Trade Update – STTBWB+BSH

The little up move at the EOD and its continued move pre-market has lowered Vol and as well, skew has changed to the point where the current STT trade has now hit the -100k range from -160k or so that it was yesterday. I’ve also got the profit from the dynamic ES hedges I put on that isn’t counted in that.

The environment is pretty wild, I mean, we are in an environment where one tweet can cause a flash crash down or a flash crash up. Anyways, despite that, the P/L comes back in quick on vol relief/up moves due to the trades maturity (they are all pretty old now). VIX was 21 yesterday and VIX/Vol increases are directly linked to time and what it really does is make a trade that’s in 120 days to expiration act like its 150 days to expiration but that has to mean revert and that force gets stronger with time. Just a week ago the trades were at +60k and with Vega increase it caused a draw down to -160k but that wants to mean revert and that force gets stronger and stronger each day. The trades then basically convert theta to P/L pretty quickly and more strongly. Time is a ticking’. We will have quick reversion in P/L with any vol relief and mean reversion in skew. If we, for instance, could fast forward a week or two, the market would have to work much harder re vol and delta move to cause the same loss in the trades. They become much more resilient as time moves on and eventually down moves even become welcome. The older trades hedge the newer ones. in ES shorts etc so my loss could hit break even by Thursday which would be nice.

I am really unsure as to what I’ll do pre Sep 1 when Trump is supposed to put the first round of tariffs through. We have a holiday on Monday (labour day) and that includes the futures markets so I guess the first trading day is Tuesday Sep 3 which just happens to be my 40th birthday and that’s when we’d have reactions to the trade war headlines. Do I lock in a slight gain or break even and sit out the event for the most part or do I try to get greedy with all the juicy theta in the trades currently. I think I might start rolling STTs about or removing them with the intent to add equivalent on a large down move. Right now and as we go forward, I don’t love HUGE up and since I am neg vega, I don’t love a big down (short of a crash). September and October have a load of volatility events and they’re seasonably pretty weak so I don’t know if I wanna keep a load of risk on. I’d rather have dry powder for vol spike entries.

Trade Update (STT+BSH+Bearish STT)

At the start of today, I was so close to forming the 30 BSH but I just missed my price and the VIX/Skew changed again and those way OTM puts rose in value and now I don’t wanna pay the extra 30c as I am fixed on the previous price because thats just how trading psychology works. Price fixation, it’s a weakness lol. I got some time though. That would have been cool, formed in 10 min market time 🙂

I didn’t trade the futures open and it just went where it went. I was tempted to use a breakout trading plan to further hedge but I just never ended up leaving it and I think I am pretty much as hedged as I can be. Today at market open (while I was flying from Milan to London–>I love internet on planes!) around 2855-2865 I ended up closing some of the ES shorts I had on, I have 7 left of 14. On the run up to 2875, I purchased more Bearish STT and I closed off 20 more STT. This adjustment puts me at exactly 0 delta. My UEL is now like -300k so I def will have to massage this as time goes by slowly converting the bearish STT into an STT. As time goes on, my deltas will get more and more negative as my tent builds up. This will be when I start converting on dips. If I don’t get the fear dips, then I’ll just let time play out and start converting and aim to get as much as I can out of the hodge podge structure.

Here’s my Dec structure (includes original STT and my entire bearish hedge structure)

Dec w/ the bearish STT portfolio adjustments

Here’s my Jan structure after adjustments today

Jan only (this position is down but was hedged by ES shorts not shown

Here’s my combined positions as ONE displays and with it set to Jan expiration line. It’s my loss on the structure but I had 14 or so ES shorts from 2915-2922 area that gained a lot of value and aren’t included in this. As well at the fear bottoms I sold puts in some equities that I follow (GooG) etc that are all up. Also doesn’t include the gains on the BS hedges and the shorts I sold on Friday. I was about +50k, now down -150k but the structure is good and my theta is 14k a day and my vega is -107k so time and vol relief are on my side. Combine this with my BSH positions and it’s pretty safe. I’d love to end September at ~250k (end of Sept risk profile at very end shows 300k). Sounds nuts but that would be pretty much the entire summer profits on a large portfolio. As quickly as I went from -8% to -4% then to +60k on Wednesday is as quick as I went from from +60k to -150k (vega mostly). It’s also how quickly (with reduction in vol or time passes) I will get back to profit..its a game of patience and risk management.

Current as is in ONE
Current – Showing Jan expiration Line
T+35

Here’s the entire structure in 14 days with a small decrease in volatility

I will wait for a spike in vix/fear and replace/roll the 30 STT I closed at a loss in the January expiration. I got the pricing during Friday and it was at about 2.50-2.95 credit and right now it’s at about 2.00 so I’ll put on an order at about 2.40 area. I’d be happy with that given I paid 2-3 dollars less to close off the STT today as opposed to Friday towards close.

