5/28 Weekly Summary

Ok, I've been absent for a few days, so here is my 5 minutes review of the week: while I don't think it is business as usual, I can point to a few indications that it is much calmer than it was a few weeks back. Look at the daily chart, we only had a few bigger than 1 st. deviationd days in the past 10 days, compared to how it was 20 days ago, it is much better. Also, the 5 day chart seems to be showing to some sort of consolidation, meaning we're not totaly biased to one side of the chart. All that being said, I'm glad I'm no longer with positions opened, but at the same time am looking for ways to stay connected, perhaps some backtesting? Or even a review of past trades, capturing some lessons learned along the way.

Cheers!

Gustavo

JUN NDX Iron Butterfly Day-by-day review

This was an extreme satisfying trade. 3 days and I got out with my target ROI! :) Most of it comes from the fact I decided to enter the JUN position regardless of the wild market conditions. I’ve made a few tweaks to the trade and made up my mind I was ready to manage whatever would come my way.
It also helped I entered later in the week due to my trip to Germany. When I saw the early morning gap on Thursday (5/20) I decided to wait for Friday (5/21), as it turns out, I entered early AM on Friday and got most of the increased volatility due to Thursday’s decline. Then it was a matter of watching the vols melt away and the profits show up.
Trade 1: From 5/21/2010 to 5/25/2010 +10.16% ROI
Day by day:

05/21 NDX Iron Butterfly
05/24 NDX Iron Butterfly
05/25 NDX Iron Butterfly

05/25 NDX Iron Butterfly – JUN/10

Ok, as we gapped down this morning I was observing the NDX and its price action, it got to about 4 points from my lower adjustment (1950), then started to bounce from there. Rather than touching the position early in the morning I’ve decided to let it ride for the extra day... As it turned out, this as a good choice as we traded to just about the same level as we closed Yesterday. With the additional Volatility crush I got to 10% on my trade and dashed for the exit! :)
Not bad, get in Friday morning, ride through the weekend, cash out 10% by Tuesday (3 days in the market) I am very grateful I got in the position this month!

05/24 NDX Iron Butterfly – JUN/10

Today is my Birthday and I think the market actually handed me a gift! Let’s call it the volatility gift! The position is around 7% profit after just one day of trade! I love it, and as a matter of fact, depending on how it looks Tomorrow I might tighten it up a bit to reduce my overall exposure to delta and vega. Normally I wouldn’t touch it, but given the recent market condition I think it is worth taking a conservative approach with gains.

APR NDX Iron Butterfly Day-by-day review

I took an unnecessary loss for my APR position, at some point in the month trading cycle I have lost track of what I was doing, with too many trades and not enough time to focus on anything. I left the Iron Butterfly “float” around the up-side zone without properly increasing its theta when needed. The result is I didn’t capture theta and ended up taking a loss when the market moved up in the last few days of the trade.

Trade 1: From 3/15/2010 to 4/14/2010 -12.33% ROI

Day by day:

03/15 NDX Iron Butterfly

03/16 NDX Iron Butterfly

03/17 NDX Iron Butterfly

03/18 NDX Iron Butterfly

03/19 NDX Iron Butterfly

03/22 NDX Iron Butterfly

03/23 NDX Iron Butterfly

03/24 NDX Iron Butterfly

03/24 NDX Iron Butterfly

03/26 NDX Iron Butterfly

03/29 NDX Iron Butterfly

03/30 NDX Iron Butterfly

04/01 NDX Iron Butterfly

04/05 NDX Iron Butterfly

04/06 NDX Iron Butterfly

04/07 NDX Iron Butterfly

04/08 NDX Iron Butterfly

04/09 NDX Iron Butterfly

04/12 NDX Iron Butterfly

04/13 NDX Iron Butterfly

04/14 NDX Iron Butterfly

MAY NDX Iron Butterfly Day-by-day review

After mis-managing APR, I did a great job staying on top of my position in MAY, and it served me very well indeed! We went from a low volatility to a very high volatility environment during the trading cycle. We saw some crazy days, a lot of whipsaw action. In the end I was happy, I mean EXTREMELLY happy to get out of there with some money in my pocket :)

Trade 1: From 4/21/2010 to 5/11/2010 +1.74% ROI

Day by day:

04/21 NDX Iron Butterfly

04/22 NDX Iron Butterfly

04/23 NDX Iron Butterfly

04/26 NDX Iron Butterfly

04/27 NDX Iron Butterfly

04/28 NDX Iron Butterfly

04/29 NDX Iron Butterfly

04/30 NDX Iron Butterfly

05/03 NDX Iron Butterfly

05/04 NDX Iron Butterfly

05/05 NDX Iron Butterfly

05/06 NDX Iron Butterfly

05/07 NDX Iron Butterfly

05/21 Daily Summary

Being fully aware we’re still in the midst of the storm, I’ve initiated my JUN position Today. My key assumption and expectation is that things are about to settle down and when the dust settles I want to get out of there with the profit target. I decided against sitting out this month simply because it has been my experience that for these type of strategies you can’t really know when they’ll work and when they won’t.. You just have to trade consistently and manage whatever comes your way. So, let’s get ready for the JUN ride. May it be a good one :)

05/21 NDX Iron Butterfly – JUN/10

Started the position Today, instead of using the regular extra long, I’ve opted for having one of my contracts set up as a broken-wing butterfly, moving the long call closer to the short call, therefore getting the extra positive delta but with a bit more theta than I would have if I had with the extra long call. Will post further details on adjustment and trade plan over the weekend.

