01/06 Daily Summary

Up-side wave cycle seems to be loosing some steam, I plan on entering a bearish Iron Butterfly on NDX if we close on or bellow 1860 Tomorrow. I'm watching and eager to play a down-side wave on the 5-day volatility chart. Have started to condorize my MNX Iron Butterfly, it improved Today and if we keep going down a bit further it will be great!

Seems that missed out on the OEX weekly this week, no problem, the good thing about the weekly trade is that the next week is just around the corner..

Position's details and price action chart:
01/06 MNX Iron Butterfly

01/06 MNX Iron Butterfly

Things are improving once again. At the end of day I took my lunch break and rolled my last 180 call, the deltas were still too high. I have orders (short trigger) to roll the 185 calls now, this will continue with the condorizing process. I plan on continuing to roll the short calls by end of day Tomorrow.

01/05 Daily Summary

Not much of a big movement Today, the daily chart shows some weakness signs at the top. If anything, it didn't quite confirm Yesterday's breakout. We'll have to see what shapes out of it in the next few days. I'm currently delta negative on my MNX trade, so as much as I like to avoid it, my money is on a pull back (I mean literally).

Position's Details and Price action chart
01/05 MNX Iron Butterfly

01/05 MNX Iron Butterfly

We're approaching closing time on the MNX Iron Butterfly, as it turns out, my bet on going for 15% didn't quite pay off. This made me review all my trades and adjust my goal for 10% on this strategy. Bottom line here is that I want to start rolling my short calls out of the money (aka condorizing). I have a "hairline trigger" order to roll the last short 180 call, and following that another to roll the 2 185 calls. I won't be able to watch the market Tomorrow, so will have to work with the contingent orders only.

My plan is to start peeling off the spreads and rolling some of the calls out of the money, as I find some time between now and Friday.

01/04 Daily Summary

Today we had a strong rebound from last Friday's session, both RUT and MNX posted over 1.5 standard deviations to the upside. I have only one position left for the JAN cycle, and it adjusted itself with contingent orders Today.

Early in the morning I was considering entering an OEX weekly iron condor, as this has been much discussed in California trading group 1 meetings. Despite very promissing backtested and live results, I became leary of the fact that OEX can be assigned before expiration. Since I don't quite know exactly what sort of impacts this fact might have, I decided to leave it alone this week until I can do a bit more research on it... I'm following one of the few overall rules I have for trading: When in doubt, stay out.

Position's Details and price action chart:
01/04 MNX Iron Butterfly

01/04 MNX Iron Butterfly

Phew!! Not a pretty day for this trade. Notice in my dashboard it had 10% at one time, my friend Gary did the right thing, he exited his trades. I've learned my lesson and am no longer going to stick around for 15% on these trades. My goal is now 10%, it is part of my adjustment plan for 2010, more on that later.

So, Today's price action triggered my contingent orders to roll the 180 calls. I rolled 2x 180 to 187.5 call, and sold one of the 190 FEB calls I had in inventory. I have orders to continue to roll if we keep pressing higher. One nice thing was that the trade fixed itself with the contingent orders, I spent the day busy with work and didn't even look at the position all day long.

Thoughts on Risk Management

"All courses of action are risky, so prudence is not in avoiding danger (it's impossible), but calculating risk and acting decisively. Make mistakes of ambition and not mistakes of sloth. Develop the strength to do bold things, not the strength to suffer." -- Niccolo Machiavelli, The Prince

These are wonderful thoughts to hold in your mind if you think of trading as being a very risky proposition. Just about any aspect of our lives have risks involved, so is option trading risky? Of course it is, especially if you're a novice and don't quite know what can hit you. Just like driving is risky if you never drove before. The key is in calculating your risk, and acting upon it.

Start small, start with a paper account, but above all, START. It is far riskier to live your life wondering "what if"... Worse yet, to rely on someone else to take care of you money, your investments, your future. As we move out of 2009 and start 2010, decide what you'll pursue, how much you know and need to learn, calculate your risks, and go for it.

This is how I navigated the past year, since July 2008 the market started becoming very much risky for non-directional traders. I had decided I would pursue this style of trading and once committed, I couldn't just walk away and wait for better times. My decision was to scale back in my position sizing, and trade, test and learn the various strategies, see how they'd work out, see how they'd could be shredded to pieces if I was to trade them without a stop, learn, adapt, learn some more, but keep walking on the path.

Even though I ended up negative in 2009, I was down by less than 1.5% in my entire portfolio. Should I have kept on trading the same way I used to back when I had just started trading options (back when I knew close to nothing about options), I'm 100% sure I would have been wiped out at least a couple of times between July 08 and December 09. I learned to trade non-directional options strategies by adjusting the greeks and using risk management. I discovered what strategies I'm more confortable with, and I'm sure that I can keep on this path in 2010.

So, this is something I want to leave behind as we turn the page for the year. Manage and calculate your risks, and act upon it.