My last 2 days of travel are in London and I’ll be heading back to Cayman Aug 29th (I’ll have internet the entire flight, so I’ll be active). Then I just keep massaging this structure as time goes and as we enter Sept. Towards end of Sept, it’d love to be in the 2650 area so that’s a lot more room to manoeuvre.

That was an interesting day!

So that was an interesting day. As expected my portfolio has fallen due to vega issues. Normally not that stressed but this is kinda a weird environment re this trade war. I am not so much stressed about any permanent draw down or loss but more so managing the rolls and dealing with fills (if we drop much further than 2825). It’ll mean that the trade will take a lot longer to get to any reasonable target. However, if we crash, I should be perfectly fine with the BSH hedges.

  1. I’ve got 115 STTs on in Jan expiration
  2. I’ve got 80 or so Dec STT but coupled with loads of bearish STT adjustments
  3. I have 14 ES shorts
  4. I have 100 puts in Sep 19 expiration at 2125
  5. 110 BSH in Oct 17 expiration (only 54 days to expiration though)
  6. 20 BSH in Oct 31 expiration
  7. 95 BSHE in Oct 31 expiration (just ratio)
  8. 30 BSH in Nov 14 expiration
  9. 30 BSHE in Nov 14 expiration (just ratio)

So I have on an estimated 195 STT, 100s of bearish STT and 285 black swan hedges of some form and 100 long puts in Sep. So should be hedged against any crash by far. Typically, 1:1 on a Aug 2015, Feb 2018 event should get you break even all said. If they activate I should be in a profitable situation. Especially given the BSHE have not yet sold the additional short just yet.

Trump tweeted “Who’s the bigger enemy Jerome Powell or President Xi?” That’s so messed up on many levels and it creates a confusing trading environment. My trades are back to about -4% or so. Which is expected with that increase in fear/vol. However, I am sorta in a really sweet spot if we should stabilise anywhere between 2750 and 2900. I really don’t know what to think re what’s going to happen here but I hope it slows down else things get a bit annoying. If it goes down hard but without a crash like trigger, it’ll get rougher before it gets good. I’ll have to initiate rolls etc and it’ll take longer to reach any reasonable P/L. If we have a sharp crash, I should be profitable as I have about 195 STTs on with a LOAD of bearish STT, BSH hedges and ES hedges. If we move around between 2750-2850 over the course of several weeks, my P/L will be fantastic.

Today: Here’s what I was doing/thinking through the past few days:

On Thursday, I got on 25 bearish STT and sold some ES shorts at about 2922-2930 area. I wasn’t loving the move to 2937 during after-hours but it wouldn’t matter since I had tons of theta and I’d get my target. The previous weeks I had put on 100 or so bearish STT and converted some over to regular STT. I have this big hodge podge mid-hedge position over the past few weeks. All in December expiration. Overall I am still negative Vega by a far amount so any increases in Vega hurt. The move from sub 16 to 21 VIX did hurt the trades as predicted.

On Friday, Before the 10am Jackson Hole events, I was building up some hedges mostly to start the massaging process through September to get my P/L up to target before my trip. The plan was to get them more negative delta and just let the market move about. I sold 8 ES which gave me -400 deltas then (this was a bit weird) I had a bunch of bearish STT trying to fill then trump tweeted, we fell to 2919 quick and then rebounded and it for some reason filled, then we went straight down. The day before that, I got another set of Bearish STT when the vix acted weird on Thursday. So yeah, pre-trump I was about -300 delta all said. When the vol kicked in and the market fell, I ended up at about +700-+900 (Sans the ES hedges). This is the effect of vega on delta. I ended up day trading the ES to build more hedge. Every bounce I sold more, and then covered at specific points and resold over and over again to build it up to -14 ES shorts. I also added in BSHE and closed some units of STT.

I did sell some short puts right at 2835 EOD for a BSH factory and the market bounced to 2857 after close, those puts were then 80c cheaper. I almost closed them but didn’t. I don’t know what to expect Sunday/Monday but I am sure we’ll test 2825 and I’ll probably wait for confirmation of a bottom before closing off my shorts. If we break 2825 I’ll have to roll some STT and ride this thing longer than I hoped. I’ll be aiming to complete those 90 shorts to make 30 more free BSH on any bounce on Monday.

So I guess we find out what happens on Sunday. I am trying to analyse my portfolio and post it here but ONE data doesn’t work on weekends…..so I can’t do anything until Monday.

I think I am pretty solidly hedged and setup. I was profitable on Wed now I am down about 4%. It’ll take some time to get it back but time is on my side unless we have a Dec style slide down that doesn’t activate BSH, then it gets more painful as we roll and let time work.

