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.
Blog dedicated to ETF and Index option trading strategies using credit spread and money management.
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