Position's Summary:
10/09 RUT Iron Butterfly *Closed*
10/09 MNX Iron Butterfly
Price Action & Forecasts:
Saturday, October 10, 2009
10/09 Daily Summary
Using a 20-day window calculated volatility, RUT moved about +0.8 and MNX +0.5 standard deviations. FinViz was showing a dark-green dashboard, while Vertical Solutions current condition screen showed mixed ETFs as well as Stock's "trending power" slowing down through the day. With time, I want to capture the relationship between the forecast tools and how much movement we get.
Position's Summary:
10/09 RUT Iron Butterfly *Closed*
10/09 MNX Iron Butterfly
Price Action & Forecasts:
Position's Summary:
10/09 RUT Iron Butterfly *Closed*
10/09 MNX Iron Butterfly
Price Action & Forecasts:
10/09 RUT Iron Butterfly *Closed*
Closed the position on Friday before expiration week. Wasn't confortable with the overall trade and decided against risking it. Had a great phone conversation with Dan Harvey and he pointed out my mistakes in the trade, I documented them in the day by day review.
10/09 MNX Iron Butterfly
Continued to exit the trade, took off one more put and call spread and left the remaining of the potision to go through the weekend. I believe this is the first time I go over to expiration week with a trade that has profits in it. Learning the condorizing process and the ability to get the most out of the trade with less risk.
Friday, October 9, 2009
10/09 OCT RUT Iron Butterfly (day-by-day review)
Here, once again I think there is something I'm doing wrong on the trade, because I couldn't quite put my finger on it, I requested another pair of eyes. That's the value of a network of traders.. Dan Harvey helped me out and pointed out some of the things I did wrong here:
1) Over trading, over trading, over trading... That was the very firt thing Dan noticed on our discussion.. He suggested I don't focus too much on the T+0 line, and yet look further out in time and make adjustment decisions based on points where the market is getting away from the tent and even the T+4 or T+8 lines are starting to look bad.
Look at the volatility cone in my dashboard, you will notice I adjusted the trade just about every day! That's way too much, specially because the market traded INSIDE the cone the whole month..
2) Rolling the delta hogs: Dan also mentioned I rolled a few delta hogs too soon, he suggested waitting and keeping these short calls/puts for as long as possible, because they are the money makers in the trade
3) Adding butterflies: He suggested adding another butterfly the same size as the original one when the market starts to get away from the first butterfly. This lifts the T+4 and T+8 lines quite a bit and allows for much more space.
4) Lock in profits: Of course, I had 8% and it slipped away.. Last month, I had 15% and it slipped away... He suggested to start condorizing the position as soon as it gets to a profitable zone like 10%.. To condorize, he suggested to do a straddle to buy back the short put and call at the same time, and then a strangle to sell the put and call at the same time. I never thought of that, had being done this by means of a vertical roll on each side... The straddle/strangle approach is much more likely to NOT affect the deltas while you do it, when the vertical rolls expose you to high deltas when you do it on each side.
The position was a loser this month, down 3%.
Here is a day-by-day view:
09/10 Daily Summary - First day, no major news
1) Over trading, over trading, over trading... That was the very firt thing Dan noticed on our discussion.. He suggested I don't focus too much on the T+0 line, and yet look further out in time and make adjustment decisions based on points where the market is getting away from the tent and even the T+4 or T+8 lines are starting to look bad.
Look at the volatility cone in my dashboard, you will notice I adjusted the trade just about every day! That's way too much, specially because the market traded INSIDE the cone the whole month..
2) Rolling the delta hogs: Dan also mentioned I rolled a few delta hogs too soon, he suggested waitting and keeping these short calls/puts for as long as possible, because they are the money makers in the trade
3) Adding butterflies: He suggested adding another butterfly the same size as the original one when the market starts to get away from the first butterfly. This lifts the T+4 and T+8 lines quite a bit and allows for much more space.
4) Lock in profits: Of course, I had 8% and it slipped away.. Last month, I had 15% and it slipped away... He suggested to start condorizing the position as soon as it gets to a profitable zone like 10%.. To condorize, he suggested to do a straddle to buy back the short put and call at the same time, and then a strangle to sell the put and call at the same time. I never thought of that, had being done this by means of a vertical roll on each side... The straddle/strangle approach is much more likely to NOT affect the deltas while you do it, when the vertical rolls expose you to high deltas when you do it on each side.
The position was a loser this month, down 3%.
Here is a day-by-day view:
09/10 Daily Summary - First day, no major news
09/11 RUT Iron Butterfly - OCT
09/15 RUT Iron Butterfly - I added the second 1/2 of the position Today. I decided against adding the hedge to the position right away, if we get to 610 Tomorrow then I'll hedge it.
09/16 RUT Iron Butterfly - I added a long contract to help control the deltas at 610, then at 615 a second hedge was released.
09/17 RUT Iron Butterfly I made my move intra-day: I did a butterfly roll to move my short 590Call and place it at 620.
09/18 RUT Iron Butterfly - No major change on RUT Today, P&L improved slightly
09/22 RUT Iron Butterfly - I did a vertical roll to adjust my position Today. I noticed that we were leaning short deltas and didn't want to add a long CALL, as it would simply smash my theta. So I moved the short 610 Call to the 620 strike level.
09/23 RUT Iron Butterfly - The position got a break and is finally in the black after Today's price action
09/24 RUT Iron Butterfly - RUT rolled down Today and the position adjusted itself thanks to all the contingent orders I had in place. The P&L dropped by a few percentage points, but it is still above water.
09/25 RUT Iron Butterfly - P&L on the trade is lagging behind if compared to MNX
09/28 RUT Iron Butterfly - Execution error: Today's price action was strong to the up-side, the position maintained its current P&L. I didn't realize this last Friday, but on my inventory I had a long Nov PUT that I needed to get rid of if we moved higher, we did Today and instead of dumping that PUT I ended up buying calls, the effects on the delta is the same, however, by selling the PUT I'd be getting some extra theta and also keeping some of the PUT's value in the trade.
09/29 RUT Iron Butterfly - Yesterday I made a mistake, Today, rather than feeling sorry for myself, I went in there and fixed it! I sold both the extra NOV Put and Call I had in the portfolio
09/30 RUT Iron Butterfly - Bounce back and forth hurt me because I changed the game-plan intra-day: RUT triggered two of my down-side adjustments, I turned the computer early in the session and notice that we were trading around 598, 1 standard deviation down.. Then I decided to place a contingent order to sell the NOV Put at 610, thinking if we bounce back hard, It is a good idea to get rid of it.. In perfect 20x20 hindsight, that decision wasn't very good. We bounced hard, hit the 610 level and came back down again...
10/01 RUT Iron Butterfly - Added the baby butter and use VOL POP to my advantage. RUT contingent orders kicked in and protected the trade as the market crashed down. By the end of the day I decided to add a small butterfly to take advantage of the volatility pop.
10/02 RUT Iron Butterfly - Contingent orders too tight: This one error on the PUT cost me almost 2% of ROI on the trade.
10/06 RUT Iron Butterfly - Could not remove NOV PUTS: I had contingent orders to do so, and we closed 1 point before triggering that contingent order
10/07 RUT Iron Butterfly - back to 0%
10/08 RUT Iron Butterfly - Whipsawed on up-side adjustment
Thursday, October 8, 2009
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
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.
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.
Subscribe to:
Posts (Atom)
