Looking back, I realized I jumped the gun exiting the position, I was afraid that it would continue to lose value due to volatility, however, by end of day Monday one could have closed the position for about 3% profit.
Mistakes I believe I made:
1) Closed the trade too soon based on current P&L rather than IBM's relative position (we were under the tent)
What I'll do better in the next trade:
1) Keep my cool and follow the basic rules (exit if beyond the expiration b/e on a second time)
Trade's history:
08/24 IBM Calendar *New*
08/25 IBM Calendar
08/26 IBM Calendar - Added 2nd 1/2
08/27 IBM Calendar
08/28 IBM Calendar - Feeling that IBM was heading lower, closed 2x 120 contracts out
08/31 IBM Calendar
09/01 IBM Calendar - Opened the 115 calendar
09/02 IBM Calendar
09/03 IBM Calendar - Trade under water
09/04 IBM Calendar - Sag forming in the middle of the graph
09/08 IBM Calendar - Position losing money, I became skeptical
09/09 IBM Calendar
09/10 Daily Summary - Closed IBM for -6.6% ROI Loss, like I mentioned, I simply became skeptical on the trade and decided to cut it out.
Monday, September 14, 2009
09/14 SEP RUT Iron Butterfly (day-by-day review)
This was my first RUT Iron Butterfly, I traded it without any previous frame of reference other than my experience with the MNX iron butterflies. I think I did ok! Of course, the profits ran away from me in the last week, but this is only a matter of adjusting things around, fixing a few items in my strategy. I am doing the homework this time, by performing at least one backtest per day for the RUT iron butterfly trade, I like the way it goes and I noticed there are some big differences between the RUT and MNX.
Mistakes I believe I made:
1) Waited 3 days before adding theta to the trade, including a weekend see 08/21
2) Intra-day adjustment when prices were out of wack. Got hit by quite a bit on 09/09 when I did a vertical roll during worst possible time, it also hit me emotionally and I gave up on the trade.
Things I did right:
1) Kept good control over greeks
2) Made money :)
Things to keep in mind for next trade:
1) Will not make decisions on-the-fly because of intra-day price action, always have 2 or 3 levels of contingent orders in place
2) Use long back-month CALLs or PUTs to control trade with contingent orders, perform a vertical rolls after things settle down (around closing time or the next day)
3) Manage last few days of trade differently: start moving In the Money calls or put sooner, cut gamma risk down
3) Open new butterfly to increase theta faster
Here is the trade on a day by day review:
08/18 RUT Iron Butterfly - Started the trade, used a shorter wingspan than what Dan Harvey recommends (after Dan Sheridan's advice), don't think this was a big deal
08/19 RUT Iron Butterfly - Smooth sailing
08/20 RUT Iron Butterfly - RUT edging higher, contingent orders in place
08/21 RUT Iron Butterfly - RUT at expiration break-even, decided not to open a new butterfly (-10 Theta)
08/24 RUT Iron Butterfly - RUT didn't back off, going another day without adding a butterfly (-5 theta)
08/25 RUT Iron Butterfly - Added to the position
08/26 RUT Iron Butterfly - Started to consider rolling the short 560 calls
08/27 RUT Iron Butterfly - Added a long Call, then realized that rolling the 560 would be a better idea
08/28 RUT Iron Butterfly - Decided not to roll the 560 calls
08/31 RUT Iron Butterfly - RUT backed off, keeping the 560s paid off, noticed gamma increasing
09/01 RUT Iron Butterfly - RUT moved down, P&L drop was steep, rolled the short 590 PUT down
09/02 RUT Iron Butterfly - Not much change
09/03 RUT Iron Butterfly - Butterfly roll to move the 590Puts down, theta is huge
09/04 RUT Iron Butterfly - Got to about 17% ROI, Gamma is high, I have 3 short 560 Calls (they're ITM)
09/08 RUT Iron Butterfly - Rolled 560 to 580s, still up 15% ROI
09/09 RUT Iron Butterfly - Over paid for a vertical roll, intra-day manual adjustment
09/10 Daily Summary - Started exiting the trade, not much Profits left, short 580s cost me money as RUT moved a little bit higher, they're ITM
09/11 RUT Iron Butterfly - SEP - Out for 0.5% ROI
Mistakes I believe I made:
1) Waited 3 days before adding theta to the trade, including a weekend see 08/21
2) Intra-day adjustment when prices were out of wack. Got hit by quite a bit on 09/09 when I did a vertical roll during worst possible time, it also hit me emotionally and I gave up on the trade.
