OCT 10 NDX Iron Butterfly - Day-by-day Review

Trade Result: +2%

Started the trade with less than optimum position, since I didn't have Internet connection at the hotel in Geneva and had very limited time to evaluate and prepare with contingent orders. When the market moved against me, I had 1 set of contingent orders missing and therefore the position went further into the red than I anticipated. By the 27th, I put together a game plan to recover, did another cut and roll and add the extra butterfly, it took a few days but the volatility finally dropped on the OCT contracts and I started seing the money early in October.

Of course, by the 5th of October I got hit with a huge whipsaw, the market stroke the down-side adjustment one day and flew up 3+ st. deviation the very next day, making me hege with a long call and put, this reduced my rate of recovery, yet by then I was already locking in profits.. By the last week we kept moving up and I ended up closing all my call contracts, locked a few bucks this month, certainly better than taking the loss as it was looking like by end of September.

9/20 Daily Summary
9/27 Daily Summary
9/27 Game Plan
9/28 Daily Summary
9/29 Daily Summary
09/30 Daily Summary
10/1 Daily Summary
10/4 Daily Summary
10/5 Daily Summary
10/6 Daily Summary
10/7 Daily Summary
10/08 Daily Summary
10/11 Daily Summary
10/12 Daily Summary
10/13 Daily Summary

10/13 Daily Summary

We had to move up higher Today, hadn’t we? Well, closed the last remaining call spread, with NDX trading this close I couldn’t afford to leave it on, specially not in the last few days. The put side is still there, and I might just take them off or leave them alone & let it expire. All and all, I’m very grateful for being able to pull this trade out of the whole and into profits, landed another month with profits and no major damage. As far as my 5% goal, got close, but no cigar,, I’ll have a beer (or two) instead Cheers! :)

10/12 Daily Summary

Still a few points shy of the 5% mark.. If we stop trading higher for just a day, or better yet, if we pull back and stay down for a couple of days I can get there.. It is down to the last final moments on the trade, so I’m being extra conservative to the up-side. I’ve closed a few spreads Today as we traded higher and am essentially at the same P/L as of Yesterday. Need to stay on top and shut it down if we keep trading higher Tomorrow, a few percentage points is better than nothing after all :)

10/11 Daily Summary

Working myself towards the 5% goal for this month, I should be reaching this goal Tomorrow, and am very grateful that I was able to stay in the trade and managed to control the position and bring about profits despite the rough start. I’m also very grateful the NDX gave me a break on the up-side. So, for Tomorrow my only protection is against an up-side, if we trade at or above 2050 I will close 2 spreads and roll the last 1, I fully expect the market to pull back or stay around the same levels of Today, so I can close out :)

e-Book #1: Non-directional option trading plan for Iron Butterflies

Ok, here is my proposed outline for the first e-Book I'll be working on this quarter:

Title: Non-directional option trading plan for Iron Butterflies

Chapters:

1. Introduction
1.1 What is non-directional trading
1.2 What are options
1.3 A word on probability & volatility
1.4 Define risk to you
1.5 Greeks basics
1.6 Mix it all up: The Iron Butterfly
1.7 Educational resources

2. Trading Plan
2.1 Purpose
2.2 Objective
2.3 Trading style
2.4 Infrastructure
2.5 Emergency procedures

3. The Iron Butterfly Strategy
3.1 Strategy details
3.2 Entry guidelines
3.3 Adjustment guidelines
3.4 Exit guidelines
3.5 Known exceptions

4. Monitoring the plan
4.1 Trading Journal
4.3 Looking at performance
4.4 When to update the plan

5. Tools of the trade
5.1 Money management 101
5.2 Volatility cone
5.3 Trade dashboard
5.4 Market monitoring tips
5.5 Support system
5.6 Trading platform

10/08 Daily Summary

Continued to close spreads out of my position, Today I got another short call out by doing a debit spread on 2075/2100 calls, by the looks of it, I expect to reach my 5% by Monday next week, go time decay! It has been a long month, a lot of trading and adjusting, yet I like the fact I can control my position and risk exposure in so many ways with the Iron Butterfly that having one or two difficult months in the year is not such a bad deal... Remember, the September trade got me 10% in 6 days, October is making me work for my money, that’s ok :)

10/7 Daily Summary

Exiting my trade Today, not much more left to do but to roll my short calls away from the money. I used debit spreads to move my short 2025 and 2050 calls all the way to 2075, also sold all my long NOV contracts (Puts and Calls) as well as my long OCT call that I bought as a hedge.