08/28 Daily Summary

The markets are pretty much in an undecision pattern, Today's new high was quickly followed by a wave of selling that pushed prices lower by the end of the day.

I've decided to not touch any of my Iron Butterflies, I did take some of the contracts off the IBM Calendar.

Position's Details:
08/28 IBM Calendar
08/28 RUT Iron Butterfly
08/28 MNX Iron Butterfly

08/28 IBM Calendar

My gut feeling tells me IBM is heading lower. I took 2x 120 Calendars off the table for a slight profit and am getting myself ready to release them as 115 Calendars if needed. For now, that was all I needed to do to keep myself relaxed going through the weekend.

Previous Posting:

08/27 IBM Calendar

08/28 RUT Iron Butterfly

RUT started to show profits! That's nice! I tought about rolling the 650 CALL up, but decided against it. I'm not convinced the bulls are in total control yet. If we push higher I may give up Today's profit, but then I'll know where we are going. So far, we have been dancing around the 480 level and Today seemed we found a lot of selling once we traded at higher prices.

Previous Posting:

08/27 RUT Iron Butterfly

08/28 MNX Iron Butterfly

Great P&L improvement Today, going through the weekend with a decent theta:delta ratio.

Previous Post:

08/27 MNX Iron Butterfly

08/27 Daily Summary

I'm very happy to say I'm up just above 2% on the current open positions. Most positions did recover well after a few days of indecision in the market. As far as I'm concerned, let's stay directionless for another week, shall we?

I posted another KEY posting Today: When do I cut Deltas on Iron Butterflies? This is answering a question I have received a couple of times already: when/how do I cut deltas? I made my best to explain in there, everyone, feel free to share your thoughts, comments, etc.

Position's Details:
08/27 IBM Calendar
08/27 RUT Iron Butterfly
08/27 MNX Iron Butterfly

When do I cut Deltas on Iron Butterflies?

I have seen this question a couple of times on the blog, and I must say, there is no exact answer, at least not from me. I don't have an exact formula, I go by a guideline and the most important thing for me is evaluating the trade every day before the market closes. One blog reader posted another blog where the author explains his formula, allow me to say a few things about how I have been doing it.

As I mentioned before, I have been following most of Dan Harvey's advice on how to trade these Iron Butterflies. Dan is a veteran trader who mentors at the Dan Sheridan program. I had the great pleasure of meeting him in San Francisco in one of Sheridan's seminars. Dan's rules are complex and quite well detailed, I follow most of them, but I'm the first to admit I'm still studying them, so can't claim to be a perfect follower. One of the most important things to know is that trading rules have to adapt to the trader's style, each trader has his/her own approach to things.

Also, important to notice is that the greeks will be quite different depending on the underlying you trade. The delta : theta ratio also depends on the size of the position, your willingness to take more or less risk, etc.

For the MNX position, I work in keeping the theta to delta ratio of 1:1, meaning if my theta is about 30, my delta shouldn't be much more than that. I also look at the risk profile and evaluate the 1-day 1-standard deviation move, if I notice that a 1-standard deviation move in any direction can take too much of my profits, I'll come in and cut some of the deltas. Every day I post those charts and the light-blue area is where Think or swim estimates 1 st. deviation to be for 1 day. Another rule-of-thumb I use is to place contingent orders in points where my delta is twice as much as my theta, to cut it in 1/2 and bring it back to a 1:1 ratio.. This has worked fairly well. I preffer to keep these contingent orders at least 1 standard deviation away from the closing price, otherwise it may whipsaw, as it happened to me back in June for my DIA Iron Butterfly trade.

For the RUT position, I don't know yet.. Sorry, no genius here, just a guy working on his craft :) I believe Dan Harvey recommends a theta to delta ratio of 3:1. However, this is for larger positions, My RUT position is the same size of the MNX, and because this is the first time I trade it, I'm not quite sure where the ratio should be. Honestly, I've been looking at the 1-day 1-st. deviation zone in the profile chart and evaluating if I can handle that kind of move, if not, I cut the deltas, if yes, I simply place the contingent orders there.

I try cutting the deltas in about 1/2 when I use contingent orders. It is BEST when you do this overnight and stop looking at it. This very month, I was watching when the MNX dropped 2 st. deviations and I over-adjusted the trade. The best practice, as far as I can tell from back-testing is to cut it in 1/2 and cut in 1/2 again if it keeps on moving.

Then again, evaluating the position at the end of the day is the most critical element here. I ask myself the question: If we go Up, am I ok? If we go Down, am I ok? If not, I adjust before closing, if yes, I put contingent orders around the 1 st. deviation zone.