Aug 23 – Less Talk more Rock

Less nuanced talk…

After reading my previous posts, I realised just how nuanced the language is and how it’d be only relevant to a few people which got me thinking that it’d be interesting to try to explain all of this in terms non-complex options traders could understand. I mostly write this blog for myself as a record of my thoughts, plans and actions as well as for entertainment and perspective differences for all the crew in the mastermind group.  

I guess I’ll start with where these ideas came from and what the style of trading is.


We’re a group of people that came together with vastly different backgrounds and strengths. It all sorta started when Emeric and I formed a Rhino trading Skype group back in 2015 that ended up attracting hundreds of people, including Ron Bertino (the founder of PMTT). That ran for a few years and Ron ended up taking over the admin portion of the Skype group (I can barely keep up with a travel/trading blog let alone managing and admin’ing a large Skype group) and eventually we all moved over to slack via the newly established PMTT group. Most of us have been working together for the last 4 years trying to explore and tackle the dart arts of “out of the money” complex options trading.  We are a vastly diversified experienced group that includes quants, some professors, some fund managers, some managing 10s of millions of their own money and others are straight up small retail traders and even others that barely trade (Delayvis) and are mostly in it for the intellectual challenges. The area that we are dabbling in was quite unexplored and very nuanced. We’ve had our ups and downs and certainly had our egos kept in check with a lot of explorative strategies that went sideways after much research. Why? I explain below.


Many of our models fail or ideas failed and the current modelling software available still hasn’t done a great job of predicting risk curves and market responses. We try to remove or mitigate most of those risks (Out of the money options risks) as well as modelling differences in an effort to capitalise on this alpha (the additional return). The alpha mainly comes from the premium in the markets (the need for insurance from big portfolios etc) as well as being one of very few groups likely exploring the areas we are exploring.  When we started in 2015/2016, we only had end of day data for options from 2008/2009 and on and really the only testable data was 2011+ with incremental hourly data.  This means that things we’d test really had very limited data sets and when you got into super complex positions though they’d test well and the modelling software would show reasonable profiles, they’d eventually get busted up in live trading. This constant evolution coupled with the fact there are very bright minds in the group has bolstered the testing, strategies and executions to where we are now. It’s eliminated a lot of types of trading and eliminated a lot of the unknowns that we experienced previously. Out of the money options trading really is a dark art like I mentioned at the beginning. We do have a lot more data now in tumultuous periods like (Feb 2018, Oct 2018, Dec 2018, May 2019 and Aug 2019).

So what are we really doing at the very basic level?

We’re insurance salesmen who also insure ourselves. That’s it.


Options can be thought of as insurance. A person can buy insurance at any level in the market (known as the strike). Someone might say I only wanna lose 2% max in their portfolio and they can purchase insurance 2% below the money. Another might be comfortable with a strike 10% below the market and they can purchase insurance 10% below the market and so on. If the market is at 2900, you can buy insurance at 2895, 2890, 2875 and so on.  The prices of insurance vary at each strike. Now as we all know, insurance prices in any industry has some fixed things in the pricing and a pricing related to risk (is it likely a hurricane is coming, pricing goes up!) this is the same as “fear” when related to market insurance.  As you can imagine, each price of each level of the market can vary in how it responds to an event in the market. The 10% below market has a “fear” portion as does the 2% strike and this amount can vary for each strike based on market pressures not only at the time you put it on but how it reacts to any event.  This is kinda known as skew.  It’s pretty much unpredictable in any real sense except when it gets stretched or abnormal you can expect a reversion to mean eventually.  Also, every insurance contract has an expiration date. The closer it gets to that, the less value an insurance contract has until the risk portion of the premium gets to zero at expiration. That’s our theta (or the average amount the contract will lose every day (we gain) with all other things remaining the same).  So we sell insurance for a premium but we also buy insurance in this complex setup of contracts that creates a risk profile graph. All of the positions we enter will generally have a positive theta (a time based deterioration of value that benefits us). For instance, my current portfolio has a theta of 11.5k a day. Which is on the high side but that’s because we just came out of a high volatility period where the premiums got jacked up and now we get the benefit of it having to come out before the contracts expiration date. I can expect to gain that over time and on average every day but if we have a super negative tweet from Trump about the trade deal, I can expect to take a hit on my account because my trade also has what’s called negative vega. Which is it responds negatively to volatility. Generally, a positive theta trade has negative vega. My negative vega is currently 100k!  If the volatility in my options go up 1 point, I can expect to take a temporary draw down of 100k. This is the price we pay as risk brokers. But! as you can imagine, as time goes forward, there’s less and less days in the contract and less and less vega can affect it. Vega acts on the time portion of the insurance contract. That’s not considering weighted vega effects re OTM but that’s for another day. Just speaking in generalities.


