1 week
Result: -20.92% (on 1/3 of the position's size)
05/28/09
05/29/09 0.7 st. deviation move up, weekend expected to help
06/01/09 1.4 st. deviation move up, rough on the position
06/02/09 - Take a look at the volatility cone
06/03/09 - First down day (barely)
06/04/09 - "Trying to do too many things at once at the closing Today, I ended up missing a review of all my positions. This trade needed to either be hedged or exited Today."
06/05/09 - Closed beyond max loss.
Start: 05/28/09
Finish: 06/05/09
Duration: about 1 week
Result: -20.92% (on 1/3 of the position's size)
05/28/09
05/29/09 0.7 st. deviation move up, weekend expected to help
06/01/09 1.4 st. deviation move up, rough on the position
06/02/09 - Take a look at the volatility cone
06/03/09 - First down day (barely)
06/04/09 - "Trying to do too many things at once at the closing Today, I ended up missing a review of all my positions. This trade needed to either be hedged or exited Today."
06/05/09 - Closed beyond max loss.
JUN RUT 30-Day Iron Condor (day-by-day review)
This was one of my best trades ever. Not because it easily gave me profits, because it as a great challenge to get a trade that was down and work its way back into profits.
I closed at a small loss due to an oscilation in P&L that I couldn't understand (see bellow). However, the lessons I learned that day and moving forward were awesome.
Start: 05/22/09
Finish: 06/10/09
Duration: a bit less than 1 month
Results: -2.68% (Priceless)
05/22/09
05/26/09
05/27/09 - Hit first adjustment level (this early in the game)
05/28/09
05/29/09 "I realized my hedge was too far out of the money, it lost almost all its value with RUT being close to 502.5 again I may need to come in and buy a new hedge, this time closer and stronger."
06/01/09 - Second hedge enabled
06/02/09 "The anxiety is out of this trade, however, I must start looking for a way out of this hedge, it makes no financial sense to leave the money sitting there earning no time decay"
06/03/09 "I'm still holding the trade expecting RUT to give up this up-swing."
06/04/09 "RUT is not giving up, Today the position was hurt by a drop in volatility. Need to remember, when you hedge the position, the vega risk is still there. Specially risky on the up-side."
06/05/09 "With the trade being down 15%, and going through the weekend at the 430 level, due to negative Theta I would be at max loss on Monday. I wanted to do something other than taking the loss, so I came up with a recovery plan and went for it! No guts no glory."
06/05/09 - Recovery Plan
06/08/09
06/09/09 - "Nice! My goal is to exit this trade Tomorrow. By the look of things, I will be able to take the 15% ROI from the original trade"
06/10/09 - MISTERY HAPPENED, where did the profits go? Read the post and find out
I closed at a small loss due to an oscilation in P&L that I couldn't understand (see bellow). However, the lessons I learned that day and moving forward were awesome.
Start: 05/22/09
Finish: 06/10/09
Duration: a bit less than 1 month
Results: -2.68% (Priceless)
05/22/09
05/26/09
05/27/09 - Hit first adjustment level (this early in the game)
05/28/09
05/29/09 "I realized my hedge was too far out of the money, it lost almost all its value with RUT being close to 502.5 again I may need to come in and buy a new hedge, this time closer and stronger."
06/01/09 - Second hedge enabled
06/02/09 "The anxiety is out of this trade, however, I must start looking for a way out of this hedge, it makes no financial sense to leave the money sitting there earning no time decay"
06/03/09 "I'm still holding the trade expecting RUT to give up this up-swing."
06/04/09 "RUT is not giving up, Today the position was hurt by a drop in volatility. Need to remember, when you hedge the position, the vega risk is still there. Specially risky on the up-side."
06/05/09 "With the trade being down 15%, and going through the weekend at the 430 level, due to negative Theta I would be at max loss on Monday. I wanted to do something other than taking the loss, so I came up with a recovery plan and went for it! No guts no glory."
06/05/09 - Recovery Plan
06/08/09
06/09/09 - "Nice! My goal is to exit this trade Tomorrow. By the look of things, I will be able to take the 15% ROI from the original trade"
06/10/09 - MISTERY HAPPENED, where did the profits go? Read the post and find out
MDY 30-Day Iron Condor (day-by-day review)
This is a review for my JUN/09 position. Note that risk management was followed with the caviat that I adjusted the $ levels once I added to the position.
In hindsight, the market moved up fast, but the biggest issue was lack of CALL contracts to properly hedge the small position. I tried incremental hedging with debit spreads and it didn't work.
I think adding the iron butterfly to bring theta back was a good idea, it didn't quite saved the trade, but gave it some more time to work itself out. As I become more experienced with iron butterflies, the over-hedging won't be an issue any longer.