I hope this helps, feel free to post your comments, share ideas, suggestions.. It is an open board here.

Cheers to our Success!
Gustavo

First the other trader's opinion is here:
http://www.optionsropeadope.com/2008/05/13/greek-exposure-calculations/

08/27 IBM Calendar

Today we had a nice "pop" in profits, if we get to 10% in about a week, You can look for me running for the exit, otherwise I'll stay for the full 15% ROI.

Previous Posting:

08/26 IBM Calendar

08/27 RUT Iron Butterfly

Not such a huge move in profits, but we're moving a few percentage points per day, that's a good recovery pace. I also added a long OCT contract Today to keep the deltas under control sort of speak. After the market closed, I went back to my profile and realized I would be better off by rolling one of the short SEP 650 Calls using a debit spread.

Depending on where we are Tomorrow, I might do just that and sell some of the long OCT contracts. The reason behind rolling these 650 calls is simple: They're getting too far In The Money, theyr delta is approaching 80, and there is not much time value left in them, so they're what Dan Harvey calls a "Delta Hog", as they become harder and harder to control as time goes by.


Previous Posting:
08/26 RUT Iron Butterfly

08/27 MNX Iron Butterfly

Today the trade made a nice run for profitability. I like it! One thing I noticed by the end of the day was that my deltas were approaching -40, this to me seemed like too much and would put me in the B/E if we had 1 st. deviation move to the upside, so I cut the deltas adding another long OCT call to keep it in line with the theta.

Interestingly enough, a blog reader asked me how do I determine when/where to cut my deltas in the position. Let me explain this in a separate posting.

Previous Posting:

08/26 MNX Iron Butterfly

08/26 Daily Summary

The portfolio is recovering, I'm slightly negative at this point and depending on how the market behaves the next few days, It may start turning the table and getting into the profitable side. No change Today, except I added the 2nd half of the IBM calendar position.

One of the blog readers asked me what are the orange lines on the Volatility cone, they are the original expiration break-even for the position, at least that's what they are on the MNX Iron Butterfly. I didn't include them on the RUT position. This has been a busy week for me, so I didn't have much time to clean up the dashboard on the RUT trade and still need to put one together for the IBM trade.. Plan on doing it later in the week.

Position's Details:
08/26 IBM Calendar
08/26 RUT Iron Butterfly
08/26 MNX Iron Butterfly

08/26 IBM Calendar

I added the 2nd half of the position Today, we're still very much around the 120 strike, so I added the entire trade on the 120 PUT Calendar. If we move (up or down) I'll close some of the 120s to add the adjustment.
Previous Posting:
08/25 IBM Calendar

08/26 RUT Iron Butterfly

RUT Made a small recovery Today, adding the extra butterfly to increase theta is helping. If we move up I may have to roll the 560 Calls, will do that at the end of the day and not with a contingent order. For now, the contingent order is to buy a long call to hedge deltas, and by the end of the day I'll evaluate if it is time to start rolling the 560s

Previous Posting:

08/25 RUT Iron Butterfly

08/26 MNX Iron Butterfly

No major change Today, the position is collecting profits, which is always nice and very welcome. I've contingent orders to cut deltas if we move up or down.

Previous Posting:

08/25 MNX Iron Butterfly

08/25 Daily Summary

Today the only trade that needed a little push was the RUT Iron Butterfly. I started with a 30-point wide butterfly, so adjusting was very much expected.

Tomorrow I plan on adding the 2nd 1/2 to the IBM calendar, I'm leaning towards the 115 calendar, but have not yet being convinced we're going to have a big pull back from here, on the chart, IBM it looks weak at the top, but we'll see.

Position's Details:
08/25 IBM Calendar
08/25 RUT Iron Butterfly
08/25 MNX Iron Butterfly

08/25 IBM Calendar

Plan on adding the 2nd half of the trade Tomorrow. I'm leaning towards the 115 calendar, but not quite sure yet.

Previous Posting:
08/24 IBM Calendar *New*

08/25 RUT Iron Butterfly

Today I added to the RUT position, decided to open another iron butterfly at the 590 strike, this allows me to pump up the up-side break-even and really jack up the theta. I wanted to add 2 contracts, but made a mistake while entering the order and ended up with 3, not a big deal, just extra theta and more inventory to manage if we start rolling to the down-side.

Previous Posting:
08/24 RUT Iron Butterfly

08/25 MNX Iron Butterfly

MNX moved a bit higher Today, did not trigger any contingent orders, that's always a great thing! I have orders in place for Tomorrow. For now the trade is collecting profits as theta is working for it.