Options can be thought of as insurance. A person can buy insurance at any level in the market (known as the strike). Someone might say I only wanna lose 2% max in their portfolio and they can purchase insurance 2% below the money. Another might be comfortable with a strike 10% below the market and they can purchase insurance 10% below the market and so on.  The prices of insurance vary. Now as we all know, insurance prices in any industry has some fixed things in the pricing and a pricing related to risk (is it likely a hurricane is coming, pricing goes up!) this is the same as “fear” when related to market insurance.  As you can imagine, each price of each level of the market can vary in how it responds to an event in the market. The 10% below market has a “fear” portion as does the 2% strike and this amount can vary for each strike based on market pressures not only at the time you put it on but how it reacts to any event.  This is kinda known as skew.  It’s pretty much unpredictable in any real sense except when it gets stretched or abnormal you can expect a reversion to mean eventually.  Also, every insurance contract has an expiration date. The closer it gets to that, the less value an insurance contract has until the risk portion of the premium gets to zero at expiration. That’s our theta (or the average amount the contract will lose every day (we gain) with all other things remaining the same).  So we sell insurance for a premium but we also buy insurance in this complex setup of contracts that creates a risk profile graph. All of the positions we enter will generally have a positive theta (a time based deterioration of value that benefits us). For instance, my current portfolio has a theta of 11.5k a day. Which is on the high side but that’s because we just came out of a high volatility period where the premiums got jacked up and now we get the benefit of it having to come out before the contracts expiration date. I can expect to gain that over time and on average every day but if we have a super negative tweet from Trump about the trade deal, I can expect to take a hit on my account because my trade also has what’s called negative vega. Which is it responds negatively to volatility. Generally, a positive theta trade has negative vega. My negative vega is currently 100k!  If the volatility in my options go up 1 point, I can expect to take a temporary draw down of 100k. This is the price we pay as risk brokers. But! as you can imagine, as time goes forward, there’s less and less days in the contract and less and less vega can affect it. Vega acts on the time portion of the insurance contract. 


Let’s give an example, lets say I sold insurance for hurricanes pre hurricane season for 5k and it expires in 4 months.  I take on all the risk of hurricanes and I get 5k to do so. If I wanted to offload my insurance contract to a re-insurance group. What would I sell it for?  Well if I had 3 months left, I’d probably say hey I’ll sell it for 4k (pocketing 1k) because there’s 1 month less risk. What if there was 2 weeks left? Well, shit, I took most of the risk and there’s like only 2 weeks left, I’d sell it for say 500 pocketing the 4500. That’s theta in a nut shell. BUT we gotta figure out what Vega is! Let’s say there’s 2 weeks left but news just came out, there’s a hurricane barreling down towards us. its a 15% that it’ll hit, what do I sell it for there? Well there’s 2 weeks, we got a 15% chance, so it’s definitely higher than the 500. That’s vega.  What if it was 50/50? Vega would act on the 2 weeks even more. But as time ticks, every day the vega effect is less and less.  What if we had 3 months left and we got a report that it’ll be a very active hurricane season?  Well, that would probably put me in a loss position for the insurance I sold 1 month earlier.. but only temporarily. Vega and Theta are interlinked. 


It’s kinda a fun game.  For instance, lemme go through what just happened to my portfolio in August..


I was pretty much entering in low vol which really wasn’t what I wanted to do but I wanted to keep the theta coming in, and I wasn’t yet convinced about exploitative STT trade entries. I understood any transition to higher volatility would bring on draw downs (though usually temporary).  I sold insurance when no hurricane was on the horizon, just trying to get the basic premium present in a non fear market. However, I was only like 40% invested. I saved the other 60% for higher vol entries (opportunistic).  Then came the first move from 3020 down to the mid 2900s. I slammed on some since it was the biggest down move we had since like May. Then I fist pumped slammed even more on when we touched 2920/2930 area (the forecast was suggesting hurricanes were kinda possible). VIX was still relatively low, but off the lowest of the lows. That means that the insurance premiums I got were meh but OK.  Probably VIX (vol index) 16.  Then came the down move of the first weeks in Aug. Skew/VIX acted a bit weird (An expectation of that a hurricane was coming). The insurance I sold went up a lot in value (a draw down) but my black swan insurance barely activated (the hurricane didn’t arrive to activate the swan insurance but the fear was maxed out) thus I had a temporary draw down of about 7-8%. Now, usually on moves like this, the BS insurance activates a bit more. My expectation is that any further large down move it’d kick in and we’d start going towards even…but I am concerned (as mentioned in my last post) about how the volatility regime has changed and wondered if there is a path where the STT can continue down in PL and BS doesn’t activate.  In either case, it’d be fine just a bit stressful. If it continued down and BS didn’t activate, I’d roll the structures, I’d probably have a max draw down of about 10%. The new STT would be extremely juicy and extremely resilient being very very very far below the market which is a great thing but we wouldn’t b feeling so great here being down 10% on the roll. As vol subsided and time moved on, I’d eventually get profit out of it and of course correct the draw down. No-one likes a draw down and it feels like crap so it’s not like its ideal. The more ideal situation is that of the older vol regimen where we’d have spikes down and large VIX reactions that put as at break even and we just roll and work the market. If the market continued down even after the roll, we’d have not that much trouble even towards 25% from peak (very rare), I’d likely have to roll again and surely at this point the BS would have activated at some point.  It’d take a few months but we’d recover but mark-to-market would have some swings. 


