11/07 Game Plan

I'm grateful I am still managing this position. Here is my game plan for Tomorrow. I will be very, very happy if we pull back from here. Ok, a little hesitation for about a week would be nice just as well :)

New idea

A friend of mine passed on an idea that kept my mind thinking and thinking.. I figured he was onto something and it sure seems that way! His suggestion was to use a broken wing butterfly or another type of trade in lieu of the back-month long call as a way to hedge my deltas. This optional trade could have a profile that added theta instead of simply being negative theta and could also be set up not to hurt as much if we backfire to the down-side.

I've looked at a broken wing butterfly as an option, notice the two profiles bellow. The first is the front-month BWB and the second is a long back-month call. If we keep going up, the BWB will provide theta to the trade, while the long call will keep robbing me of theta. If we stay around the same level the BWB will not lose that much money, and if we back-fire they both seem to have the same rate of loss.

The key difference here is Vega and Theta. I have to do some more research and perhaps run a parallel Butterly next month with this option in play to see how it behaves in real life situation. For now it is just an idea to explore. Looks like a great idea though.. Thanks!

11/05 Daily Summary

Very brief update Today, after all, it is Friday and I can welcome the break! I've added an extra butterfly this morning to increase my position's Theta and help pay for the cut and roll costs from a couple of days ago. The market also did its job and stayed quiet, allowing the position to take a break as well. I do hope it backs off a bit or stays quiet Monday so I can take on the weekend's worth of theta. For now, relax and enjoy the weekend!! Cheers!

11/04 Daily Summary

Ouch! This morning when I saw we gap up to 2185 I felt a bit sick on my stomach.. Well, on the bright side I had moved those short calls Yesterday, so this saved me from hitting a wall right away.. The contingent orders triggered and I'm still in the trade. The up-side movement is tricky because the volatility goes down with it, so right now I'm vega positive which means I have up-side risk due to volatility compression.. I will roll one more time if we keep trading higher.

I want to add a butterfly Tomorrow morning because the current theta at these levels is not enough to bring in profits. However, I will have a super busy Friday at work, so I'm not sure if I'll be able to do so. I don't like opening trades on Friday either, so I may just have to sit on my hands and see what comes out of it. We'll see.

11/03 Daily Summary

Today was wild action during the FMOC, I didn't watch it and sure am glad the position didn't go trough any contingent order. By end of the day, during my lunch hour I looked at it and decided to jump in and move my short calls up a level, the Deltas were approaching 65 which is my warning light for doing the jump. Because we don't have too many days left to go, I figured it is better to jump on the adjustments right away so I can still get the time decay. I also expect vols to drop now the announcement is over and therefore didn't want to stick around with positive vega exposure and little theta on the position.

11/2 Daily Summary

This is a tricky one, hitting this adjustment just prior to the FMOC meeting is not the best scenario, as the market can go up and down pretty hard Tomorrow, so I must prepare for all scenarios, including a whipsaw action hitting my up-side adjustment and then crashing back down.. I've created a special type of order to handle the whipsaw action, posted a screen shot of it on the facebook page (see link to the right). See the extra decision node I added to the game plan chart, where it shows what I'll do if we hit 2165 and then crash back down.

Only exposure I have is if we keep going up and volatility drops drastically, this will make me go deeper in losses. The mitigating factor is the FMOC where vols may be higher during the day and during the price action, so my plan at this time is to hedge if we go to 2165 and do a manual cut and roll anywhere above this level, Probably will wait till Tomorrow for the cut and roll.

11/1 Daily Summary

Today was a good day, the market is starting to discount the values on my short contracts and I finally feel that price decay is kicking in. We got close to my adjustment point, and I'm glad we didn't touch it. Wednesday is finally the FMOC meeting, with this behind I feel the trade will start to function as expected (i.e. time decay will kick in and not be taken over by inflated values/higher vols).

Last but not least, in case you didn't notice the black bar on the right side, I've created a Facebook page to relate back with this blog. My goal with facebook is to create more of an on-line conversation rather than a formal record of the day to day trading journal.. Anyhow, if you like you can add it to your facebook and I hope to hear your comments, discussions, etc.