Previous' Posting:
08/24 MNX Iron Butterfly

08/24 Daily Summary

Today was a good day for the portfolio, no adjustment was made, and in this case, no news is GREAT news! I'm still down for the SEP positions (-3% ROI), the MNX trade came back above water and RUT didn't move.

I added the IBM Calendar position Today, this is the last portion of my SEP portfolio, and I plan on completing the position by Wednesday.

Positions' Details
08/24 IBM Calendar *New*
08/24 RUT Iron Butterfly
08/24 MNX Iron Butterfly

08/24 IBM Calendar *New*

It feels a bit odd for me to start a position on the bullish side. However, with IBM sitting right above 119, I could not justify starting the trade with the 115 Calendar (as much as I wanted). So, I have entered the first 1/2 of the trade and plan on adding to it during this week (likely Wednesday)

08/24 RUT Iron Butterfly

RUT didn't back off, and we're still sitting right at the top of the trading range and on the break-even for the trade. I can't afford to keep on running without Theta, so Tomorrow, if we don't back off I'll add to the position and bump up its theta.

Previous Posting:

08/21 RUT Iron Butterfly

08/24 MNX Iron Butterfly

MNX took a break over the weekend, the position is now back in the black. Notice the Delta is under control and we got an increase in Theta. The goal for the trade is to keep theta running with at least 1% per day, so every quiet day books money in the bank.

Previous Post:

08/21 MNX Iron Butterfly

08/21 Daily Summary

Today's price action brought my positions down a bit, total portfolio value is down -5%, not a big deal, considering I still have money to deploy next week (IBM Calendar). For now, I plan on enjoying the weekend, getting some rest and coming back ready next week!

Position's Details:
08/21 RUT Iron Butterfly
08/21 MNX Iron Butterfly

Cheers!
Gustavo

08/21 RUT Iron Butterfly

RUT made its trip to the edge of the expiration graph. I decided not to jump the gun and open a new butterfly just yet. My plan is to do so if we continue moving up and get to 490 next week.

See Yesterday's:
08/20 RUT Iron Butterfly

08/21 MNX Iron Butterfly

The good news is, we're back in the center. The bad news? Over-adjusting on the down-side cost me some money fixing things up. On the bright side, I had the foresight to start leveling things up since Yesterday, otherwise we'd be down twice as much Today. The trade only need a few quiet days to recover, let's see what next week brings.

See Yesterday's:
08/20 MNX Iron Butterfly

08/20 Daily Summary

Made few adjustments on MNX, didn't toucht the RUT position. Looking forward to the weekend. MNX AUG trade going through expiration without major risk.

Position's Details:
08/20 RUT Iron Butterfly
08/20 MNX Iron Butterfly

08/20 RUT Iron Butterfly

RUT edged higher Today, I have contingent orders to cut delta in 1/2 if we move up to 675 Tomorrow. Nothing alarming Today..

Position's History:

08/19 RUT Iron Butterfly

08/18 RUT Iron Butterfly

Return to home

08/20 MNX Iron Butterfly

Today MNX basically got back to where it was when I entered the trade. I realized I had sold the SEP extra call too soon, and ended up buying another SEP call Today. The main reason for buying this call was to controll the Gamma exposure. The trade was already building up gamma, and the OCT contracts usually have lower gammas.

It is back to B/E, once again, I went overboard when I adjusted to the down-side, I flattened the deltas too hard, next time will do it gradually, cut in 1/2 first and then go from there. Because of its high gamma, the MNX tends to flip back and forth on the deltas, and if you flatten it out, you may find yourself in my position, going back to where it was, but without any profits to show for.

Position's History:
08/19 MNX Iron Butterfly - SEP
08/18 MNX Iron Butterfly - SEP
08/17 MNX Iron Butterfly - SEP
08/14 MNX Iron Butterfly - SEP
08/15 MNX Price & Volatility Study
08/13 MNX Iron Butterfly - SEP *New*

Return to home

08/19 Daily Summary

I'll have to simplify the writting on the blog. I have been spending too much time posting, and need to focus a bit more on my trading and the daily job. I noticed I have used this daily summary posting to repeat what I already said in the detailed posting for each position, so from now on, I'll just use this to posting as a daily index to make it easier for people to navigate the current positions I have on in any given day.

Current Positions:
08/19 RUT Iron Butterfly
08/19 MNX Iron Butterfly - SEP
08/19 MNX Iron Butterfly

08/19 RUT Iron Butterfly

No major change in the trade, that's a good thing! Have orders to cut deltas if we move too the break-even points Tomorrow.