So anyways, OK, not the nicest feeling but I was up about 30% for the year so it’s not terrible and this is the fun part since we can make most of our profits from rebounds on these types of falls as the majority of our premium and potential is closer to the insurance tent in the risk profile. Then I can convert it into a hedge and wait for more vol spikes


So now at this point, I realise that any pause or stoppage in the fear will bring a quick rebound in P/L and every week of market indecision (and no further crash) is closer and closer to expiration and less and the less Vega can affect (and the more theta converts to my profit). But I also realise that I have to start looking at heavy rolling and risk management because the vega and negative delta is getting steep. So on the first rebound, I add bearish STT (a mid way hedge) and I roll my closest STT as well as short ES.  All of this is a cost but on some down moves, I start selling PCS to convert part of the bearish STT. All of this is a cost…but its largely offset by the fact that we’re in a juicy area of the original trade if we get some vol relief.
One week later I was down about 4% from a draw down in the fear spikes of 7-8% and then just days after that I was profitable on the Wednesday( fed meeting). IE my entire portfolio trade was up about 65k from Aug 1 which is great given the events that transpired. I’ve got a load of hedges still on that compliment the risk profile. The risk profile I posted includes all hedges (Except the Black swan hedge).  Now yesterday was a slightly different story. We had a change in skew (the volatility portions of each strike changed) and I had a draw down to about -7k on the trade but does it worry me? NOT AT ALL. It’s a reaction to the fact that we have an important event on Friday (one being Powell speaking at 10am) and the fact that we didn’t have continuation in the up move. Skew and vol reactions w/ out market moves are generally temporary in relation to the specific structures I trade.  So an area where I sold the insurance either went up or the area I bought went down. Pretty much it. But its all temporary.  If we move up today, we get weekend theta and moving into next week is 4-5 more days of theta and less ability for vega and skew to affect. I predict I am back at the highs pending no big move by end of day today, I’ll post my graph either way to see.


Either way, now its a fun time of having the clock tick and getting further and further into our trade letting it mature. By sep 9 ish, my trade will have a matured risk profile that doesn’t mind more larger falls and starts to become more and more of a hedge profile as I massage out risk and take profits. My aim is to get it to about 250k before I go away. That’s sick. Yes, these trades mature every day and become not only more and more resilient but they also get massaged into hedges for newer trades that have a lot more time left.


Here’s the thing I realised, I tested just entering these trades on massive fear spikes (IE selling when the hurricane is barreling down). This happens a few times a year (probably 4-6x with Trump) and it eliminates most of the risk and has the same return as if you entered monthly (always on). You can do 15%-20% on capital and if you get a few a year, that’s 30%-40% with much less risk, draw down, stress, management and time in market. 

So yeah, It’s a risk game where we syphon out the premiums on insurance.


The most common setup we use is known as a broken wing butterfly. Which is defined +1/-2/+1

Current portfolio Risk Graph

This is my current positioning of my entire SPX STT options portfolio sans the BSH of course. This is Dec/Jan mixed together. It’s profitable now since inception and I’ll be working this trade through Sept and closing before my 40th birthday/20th Anniversary trip to Necker (ridiculous I know) but YOLO?

Will be managing it diligently and removing risk and locking in profit. When I get back it’ll just be opportunistic STTs from there on in.

Aug 21 Trade update

Man, I really wish I would post more. I get so damn behind in traveling and this just gets totally forgotten about. I am really really sick of traveling and I think I’ll probably stop most of the longer trips as the net benefits and excitement are now becoming benign. I haven’t really been home since April. It’s too much.