Start: 05/20/09
End: 06/16/09
Duration: Aprox. 30 days
Result: -19.43%
05/20/09 - Started the trade slightly bearish
05/21/09
05/22/09 - Bearish stance paid off (first few days)
05/26/09 - 1.5 standard deviation up, P&L took a hit
05/27/09 - Market backed off
05/28/09
05/29/09 - MDY Got close to 1st hedging level. "...isn't a long contract that will cut my deltas in 1/2, the only alternative would cut it too much, since this position is very small, I will have to use a debit spread to cut the delta, hope I won't even need it, we'll see." In hindsight, this was a bad idea.
06/01/09 - "I hedged the position using debit spreads because there were no long contracts available to cut small deltas. It was very inneffective and as a result it hit max loss. I couldn't get out with no fills on the PUT side, so I hedged once again and will re-evaluate it Tomorrow."
06/02/09 - "The MDY trade is on hold pattern, the P&L somehow improved a bit Today. Once again, it makes no financial sense to leave the position on if it is not earning any money. I might add a calendar or pull it off the table." NOTE: It was no longer at max loss, spreads had come back down to mormal levels
06/03/09 - Started a recovery plan: Added an iron butterfly to bring theta back into the picture, considered the additional capital and adjusted profit & max loss levels.
06/04/09
06/05/09 - Had the game plan in advance helped me. The market opened gapping up, didn't have to freak out
06/08/09
06/09/09 - "The lack of upper CALL strikes on MDY has been a problem on this trade since a while back. Back when MDY fired up, I wanted to hedge the position but couldn't because there was no contract available to fine-tune the delta."
06/10/09 - Ended the day with negative Delta, not too much
06/11/09 - Over adjusted the Up-side, cut deltas by too much
06/12/09
06/15/09 - Started peeling off spreads
06/16/09 - Closed the trade, execution took $ down from 15% to 20% negative.
In hindsight, the market moved up fast, but the biggest issue was lack of CALL contracts to properly hedge the small position. I tried incremental hedging with debit spreads and it didn't work.
I think adding the iron butterfly to bring theta back was a good idea, it didn't quite saved the trade, but gave it some more time to work itself out. As I become more experienced with iron butterflies, the over-hedging won't be an issue any longer.
Start: 05/20/09
End: 06/16/09
Duration: Aprox. 30 days
Result: -19.43%
05/20/09 - Started the trade slightly bearish
05/21/09
05/22/09 - Bearish stance paid off (first few days)
05/26/09 - 1.5 standard deviation up, P&L took a hit
05/27/09 - Market backed off
05/28/09
05/29/09 - MDY Got close to 1st hedging level. "...isn't a long contract that will cut my deltas in 1/2, the only alternative would cut it too much, since this position is very small, I will have to use a debit spread to cut the delta, hope I won't even need it, we'll see." In hindsight, this was a bad idea.
06/01/09 - "I hedged the position using debit spreads because there were no long contracts available to cut small deltas. It was very inneffective and as a result it hit max loss. I couldn't get out with no fills on the PUT side, so I hedged once again and will re-evaluate it Tomorrow."
06/02/09 - "The MDY trade is on hold pattern, the P&L somehow improved a bit Today. Once again, it makes no financial sense to leave the position on if it is not earning any money. I might add a calendar or pull it off the table." NOTE: It was no longer at max loss, spreads had come back down to mormal levels
06/03/09 - Started a recovery plan: Added an iron butterfly to bring theta back into the picture, considered the additional capital and adjusted profit & max loss levels.
06/04/09
06/05/09 - Had the game plan in advance helped me. The market opened gapping up, didn't have to freak out
06/08/09
06/09/09 - "The lack of upper CALL strikes on MDY has been a problem on this trade since a while back. Back when MDY fired up, I wanted to hedge the position but couldn't because there was no contract available to fine-tune the delta."
06/10/09 - Ended the day with negative Delta, not too much
06/11/09 - Over adjusted the Up-side, cut deltas by too much
06/12/09
06/15/09 - Started peeling off spreads
06/16/09 - Closed the trade, execution took $ down from 15% to 20% negative.
Wednesday, June 24, 2009
06/24 RUT Iron Butterfly
With one day into the trade, there is not much to say, except that we hit the 500 level and I added the AUG 580 Call. profits are starting to build up.
06/24 SPX Iron Butterfly
I did something wrong with my contingent orders, when SPX was moving up, they didn't trigger. When I looked at them, realized they had been canceled. Good thing it is a paper trading position. I executed the orders manually, and now the up-side is safe (probably an over kill).
06/24 RUT 30-Day Condor
RUT gave the position a break Today. The volatility drop also helped to bring profits back up.