Position's History:

08/18 RUT Iron Butterfly

Return to home

08/19 MNX Iron Butterfly - SEP

We backed off from the down-side break-even and now are rolling against the up-side, see how the delta switched in the dashboard.. This tells me I went overboard adjusting to the down-side. For future reference the best thing to do was to cut delta in 1/2 not simply smashing it down. I have contingent orders to sell some of the OCT longs at the levels indicated bellow.

Position's History:
08/18 MNX Iron Butterfly - SEP
08/17 MNX Iron Butterfly - SEP
08/14 MNX Iron Butterfly - SEP
08/15 MNX Price & Volatility Study
08/13 MNX Iron Butterfly - SEP *New*

Return to home

08/19 MNX Iron Butterfly

I closed the short 165 call just to be 100% safe, and even though I still have contracts left on the trade, I'll let them expire worthless. The odds are they will. So I'll stop tracking the position and am publishing the results. Of course, I was aiming for a lot more, but it is always better to have some money in my pocket than to have money out of my pocket.

Position's History
08/18 MNX Iron Butterfly
08/17 MNX Iron Butterfly
08/14 MNX Iron Butterfly
08/13 MNX Iron Butterfly
08/12 MNX Iron Butterfly
08/11 MNX Iron Butterfly
08/10 MNX Iron Butterfly
08/07 MNX Iron Butterfly
08/06 MNX Iron Butterfly
08/05 MNX Iron Butterfly
08/04 MNX Iron Butterfly
08/03 MNX Iron Butterfly
07/31 MNX Iron Butterfly
07/30 MNX Iron Butterfly
07/29 MNX Iron Butterfly
07/28 MNX Iron Butterfly
07/27 MNX Iron Butterfly
07/23 MNX Iron Butterfly
07/22 MNX Iron Butterfly
7/21 MNX Iron Butterfly
07/20 MNX Iron Butterfly
07/17 MNX Iron Butterfly
07/16 MNX Iron Butterfly *New*

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08/18 Daily Summary

Today was a good recovery day for the SEP MNX Iron Butterfly. I also got my profits out of the AUG IBM Calendar and am going to exit the AUG MNX Iron Butterfly Tomorrow.

Added the RUT Iron Butterfly, it is a bit different from the MNX position and this is the first time I trade the RUT Iron Butterfly, so let's see how it goes. I had a positive session with Dan Sheridan, we discussed a few fine tunning adjustments on the way I'm handling the Iron Butterflies, but overall no major blunders on my part, which is always good!! :)

Now the only position left for my SEP trades is the IBM calendar, I plan on adding it next week.

Position's Details:
08/18 RUT Iron Butterfly
08/18 MNX Iron Butterfly - SEP
08/18 IBM Calendar
08/18 MNX Iron Butterfly

08/18 RUT Iron Butterfly

I entered this new position Today. Following Dan Sheridan's advice, I looked into placing my long contracts a bit closer than I have been doing on the MNX Iron Butterfly. This made my expiration break-even about 5 points short on each side, however, it gave me a much smoother P&L curve and I like that!


So, here is the profile at day 1

08/18 MNX Iron Butterfly - SEP

The SEP MNX Iron Butterfly recovered from Yesterday, I have some contingent orders to sell the OCT PUTs if we keep moving back up.

Position's History:
08/17 MNX Iron Butterfly - SEP
08/14 MNX Iron Butterfly - SEP
08/15 MNX Price & Volatility Study
08/13 MNX Iron Butterfly - SEP *New*

Return to home

08/18 IBM Calendar

Got my Money out of the trade Today! Had an order running to exit me with 15% and it triggered Today. This was the easiest of my AUG trades, the only one that reached the profit target.

Position's History:
08/17 IBM Calendar
08/14 IBM Calendar
08/13 IBM Calendar
08/12 IBM Calendar
08/11 IBM Calendar
08/10 IBM Calendar
08/07 IBM Calendar
08/06 IBM Calendar
08/05 IBM Calendar
08/04 IBM Calendar
08/03 IBM Calendar
07/31 IBM Calendar
07/30 IBM Calendar
07/29 IBM Calendar
07/28 IBM Calendar
07/27 IBM Calendar *New*

Return to home

08/18 MNX Iron Butterfly

I had a session with Dan Sheridan Today and we went over this trade's beginning. One thing I got from the session is that I waited a bit too long to make the first adjustment, yes, I agree with that and I'm being a bit more proactive on my SEP trade. Other than that, Dan is against making multiple smaller adjustments, this is actually against what Dan Harvey says. If I have to choose one style, I preffer to make small fine-tunning adjustments, even if they seem a bit too much. This goes back to trader prefference I guess.