Here’s my gut take on the version of STT+BSH trade I do, which is tailored in methodology to my preference (higher UEL etc). Since Feb 4, 2018, the volatility regime has changed significantly. There was a loss of several large market components ie the collapse of several inverse volatility ETFs, which were a component of the market structure. They arguably amplified (and dampened) certain reactions in the pricing of options and, more importantly, out of the money (OTM) options pricing. It had a large imposing effect on how volatility works and how option pricing reacted to market moves.  Volatility indexes such as the VIX is measured by the fear reaction in options pricing. Options have varying strikes, and the reaction happens differently depending on just how far out the option strike is and the positioning of the strike in general. Picture each strike price as a bar where some of that bar is coloured grey, now pretend that grey price is the fear portion of price. Each strike’s grey bar may react with different magnitude during a market move. This is known as skew.  A strike at the money may have a different % reaction in fear than one 5% out, and so on. Skew is not predictable in any actionable sense. 

How this relates to OTM trades and corresponding BSHs?  We purchase way out of the money insurance by way of a black swan hedge, and when we have a black swan or major down move, this has been our protection. However, since the volatility regime change, these OTM options have not activated as much as they have in the past. The % moves in SPX are not corresponding to the increase in pricing in way OTM options and Vix is not spiking the same relative to the % move in SPX. Another theory I have is that previous to 2018, there was no real open interest in these way OTM strikes, it is in fact our presence in the market that’s perhaps causing an additional opposing effect on the activation of these insurance structures.  Having open interest as large as the PMTT group would or could cause a levelling effect to volatility responses just as the inverse VIX indexes provided an over-reaction. Who knows but I think I might adjust some things.

Since Feb 2018, we’ve had several large market declines since then including the Oct and Dec declines which saw several moves within the time period where VIX should have spiked to >30, but it only spiked to 20. This was confirmed again in May of 2019 and this month (Aug 2019). The market has changed. The over reactions in vol are now more efficient and muted. This is probably overall neutral. This means that the income trade portions don’t lose as much, but also the black swan counter part does not activate as much. The problem is just how much MDD you’re comfortable with. With the OTM income trades that are initiated in very low vol (12-14) and the market transitions to higher vol. Our income trades are so negative vega (volatility) that we will have a roughly 7%-10% draw down on our income structures. Basically like all VEGA/Skew change losses. Typically bear moves have a spike, and BSHs activate and we can roll both the BSH and the income trades at minimal cost. In the new regime, it appears it’s not guaranteed. This has made me change my methodology going forward as my theory is a lower overall draw down provides for much better compounding effects and overall higher return. As well, going from low vol to higher vol can have margin expansion and prevent having capital to enter the juicier opportunities.  In the most recent event, you could get close to profit target on an STT in 6 days whereas it usually takes 75 days. That’s 69 days less risk!

I’ll probably be only entering STT+BSH income trades on a large fear spike found when the market is in a forced liquidation period and when the VIX is >21.  These happen a 2-3 times a year on average, but the tests indicate that it’ll do 15- 20% on capital per trade with incredibly less risk, much less draw down potential, and minimal time in the market. Our income trade exposure goes from 365 days in market to 65-75 days. 

In the August event that just happened, I am now slightly profitable BUT I did have some temporary draw downs that reached 7% due to vol and the BSH did not activate. I saw things in the models during that event that I did not like given I initiated these in lower vol environments and the transition hurt. The issue was specifically, the night when we had touched 2790 after hours. If it had opened at 2790 and slowly went down, the draw downs (IF the BSH did not activate) would have been larger though potentially temporary as we’d roll and eventually likely recover. But we’d miss the best opportunities, and it causes fatigue as it requires a lot of work to manage. Entering in a high vol regime negates tons of % of that risk. 

Since Aug 1 to now, I am up a few % and that’s pretty damn cool. My structures a bit more matured and resilient as time passed by. I will massage these and my theta per day is currently 11k but I’ve adjusted from positive delta to more negative to lock in small profits and to minimise risks. I’ll massage this into Sep and only enter new ones in big fear spikes. I am expecting to end September at 35% for the year to date on capital.

I’ll be doing BSH factories in income and hedge format, opportunistic STT and LTI stuff as a base (12% return per year with 6.5% max draw down). Done and done.

Jun 12 – Update

Long ass 6 days of poker. I was able to finish 150th out of 8,809 in the WSOP (World Series of Poker) Millionaire maker. Pretty wild, 5 of 12 of us in the coaching group finished in the top 150 the other 4 were pro (coaches). Pretty wild result and testament to the studying. I am utterly exhausted. It’s been 12-14 hour days and there’s no chance I could play any more tournaments right now. I busted the 1k and marathon pretty quickly and entered a 1k in the Venetian which had a fantastic structure and though there was re-entry I think I made a few mistakes that was telling me I was fatigued.

Hand 1:

I’m CO, I open 56hh to 1600

BB raises 4,100 so I call given size

Flop AA7h

He bets 1/4th pot. I call

Turn 8h

He checks. I think to myself that he’s most likely missed and unlikely to have an ace given the sizings of his flop bet and he insta checks turn so I pot it (stupid) to fold out everything else in case I miss the million outs on the river. He jams…Ugh oh. Now I am forced to call w/ those million outs… I miss (no 9 or 4 or heart). I also thought I had much higher equity in the pot but I didn’t and I should have checked back and folded a missed river. Too high variance in a weaker tournament.