06/24 MNX Iron Butterfly
MNX hit the first adjustment level I had to the up-side Today. It was moving by more than 1 st. deviation intra-day, then faded after the interest rate announcement. One way or another, it made a little bit of money and now sits right in the middle of the graph.
06/23 RUT Iron Butterfly
Brand new position, just want to trade as many iron butterflies as I can. This one was opened late in the game. It is a paper trade.
06/23 SPX Iron Butterfly
So far, so good. Dan Harvey doesn't recommend adjusting these Index trades on the first week of the trade. I started these late in the time-frame, so I think adjusting is prudent, provided there isn't too much time left to wait for things to settle if we get larger movements. We'll see how it goes.
06/23 RUT 30-Day Condor
RUT took a hit on P&L, We need it to move back up for a recovery. I have contingent orders to cut the deltas if we reach the 480 level. I want to close the CALL side, I have already closed 1 spread and may close a few more if I get a decent price. It is far out of the money, but we never know..
06/23 MNX Iron Butterfly
The trade got the benefits from a quiet day in the markets. I have the contingent orders in place and let's see what happens next. Note the day-step graph on TOS, assuming it all stays the same, my goal is expected by 07/04
06/23 SPY Double Diagonal *Closed*
We had this trade for over 15 trading sessions, the profit got up to 8% and when it started to drop back down I decided to close it.
I believe that for these double diagonals the timing is important. Notice on the volatility cone the orange horizontal lines, these are the pre-defined adjustment points. You can see how the 1 st. deviation on the volatility cone intersects these adjustment points in a certain time period. In my mind, this is telling me that simply by law of probabilities the trades have a high probability of requiring adjustments if you stay too long. So I didn't want to test the theory and decided to book the profits.
I believe that for these double diagonals the timing is important. Notice on the volatility cone the orange horizontal lines, these are the pre-defined adjustment points. You can see how the 1 st. deviation on the volatility cone intersects these adjustment points in a certain time period. In my mind, this is telling me that simply by law of probabilities the trades have a high probability of requiring adjustments if you stay too long. So I didn't want to test the theory and decided to book the profits.
Tuesday, June 23, 2009
Today's updates
I'll be posting the updates Tomorrow. I've had a pretty busy day. Only a few things happened Today:
1) Closed the SPY Double Diagonal: Got to 15 trading days and decided to take whatever I had, about 5% ROI.
2) Adjusted MNX Iron Butterfly at closing: Bought a long PUT to keep my delta:theta ratio under 1:1, this ensures I won't have any nasty surprise to the down-side nor the up-side.
3) Added a paper RUT Iron Butterfly. I now have 3 iron butterflies to manage, these will be a bit bigger in size to mirror my desired size in the near future.
I want to start posting these blogs in the mornings before the market opens, by the end of day I'm pretty much toasted after a long day of work. So will start this shift Tomorrow.
Cheers!
Gustavo
1) Closed the SPY Double Diagonal: Got to 15 trading days and decided to take whatever I had, about 5% ROI.
2) Adjusted MNX Iron Butterfly at closing: Bought a long PUT to keep my delta:theta ratio under 1:1, this ensures I won't have any nasty surprise to the down-side nor the up-side.
3) Added a paper RUT Iron Butterfly. I now have 3 iron butterflies to manage, these will be a bit bigger in size to mirror my desired size in the near future.
I want to start posting these blogs in the mornings before the market opens, by the end of day I'm pretty much toasted after a long day of work. So will start this shift Tomorrow.
Cheers!
Gustavo
Monday, June 22, 2009
06/22 SPX Iron Butterfly
Added this position on my paper account. I know it is past the optimum time to enter the Iron Butterflies, I want to test my hand in managing it on an Index with a larger size position.
06/22 Trading styles within the income trading strategies
There are several different trading styles when it comes to trading income strategies with options:
0) Pray and hope: no guidelines, put a large condor and pray and hope price won't bust your trading account. I've done that in my early stages of options trading, scary as it seems, it works a lot of times, but then and again you come accross an October, and you can give away all your trading capital + emotional strenght to come back the next month.
1) So far I have taken the guideline-driven approach, where I would make adjustment to my trades at pre-determined levels using criteria such as the position in relation to the break-even levels at expiration, the delta of short strikes, etc. For this approach, you're not expecting profitability every month, you expect to be profitable over one year. You are very likely to make more than 15% per year.
2) Incremental approach: When I started trading the Iron Butterflies with Dan Harvey's guidelines, a new style appeared: make incremental adjustments based on the T+1 line and taking into account current P&L levels. This is a far more active approach, however, if done properly, it ensures no big draw-downs and even though you adjust more often, there is a plenty of money in the iron butterflies to make sure you can still make your target. You expect to make money every month, the market may beat you out of your cash in one or two months in a year, but it won't be twice as much what you usually make when you win.
