10/08 Daily Summary

Today I got once again caught up with a whipsaw.. I adjusted the RUT trade (perhaps over-adjusted?) and the market faded from the top. I was lucky that I didn't go overboard on the MNX position, it was nevertheless an adjustment that I could have lived without.

That led me into thinking about possible ways to avoid such scenarios. We want to make adjustments when we the market will continue its way moving against our positions, we want to avoid adjusting when the market fades back to "no movement" stage. The $1 Million dollar question is how do you know?!?!

I have started following two sites that I think provide an extra edge in determining the market sentiment: Vertical Solutions Forecasts and FinViz.com, they both gave me their permissions to post screenshots of their site on this blog, and I'll do so in order to capture the relationship between their information and the market action.. This might lead into a situation where adjusting can be done "IF" the sentiment is bullish and probabilities of over 1 st. deviation are confirmed.. Wouldn't that be awesome?!?!

Position's Details:
10/08 When to Adjust?
10/08 RUT Iron Butterfly
10/08 MNX Iron Butterfly

10/08 When to Adjust?

I think one improvement that can be made on my approach to trading the Iron Butterfly strategy is being able to identify when it makes sense to adjust intra-day vs. when it makes sense to wait to adjust at end-of-day.

Today is a perfect example: The market moved about 1 standard deviation higher intra-day, but then faded and closed just around Yesterday's closing. It hit my adjustment contingent orders for both RUT and MNX, and therefore I paid to protect myself from an up-side move that never happened.

So, the question is, how do you look at the market and make this decision AND at the same time do not take a "directional bias"? I think the answer is in evaluating the market "internals", sort of having an X-ray of how is the overall sentiment. I have started following a couple of web sites that I think give me an objective view on this sentiment:

1) Vertical Solutions: I like his trend odds forecast as well as the current conditions chart. They could be a great way to frame the market environment and help with that adjustment determination.

2) FinViz: I really like their front-page, it will clearly display ALL green or red for the SPX, and this can help you determine if we're facing a 1+ standard deviation day, vs facing a move that might not be that bad..

I got permission from both sites to post their screens on the blog, and will start doing so as a way for me to gauge and compare Vertical Solutions' forecast tools and FinViz X-ray with the end-of-day market results. With time I think this will give us an extra edge in terms of decision making.

10/08 RUT Iron Butterfly

I made adjustments to RUT when we were moving up 1 st. deviation. I have to re-think the way I'm adjusting the trade all together, will ask for some feedback from Dan Harvey to figure out where I might be able to improve the way I'm handling the trade.

10/08 MNX Iron Butterfly

MNX was moving about 1 st. deviation when I rolled the CALL spreads, by the end of day I rolled the second contract, I'm moving the short calls and puts as further away from price as I can, and notice how this drops my Gamma risk and keeps some theta in the trade to justify staying over the weekend.