5/19 Daily Summary

I'm glad the order I had Yesterday didn't fill. I was pushing for a fill at a higher price to compensate for the risk of having an order without knowing where the NDX would be trading at. As I write this we are moving about 40 points down and the volatility is going higher. I will then wait for end of day to jump in.

Cheers!
Gustavo

5/19 Daily Summary

Sorry, can't post my daily summary chart Today. I'm in Munich and on my way back to San Francisco, just wanted to get re-started on the blog. Looking to add my JUN position either Today or Tomorrow. I have floated an order to enter the trade once the market opens Today, if it gets filled great, otherwise I'll have the position early morning Tomorrow. So far looking at the 1875/1800 puts & 1925/2000 calls, keeping an eye on the donw-side once again this month. I won't add the extra call unless it triggers at 1910 (actually, first it needs to trigger the butterfly order, then the contingent).

Cheers!
Gustavo

05/13 Daily Summary

Still a very choppy market environment, a 1 day standard deviation looks like nothing these days.. On the bright side, the 5 day vol spike chart may be showing some sort of consolidation is starting. That’s what I’m hoping for, as we enter the “hunting” season for JUN contracts.. I will be traveling to Europe next week, so may not be able to post for a few days. Plan on starting a position from there though, likely to enter on Tuesday. Cheers! I closed my accounting for MAY, ended up making a very thin profit, that was AWESOME considering such a wild ride!

05/12 Daily Summary

Sorry I have been out of touch lately, got into a busy period at work. Actually I’m glad my position has been closed, as I wouldn’t have a whole lot of time to dedicate to it. Back on the 11th I closed the short call spread and sold back all my remaining longs when NDX traded at 1960. This was done through contingent orders. For now I’ll kick back and relax until we get into the JUN cycle.

5/10 Daily Summary

Not much to say Today, except that with this sort of price action going on I might just spend the extra money to close my last short call. Don't have much time Today, but will post any action I do Tomorrow.

05/07 Daily Summary

Watch the video again. Which trader are you? Today (and forever as far as I can help) I am the trader on the right, the guy who observes the market conditions and surfs the wave without freaking out. I navigated Today’s up/down/up roller coaster and got myself out of my iron butterfly with PROFITS! Remember, I was down 15% Yesterday. I didn’t go crazy bearish, in fact I actually changed my contingent order to be slightly less bearish than I had planned Yesterday. What happened was that my JUN put hedge suddenly exploded in value, not by my design, but because people in the market were freaking out. So, my job as a trader was to keep it cool, and SEIZE THE OPPORTUNITY :)

http://www.youtube.com/watch?v=hyFl-IyDUhE

05/07 NDX Iron Butterfly – MAY/10

Ok, let me start by saying, what a ride!!! As we opened up this morning my instruction was: look for ways to cut and roll the short puts that are hurting the position. Let the P/L settle down and go for it at the best possible price. Just in case you didn’t read my daily summary and are reading this post isolated, let me make one note: I didn’t go super bearish with my put hedge, quite the contrary, I actually adjusted it this morning to be slightly less bearish (in case of a whipsaw)

Realizing I could not cut and roll (none of my orders were being picked up), I had to sit back and wait a bit longer. I had a contingent order to hedge the trade if we traded at or bellow 1870. Sure enough, we started to go that route and it quickly hit my contingent order.. The market started to roll over once again and I noticed my hedge had given me an opportunity: Negative delta and positive Vega. Perfect Nitro combination for the morning price action

Within about 30 minutes we were crashing, panicky put buyers kept pumping Vols higher. I saw the P/L was jumping around the profitable zone. So, my first reaction is: “CLOSE”.. Then off course, I realized it wouldn’t be this simple, it would be like disarming a bomb, one wrong click could set me up with the wrong delta exposure, given the market’s speed I could be toast quicker than you can say “toast”. So, I took a deep breath and analyzed the exit sequence: Eliminate the delta hog, sell the long puts ASAP for their overpriced value (Vol hyped value) and keep your Greeks under control. I closed my first vertical with the short 1950 puts, and dumped my two long Jun puts. At that point my Greeks were basically FLAT, no delta, no gamma, positive theta and small vega.