Things I did right:
1) Kept good control over greeks
2) Made money :)
Things to keep in mind for next trade:
1) Will not make decisions on-the-fly because of intra-day price action, always have 2 or 3 levels of contingent orders in place
2) Use long back-month CALLs or PUTs to control trade with contingent orders, perform a vertical rolls after things settle down (around closing time or the next day)
3) Manage last few days of trade differently: start moving In the Money calls or put sooner, cut gamma risk down
3) Open new butterfly to increase theta faster
Here is the trade on a day by day review:
08/18 RUT Iron Butterfly - Started the trade, used a shorter wingspan than what Dan Harvey recommends (after Dan Sheridan's advice), don't think this was a big deal
08/19 RUT Iron Butterfly - Smooth sailing
08/20 RUT Iron Butterfly - RUT edging higher, contingent orders in place
08/21 RUT Iron Butterfly - RUT at expiration break-even, decided not to open a new butterfly (-10 Theta)
08/24 RUT Iron Butterfly - RUT didn't back off, going another day without adding a butterfly (-5 theta)
08/25 RUT Iron Butterfly - Added to the position
08/26 RUT Iron Butterfly - Started to consider rolling the short 560 calls
08/27 RUT Iron Butterfly - Added a long Call, then realized that rolling the 560 would be a better idea
08/28 RUT Iron Butterfly - Decided not to roll the 560 calls
08/31 RUT Iron Butterfly - RUT backed off, keeping the 560s paid off, noticed gamma increasing
09/01 RUT Iron Butterfly - RUT moved down, P&L drop was steep, rolled the short 590 PUT down
09/02 RUT Iron Butterfly - Not much change
09/03 RUT Iron Butterfly - Butterfly roll to move the 590Puts down, theta is huge
09/04 RUT Iron Butterfly - Got to about 17% ROI, Gamma is high, I have 3 short 560 Calls (they're ITM)
09/08 RUT Iron Butterfly - Rolled 560 to 580s, still up 15% ROI
09/09 RUT Iron Butterfly - Over paid for a vertical roll, intra-day manual adjustment
09/10 Daily Summary - Started exiting the trade, not much Profits left, short 580s cost me money as RUT moved a little bit higher, they're ITM
09/11 RUT Iron Butterfly - SEP - Out for 0.5% ROI
09/14 SEP MNX Iron Butterfly (day-by-day review)
I think overall this trade was awesome! It got to 15% ROI, my target was set to 20%, I ended up closing it with just around 10%. After watching a Dan Harvey video he mentioned he goes for 10%, so I realized 20% was over aggressive, and that 15% was a great deal.