I should have checked behind and c/f on a miss. I forced myself into an all-in pot with a pot sized bet.

Hand 2: AA MP

I raise and BB calls

Flop is 873 rainbow

Check, I bet pot, he min click raises back to me. I jam for the remaining 25bb. My initial gut was that I was beat and I could make an exploitative fold but then thought that was nuts on a 783 board with AA. I’d mandatory call the min-raise and probably a small bet on the turn and fold rivers if he triple barrels. I wouldn’t normally jam here and it was a rec player so a min raise back is probably pretty strong. I call one all day long here against anyone else but def not jamming. Instead, I think that I can get max value out of all pockets lower than mine and any pair of 8s and jam. I am obv wrong and I end up with 30% equity against 78 two pair and missed. Way to borderline a spot to get it in. I doubt rec player min-clicks back like that with anything worse. Maybe a small pair but I block A8. He has all sets and two pairs. Meh.

Not a whole lot going on with the trades. The run-up makes things boring (though tonight it seems like we’ve had a bit of a market fall). Might make for some STT opportunities tomorrow.

I am stuck right at about 24% and I don’t have a whole lot of opportunity for big increases until I can get on more trades.

Jun 6 Trade and Travels update

My account is at 24% as of yesterday. A big increase and I removed all of my August trades throughout this week. I have September expiration which I’ll remove next week grossly above profit target but neutralized. October is also just above profit target so I may have to remove that next week as well. Normally, they’d be removed right away but the downside room is incredible and it’s got a profit tent built and my theta ratio to margin is still good. I am going to remove soon but I’ll give it another 7 days. Not much exposure now and locked in loads of profit. I have significant ability to take advantage of more vol if it does happen. Else, things can slow down again like it did in April. Profit comes in bunches during higher vol times. The majority of my potential profit came in the last 4-7 days so I doubt I’ll have the same trajectory through the remainder of this month. I’ll be happy to end around 25-26% for H1 2019. We had some vol but it came out on this gigantic move up from 2725 and that is the majority of my P/L increase. That 25% is on actual capital I have in total in my account. That’s pretty damn good. The thing that I am noticing is that since I put on STTs in every expiration on higher vol days, is that I end up with 4-5 expirations that the older ones act as medium hedges to the newer ones. In all of the vol we’ve had in the last 6 weeks, I’ve just been going up and up and up in P/L. If we had significant moves, they’d be fine because of the BSHs. All in all, I am loving how multiple expiration and maturity of STTs interact with each other.

I’ve been in a whirlwind of traveling since May 29th. I started off in Montreal which got a bit messy. I had some friends visit me and we brought our nanny so for a few nights things got a bit out of control especially given the fact one of our favourite bands was in town 🙂 Suffice to say it was a bit indulgent. A few days after that, I got to play a few poker tournaments there which went well in terms of applying the recent coaching etc but just didn’t have the luck deeper in. Next up is WSOP Millionaire maker tomorrow.

After MTL, I headed to Ottawa to do a whole slew of meetings for my software licensing business. Those ran long but we hashed out our future pathways. It was very productive and everyone got on the same page after hours of board room meetings. I have the best partners you can ask for and given we’ve been in business since 2004, we’ve never in all that time not ended up on the same page after a face to face nor have we ever had emotional disputes. I guess we’re all lucky, as I have heard other companies can have nightmare situations. I am fortunate to have good partners.

I ended up quite tired after the week of partying and heavy meetings. We stayed at this awesome airbnb house on the Gatineau river where I tried to recoup for the next leg.

After Ottawa, we met with a private educator in Toronto to see if we get along. We’re using next year as a year to get our kids top notch and ready for the real world and ready to apply for competitive private schools. They’re currently in Montessori and its just not cutting it. My daughter doesn’t thrive in a Montessori environment. Long story short. Lemons making lemonade, use the year to travel w/ a private educator and use the year as an opportunity. Soon come, the kids will be older and it won’t be possible to travel.

Then my wife and I departed Toronto sans kids while the kids left w/ her sister to Cayman. We upgraded our flights and flew to Denver and spent two days there. Awesome town but def some sketchy areas. We had to call the police because a guy was dying in the middle of the road (this would be the second death we seen on this trip face to face……) Horrible to see. We had some pre-wedding parties to attend and ended up having a pretty good time. We rented a car and drove 5 hours to Moab for a glamping wedding. Was awesome but again my liver is suffering a bit. We ended up sky diving which was the highlight of the trip.