Dan also suggested exiting the trade. I didn't have time to work my way out of the position Today, but will take a look at doing that Tomorrow. At first my plan was to leave it alone till expiration, but there is not any more theta left, so it doesn't pay to stay..


Position's History
08/17 MNX Iron Butterfly
08/14 MNX Iron Butterfly
08/13 MNX Iron Butterfly
08/12 MNX Iron Butterfly
08/11 MNX Iron Butterfly
08/10 MNX Iron Butterfly
08/07 MNX Iron Butterfly
08/06 MNX Iron Butterfly
08/05 MNX Iron Butterfly
08/04 MNX Iron Butterfly
08/03 MNX Iron Butterfly
07/31 MNX Iron Butterfly
07/30 MNX Iron Butterfly
07/29 MNX Iron Butterfly
07/28 MNX Iron Butterfly
07/27 MNX Iron Butterfly
07/23 MNX Iron Butterfly
07/22 MNX Iron Butterfly
7/21 MNX Iron Butterfly
07/20 MNX Iron Butterfly
07/17 MNX Iron Butterfly
07/16 MNX Iron Butterfly *New*

Return to home page

08/17 Daily Summary

Navigating the storm!! That's what we're doing as non-directional traders, I'm rolling from one iron butterfly into another and already making adjustments on the SEP position.. I decided to keep on top of the AUG trade, rolling the PUT side down to cut delta and gamma exposure, now it all depends on how far this correction will be, one way or another, I think my chances are good of MNX staying in the profit zone for AUG.

Detailed Positions:
08/17 MNX Iron Butterfly - SEP
08/17 IBM Calendar
08/17 MNX Iron Butterfly

08/17 MNX Iron Butterfly - SEP

OUCH!! Taking a 2 standard deviation move right off the gates is never fun! This time we'll be testing the MNX, can it handle it?!? Can I handle one hard-core trade after another? I thought I'd get a break in the SEP contracts, well, this may be just the beginning of another long trade..

I was forced to cut deltas, my original plan was to leave the position alone, we broke the threshold of comfort, so I cut the deltas and am ready to keep with the market if we keep rolling down.
Position's History:
08/14 MNX Iron Butterfly - SEP
08/15 MNX Price & Volatility Study
08/13 MNX Iron Butterfly - SEP *New*

Return to home

08/17 IBM Calendar

I'm willing to go all the way for the 15% ROI. I noticed IBM did not fall as badly as the rest of the market, and its 1-hour chart was actually showing some willing buyers. I have my exit pre-set if we take a deep drop Tomorrow, otherwise I'll take it to the target.

Position's History:
08/14 IBM Calendar
08/13 IBM Calendar
08/12 IBM Calendar
08/11 IBM Calendar
08/10 IBM Calendar
08/07 IBM Calendar
08/06 IBM Calendar
08/05 IBM Calendar
08/04 IBM Calendar
08/03 IBM Calendar
07/31 IBM Calendar
07/30 IBM Calendar
07/29 IBM Calendar
07/28 IBM Calendar
07/27 IBM Calendar *New*

Return to home

08/17 MNX Iron Butterfly

I'm still in this trade! I guess that if MNX keeps on rolling down I'll take a small loss, otherwise, it will be a small win. One way or another, I rolled the 152.5 Puts to 147.5 Put. This trade is being a long lesson in stayig in the game. In past trades I would be getting out, this time I'm willing to take the dance to the last minute.



Position's History
08/14 MNX Iron Butterfly
08/13 MNX Iron Butterfly
08/12 MNX Iron Butterfly
08/11 MNX Iron Butterfly
08/10 MNX Iron Butterfly
08/07 MNX Iron Butterfly
08/06 MNX Iron Butterfly
08/05 MNX Iron Butterfly
08/04 MNX Iron Butterfly
08/03 MNX Iron Butterfly
07/31 MNX Iron Butterfly
07/30 MNX Iron Butterfly
07/29 MNX Iron Butterfly
07/28 MNX Iron Butterfly
07/27 MNX Iron Butterfly
07/23 MNX Iron Butterfly
07/22 MNX Iron Butterfly
7/21 MNX Iron Butterfly
07/20 MNX Iron Butterfly
07/17 MNX Iron Butterfly
07/16 MNX Iron Butterfly *New*

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