Mistakes I believe I made:
1) Looked at P&L and over-adjusted to the down-side on the 17th, it was down because of volatility and option pricing, P&L got back in order in the next day
2) Went over the weekend with too much gamma exposure and with ITM short calls
Things I did right:
1) Controlled trade in the last week, got gamma back on track and landed the position with around 10% ROI
Things to keep in mind for next trade:
1) Go for 15% ROI
2) Watch all greeks, controll gamma exposure
So, here is what happened on a daily basis:
08/13 MNX Iron Butterfly - SEP *New*
08/17 MNX Iron Butterfly - SEP - Took a 2 st. deviation move right off the gates, got down 7%
08/18 MNX Iron Butterfly - SEP - P&L back in order
08/19 MNX Iron Butterfly - SEP - Started rolling against the up-side. I may have over-adjusted the down-side
08/20 MNX Iron Butterfly - Adjusted the position, back in the center of the graph
08/21 MNX Iron Butterfly - Need a few days to recover
08/24 MNX Iron Butterfly - MNX took a break, back in profits, theta increasing
08/25 MNX Iron Butterfly - Theta : Delta ratio 1:1, borderline delta exposure
08/26 MNX Iron Butterfly - Not much happening, collecting $
08/27 MNX Iron Butterfly - 6% ROI Cut deltas at end of day
08/28 MNX Iron Butterfly - 8% ROI
08/31 MNX Iron Butterfly - MNX Pulled back, P&L up to 10% (**Gamma over 30)
09/01 MNX Iron Butterfly - MNX moved down fast, Volatility and Options pricing pushed P&L down to 0, (Gamma still over 30)
09/02 MNX Iron Butterfly - Recovered some P&L
09/03 MNX Iron Butterfly - Back to around 10% ROI
09/04 MNX Iron Butterfly - Flattened delta, (**Gamma over 40)
09/08 MNX Iron Butterfly - Small P&L drop with market moving up after long weekend (Gamma back to 20)- Started managing inventory, getting rid of delta hogs
09/09 MNX Iron Butterfly - Moving short ITM calls out of the money, gamma around 20, flat deltas and good theta
09/10 Daily Summary - Started to exit the trade
09/11 MNX Iron Butterfly - SEP - Out 9.5% ROI
Mistakes I believe I made:
1) Looked at P&L and over-adjusted to the down-side on the 17th, it was down because of volatility and option pricing, P&L got back in order in the next day
2) Went over the weekend with too much gamma exposure and with ITM short calls
Things I did right:
1) Controlled trade in the last week, got gamma back on track and landed the position with around 10% ROI
Things to keep in mind for next trade:
1) Go for 15% ROI
2) Watch all greeks, controll gamma exposure
So, here is what happened on a daily basis:
08/13 MNX Iron Butterfly - SEP *New*
08/17 MNX Iron Butterfly - SEP - Took a 2 st. deviation move right off the gates, got down 7%
08/18 MNX Iron Butterfly - SEP - P&L back in order
08/19 MNX Iron Butterfly - SEP - Started rolling against the up-side. I may have over-adjusted the down-side
08/20 MNX Iron Butterfly - Adjusted the position, back in the center of the graph
08/21 MNX Iron Butterfly - Need a few days to recover
08/24 MNX Iron Butterfly - MNX took a break, back in profits, theta increasing
08/25 MNX Iron Butterfly - Theta : Delta ratio 1:1, borderline delta exposure
08/26 MNX Iron Butterfly - Not much happening, collecting $
08/27 MNX Iron Butterfly - 6% ROI Cut deltas at end of day
08/28 MNX Iron Butterfly - 8% ROI
08/31 MNX Iron Butterfly - MNX Pulled back, P&L up to 10% (**Gamma over 30)
09/01 MNX Iron Butterfly - MNX moved down fast, Volatility and Options pricing pushed P&L down to 0, (Gamma still over 30)
09/02 MNX Iron Butterfly - Recovered some P&L
09/03 MNX Iron Butterfly - Back to around 10% ROI
09/04 MNX Iron Butterfly - Flattened delta, (**Gamma over 40)
09/08 MNX Iron Butterfly - Small P&L drop with market moving up after long weekend (Gamma back to 20)- Started managing inventory, getting rid of delta hogs
09/09 MNX Iron Butterfly - Moving short ITM calls out of the money, gamma around 20, flat deltas and good theta
09/10 Daily Summary - Started to exit the trade
09/11 MNX Iron Butterfly - SEP - Out 9.5% ROI
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