After that we drove to Las Vegas for a night and unfortunately saw ANOTHER dead person on the side of the road….we checked the news after and they’re still investigating it as a potential homicide. Horrible thing to see, still see it in my head. Was very close to where we were (right on side) saw it clear as day. Death is apparently following us….

We spent a night in LV and had an awesome dinner and got an epic suite. It took about 6 hours to get there from Moab. We left at 8 and arrived around 2pm. We were just stopping through on our way to LA for our final leg together (which ends today).

In LA, the first night we went to the Laugh Factory and were so luck to have stumbled upon one of those surprise unlisted guests (George Wallace) who free styled and actually crushed it. Was one of the best experiences I’ve had re comedy. Super lucky. We were right up front too. The following night we decided to go and spend time in the room where comedy goes to die (The Belly Room) and again had an awesome time. We’re staying near Santa Monica Blvd in the gay district and it’s coming up on the 50th anniversary parade so it’s high action. I get loads of compliments while walking with my wife. Love it lol. The wife leaves tomorrow early for Cayman and I stay for 4 days to play a few WSOP events (I’ll drive to Vegas from LA tomorrow). I miss the kids way to much though now as it’s been 7 days so I’ll be looking to book an earlier flight on any bust out. But I’ll be back with the family Jul 1 for the main event.

May 22 (Trade Plan)

Busted the tournament in Day 2 (200th out of 529). Ran into another damn 3 outer that crushed my stack and that was the start of the end. Exiting main hurts bad every time. I had managed to get my stack up 50% for the day. Felt good, near average. I had AQspades SB vs BTN. He raised PF in the BTN, I three bet in the SB and he called mandatory with K7s. the flop had a K on it with two spades. Check/Bet turn is an Ace, he checks I shove..he calls and hits a 7 on the river. If I had won that I’d have been above average and ready to compete for the end. I’m always super emotional after a tournament (When I bust to these ridiculous hands) after having put in hours and hours of concentration. The good side is that my game has never been better, I’ve been playing really well, I have confidence in the game I am playing and I guess eventually it’ll work out. I guess I got two day 2’s out of the trip. I busted the 1k with a BS hand as well as I previously wrote. That was 240 or so out of 1540…..One of these have to damn well connect. It’s never about the money, its all about the competition 🙂

When you’re early in the tournament you’re usually not at risk re your entire stack. It’s the day 2/3 when you need a few 80-90% EV hands to not run bad on you! I get it in with the best of it and just get run out of. I am running bad. I haven’t been able to get it in positive more than 1 time in a row deep in a tournament. Unfortunately, you need 2-3 good hands in a row to chip up and if I don’t get these I can’t win. I mean AA vs AK in 2018 vs Ryan Reiss, I had KQ on KQ8 in the barcelona to exit to 88. Or A8s vs A2o in the Barcelona main only for him to hit the 2. Blah. Any one of those 5-10% go the other way, I’d be deep running.

My trading account is hitting about 19% today which is the only positive thing today 🙂 I removed most of my Aug trades today and have dry powder. I was able to get 60 short puts sold for my factory but I wasn’t able to get on more STTs today which is annoying, well maybe not, there’s 10 min left in the day, maybe my orders will fill.

Off to Ottawa tomorrow for a comedian show and some meetings. Then I am making my way to Toronto and over to Moab for a wedding. The next tournaments will be Vegas WSOP. Let’s see how those go.

May 21 2019 (STT+BSH Trade Plan)

I just hit 18.5% for the year which puts me right on target for my expectations. I am hoping to hit 20% for H1 2019 (roughly 3.4% a month). I can compound monthly (and will) and after 3 years (36 months of compounding @ 3.5%) which should double money every 21 months..and 7x every 5 years 🙂 Let’s see how it goes with diligence and trade plan following. So far so good. Within the next 7 days I’ll close off Aug and probably Sep and I may start removing Oct as I’ve already got some good profit in there. Then I’ll just wait for another vol event and rinse repeat.

I am in MTL right now for a few tournaments, I got 240/1535 on the first one which was a speedy tournament with very quick blind levels. Busted TT vs AJ right relatively close to the bubble. I didn’t cash but was damn close. By far the best I’ve ever played, it’s not even close it’s a different level then even the last round of play and all due to the coaching arrangement I have setup w/ Ryan Laplante and CLC coaching. I’ve learned a ton and confidence is through the roof. Getting next level in the game and ready to get cracking and finally get a final table within the next year or two. If I can get some good runs near the end of a tournament that would set me up. I got deep yet again here (240 out of 1535!) but just had a cold few hours and the blinds were way to quick. The main event is 3x less speed and the WSOP events are like 10x slower. So I should have some good opportunities with the WSOP main events, MTL main and marathons.