What you like best depends on how you are treating your money. I agree with Dan's analogy between: dinner & movie vs. mortage payment. If you're trading for extra cash, and you don't really depend on that cash for a living, taking a guideline-driven approach makes more sense. If you are trading for a living, then it makes sense to protect your capital and stay more active in the trades to make sure you defend your capital against large price swings.
Today provided me a clear distinction: Both the SPY Double Diagonal and RUT 30-Day condor gave back about 3% of profit + the weekend time decay with Today's action. The Iron Butterfly gave back nothing, in fact P&L actually improved by 1%, which means it kept some of the money it made over the weekend.
Needless to say, I'm leaning more towards the active approach. Please realize, I'm not day-trading those!! I have pre-defined contingent orders to bring the deltas back in line if they start to go crazy with me. I also have contingent orders on the guideline-driven trades.
Today I started an SPX Iron Butterfly. It was done on paper trading because of its size and because it is my first shot at managing an index iron butterfly. I have a feeling they are easier to deal with because of their low gamma. We'll see.
Cheers!
Gustavo
0) Pray and hope: no guidelines, put a large condor and pray and hope price won't bust your trading account. I've done that in my early stages of options trading, scary as it seems, it works a lot of times, but then and again you come accross an October, and you can give away all your trading capital + emotional strenght to come back the next month.
1) So far I have taken the guideline-driven approach, where I would make adjustment to my trades at pre-determined levels using criteria such as the position in relation to the break-even levels at expiration, the delta of short strikes, etc. For this approach, you're not expecting profitability every month, you expect to be profitable over one year. You are very likely to make more than 15% per year.
2) Incremental approach: When I started trading the Iron Butterflies with Dan Harvey's guidelines, a new style appeared: make incremental adjustments based on the T+1 line and taking into account current P&L levels. This is a far more active approach, however, if done properly, it ensures no big draw-downs and even though you adjust more often, there is a plenty of money in the iron butterflies to make sure you can still make your target. You expect to make money every month, the market may beat you out of your cash in one or two months in a year, but it won't be twice as much what you usually make when you win.
What you like best depends on how you are treating your money. I agree with Dan's analogy between: dinner & movie vs. mortage payment. If you're trading for extra cash, and you don't really depend on that cash for a living, taking a guideline-driven approach makes more sense. If you are trading for a living, then it makes sense to protect your capital and stay more active in the trades to make sure you defend your capital against large price swings.
Today provided me a clear distinction: Both the SPY Double Diagonal and RUT 30-Day condor gave back about 3% of profit + the weekend time decay with Today's action. The Iron Butterfly gave back nothing, in fact P&L actually improved by 1%, which means it kept some of the money it made over the weekend.
Needless to say, I'm leaning more towards the active approach. Please realize, I'm not day-trading those!! I have pre-defined contingent orders to bring the deltas back in line if they start to go crazy with me. I also have contingent orders on the guideline-driven trades.
Today I started an SPX Iron Butterfly. It was done on paper trading because of its size and because it is my first shot at managing an index iron butterfly. I have a feeling they are easier to deal with because of their low gamma. We'll see.
Cheers!
Gustavo
06/22 MNX Iron Butterfly
The strongest of the 3! The position took a 1.5 st. deviation beating, it is a fairly new position, with less than 1 week of life. Look at the P&L, it is almost unchanged, in fact, we gained a few bucks since Friday, despite this big drop.
I have adjusted the trade twice:
1) I used a contingent order to sell the Long AUG Call I had, see the pre-opening game plan.
2) At closing, I cut the deltas further and brought it down to 15, my theta is 25, so I am at more than 1:1 ratio.
I have adjusted the trade twice:
1) I used a contingent order to sell the Long AUG Call I had, see the pre-opening game plan.
2) At closing, I cut the deltas further and brought it down to 15, my theta is 25, so I am at more than 1:1 ratio.
06/22 RUT 30-Day Condor
RUT gave back some of its acquired profits, we're about 1 st. deviation from the 1st hedging point at 480, I'll stay on the trade. If we go down my plan is to exit the CALL spreads and hedge the position at 480.
06/22 SPY Double Diagonal
This is the 3rd week on the trade, and the question I ask myself is: do I want to stay here? We're approaching the level where the adjustment point is no more than 1 st. deviation in the volatility cone, from that point on, adjusting is simply part of the expected law of probabilities.
I'm looking for a small retracement Tomorrow so I can take this trade off the table. If we open crashing down, then I might stay for the ride and take my chances adjusting, otherwise, 5% is good to me.
I'm looking for a small retracement Tomorrow so I can take this trade off the table. If we open crashing down, then I might stay for the ride and take my chances adjusting, otherwise, 5% is good to me.
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