What happened was that I had rolled 2 of my short 1950s Yesterday, once I closed the 1 remaining vertical, I then Had 3 short call verticals and only 2 short put verticals. Because I locked in gains from my previous transactions, thanks to those over-priced puts, I was simply navigating flat with profits locked in. Because you never know if those profits were only due to expanded bid/ask spreads, or whatever reason, my next step was to close all short PUTs, balance the remaining trade and leave only one short call left (2050 call) alone. I might dump everything on Monday just to be fully relaxed, but you know, I’m not afraid if it starts rallying up again. Remember the kids in the roller coaster? :)

05/06 Daily Summary

I followed my gut feeling this morning, did a cut and roll on 2/3rd of my short put spreads, this really helped me when the market rolled down like the world was ending.. I believe my P/L is worse than it should be because of the last hour wild swing on major market. I need to see where we stand Tomorrow morning.

05/06 NDX Iron Butterfly – MAY/10

This morning I had a gut feeling I needed to cut and roll my puts. So I evaluated the risk profile and saw that it made sense to do it (see attached picture). So I started doing so, I was able to pre-emptively roll 2 of my short puts, but got a glitch on Internet connection and ended up not moving the 3rd one. So, left it alone with a contingent order to hedge the position at 1935.
I evaluated cutting and rolling and it made sense as it improved my position in all aspects except it exposed to a bit more vega, since I had the contingent order to hedge I wasn’t too worried about the vega for a short price space (from 1945 to 1935). Then the market proceed to roll down and never stopped.. I wasn’t watching, and I think my current P/L is not very accurate as it reflects the wild swing we had in the last hour of trading. My game plan is to cut and roll the last short put and keep the trade hedge to see where it stands Tomorrow.

05/05 Daily Summary

I was able to move my downside adjustment to 1935 and maintain the same levels of P/L thanks to the extra day of time decay and perhaps some volatility that is going away. I did adjust my contingent order early in the morning as I did not want it to be triggered in a whipsaw action, I moved it to the lowest point of the day once I noticed we had formed a hammer on the 30 minute chart. It would not have triggered either way, but to be fully honest here I wanted to capture that I made that adjustment.

05/05 NDX Iron Butterfly – MAY/10

As we opened Today bellow the 1940 level I decided to make an executive decision and lift my lower adjustment, moving it further down to 1935 level. My thinking behind it was that we opened with such a gap down that it seemed logic it would try to trade back up and fill the gap. If I was wrong the contingent would trigger at 1935 and I would be down an extra -1% ROI, so it seemed worth for me to do it this way rather than blindly locking the trade down with the extra put.
Worked out ok, now with the advantage of time decay and reduced vols I can leave my down-side adjustment at 1935 and maintain the same P/L level as Yesterday with the adjustment being 10 points further out.

05/04 Daily Summary

Bears are out and seem to be hungry! I got my contingent orders adjusting the trade for me, then manually added the cut&roll and the extra iron butterfly to bring on extra theta. Still in the game and keeping an eye on the prize. Remember the roller-coaster video.. which trader are you? I’m keeping that in mind to make sure I’m the one observing and riding the waves.
Worth re-posting? You bet:
http://www.youtube.com/watch?v=hyFl-IyDUhE

05/04 NDX Iron Butterfly – MAY/10

I’m still in the game, following my game plan, and as you can see I forecasted to be down 7% if hit both my down-side adjustments, as it turns out I’m down -7.5% after going beyond the second adjustment point, not bad.. One think I noticed was that adding the cut&Roll and the extra iron butterfly ended up costing me about 2% in ROI, I would be down only 4.5% if had executed only the hedging adjustments.. I think this will pay off Tomorrow if we pull back slowly and volatility comes back a notch or two.
Bottom line, I needed to increase theta and so I did as I had previously planned to do. No hesitation.

05/03 Daily Summary

Nothing new, we’re going back and forth on a wide range. I’m glad I stuck to my plan this morning, controlling the urge to lean bearish was a great victory for me Today :) Have to be patient this month, plan the trade and trade the plan, follow NDX, keep an eye on adjustment options and making sure there is enough theta to reach the goal.

05/03 NDX Iron Butterfly – MAY/10

We’re still trading back and forth on this very wide channel. NDX is pumping wide swings. I controlled my urge to go “bearish” early this morning, leaving my trading plan behind and leaning bearish. That would be a mistake in many ways, for once the market negated and rallied up, not to mention that so far I’ve been adhering to a well-defined and detailed trading plan, keeping an eye on reaching my 10% goal by next week. Throwing it out the window per say would jolt me out of wack and make it harder to stay in the game. Patience, patience is the name of the game this month for me.

04/30 Daily Summary

If you’re not at the edge of your seat yet, I don’t know what will get you up :).. Notice the waves are getting bigger, there are sharks roaming around, the wind is blowing, no visibility, you name it, the storm is out there.. So here you have it, my alerts are on. I’m trading focused on the goal, and fully aware the environment is choppy to say the least.

04/30 NDX Iron Butterfly – MAY/10

I am very, very grateful this position is going up in P/L despite the wild-wild west environment we’re in.. I’m specially glad it didn’t trigger my contingent orders to adjust at either extremes, we traded within 1 point of my down-side adjustment when it was down earlier in the week, then rallied up to trade within 3 points of my up-side adjustment. So, here we are at the lower edge, let’s back up to the middle NDX :)