We’re back in Arona, Italy. Where we will spend most of the remaining parts of the road trip. After that we’ll be ending the trip with a Norwegian Fjord cruise and then we’re back in the Cayman Islands.
We’ve put on about 8k km with our Tesla driving all across Europe and we’ve paid zero for gas. It’s a pretty epic road trip especially in an electric car. It hasn’t gotten much attention despite Tesla tweeting about the smallest road trips (I think one was someone going from UK to Amsterdam). Really? That’s like one leg of 30 on my trip. I thought it’d have been interesting taking an electric car from Malta all the way up to Sweden.
Here are some pictures of Arona.
The protector Alpha is up 3% for the year vs SPY ~1.3%. We got hurt a bit on the last whipsaw. I had reluctantly rolled my 211 short puts to 213.5 when the market was at around 213 for a loss having missed the big upswing and thus losing on intrinsic value. The market moved very quickly and I just couldn’t stay up on it (overnight gaps etc). THEN the market decided to suddenly reverse falling to 206 leaving our 213s with no extrinsic value. Talk about whipsaw. I then rolled to 211 to get a bit of extrinsic now it’s on its way up again. I do believe this is a bounce into fed Wednesday and that we may stall or reverse hard but I’ll be sure to quickly roll if we come near 210.5. Not a great environment for rolling the shorts. That and the big loss NEM had (was actually -15%) has put our PA account at just about 3% for the year. Leveraged 7x = 21% or just about 3.5% a month for the year. This is better than expected given the market this year. This is a bullish strategy and has its place in our portfolio. It does well when the market does well yet is completely hedged on the downside. It’s not the big returns you’ll see in the market neutral options strategies but it’ll help in big bullish years. Maybe those years are behind us in the next 5 year time span? I don’t know.
My balance moved up 5% yesterday after the fall in volatility. Again, it shows how the mids and stated option pricing moves around so much in high volatility environments. It’s like the volatility was just sucked out of my accounts yesterday. It wasn’t delta losses or actual losses, it’s just that when the volatility floods out the MID pricing gets tighter and more accurate especially in the SPX. This can affect your stated balance (AND margin calculations quite a bit). Any new traders utilizing portfolio margin should be aware of this. You can go to bed with PM stating 100k liquid only to wake up having it show -100k and be forced into liquidations. It’s happened to me in my early days running MICs. You end up buying back risk at a premium during the first 15 min of market open. Not pleasant. There are tricks to reduce margin during these 15 min but that’s a subject of another post.
Some early results:
Aug Bearish butterfly: Up about 15%
Aug M3: Up about 8%
Rock Trades: up about 4%
So we got that relief rally and the buy zone at 1210 on the RUT seemed to work out. On the way up I added some hedges and balanced my delta. I did this while driving through the Swiss alps enroute to Arona, Italy. I sometimes shake my head at my lifestyle. So bizarre what technology allows in terms of personal freedom.
I gotta admit though, the last few days were a bit hectic. On Monday, pretty much every trade (I have 9 on) hit delta or Greek trend limits and needed adjusting and man, it took all of my concentration. Every indicator I use suggested a near term bounce and that meant my adjustments were reluctantly and more conservatively made. I spent about 3-4 hours on Monday managing my trades and setting them up for a potential incoming bounce all the while managing my risks. Because of the volatility, the option pricing (mids) were all over the place. My balance was fluctuating the size of an expensive car. I’m used to it by now. But it can defiently scare a new trader into closing out trades prematurely.
By EOD today my account is at All time highs. I’m happy about that. All the trades are sitting perfectly and soon I’ll start closing off August ones at profit targets. I even think a few September ones may soon be reaching targets. My September M3 is up about 5 percent already. Every trade is sitting nice (maybe not so much the protector) but all the options trades are. I’m feeling like I am about 60 % where I want to be re this trading thing that I am doing. I am now actively working on a lot more trade due diligence ( trade plans, post trade back test and analysis –> where’d I deviate from plan? Why? How did it work out? Etc etc.) and alongside of that I am continuing to learn more advanced options strategies that are far more risk averse.
So I write this almost two months into our road trip, and having some regret not actively updating as much as planned. Every day felt like a scurry with never ending catch up with obligations in my business, trading, new courses I’m taking (m3, bearish butterfly, m21 and APM2) seeing each place we visit and making sure to keep up my fatherly duties. There simply wasn’t much time for updating. I will make up for it this week. I’ve been all around Europe now on this road trip and I’ve come back to where I started. Why? Because it’s our favorite place and we kept talking about it the entire trip, so why not just come back? We are in Arona, Italy near como. We pulled in the driveway to be greeted by the b&b owners the two dogs, a goose that thinks he is a dog and a cat. All tagging along with each other. And it feels like home.
The spy opened on a gap up only to fill it 15 min later. The RUT opened up down and fell hard to 1205 (below the important 1210 level). It’s much below its Lower BB and probably a very good r/r zone for a buy. By 10:15 It bounced back to its support at 1210. This action and volatility is giving me some sticker shock (account balance fluctuations) .
Everything is over sold and we should get a relief bounce where I’ll reposition a few things. I don’t want to do it right yet unless the rut breaks 1200.
The last 5 trading days have been a bit tough on our protector alpha portfolio and MIC positions as we experienced whipsaw in the big up move followed by a very aggressive down move. The PA lost significant value when both rolling out shorts didn’t work in our favor and also having one of the equities fall 10 percent (NEM). The MIC for SPX suffered when we closed 9 units of our credit spreads and added 3 2040/2020 to balance only to have the 2040/2020 take a big loss on Friday and again yesterday (they are closed). Trade is still up as is the Rut mic but definetly felt the hurt.
I’ve got a few M3 and Bearish Butterfly’s on which are all profitable. My BB was up about 20 percent and is now at around 15 percent. Rules call for closing the trade at 30 percent.
Through the trades I figured Rut should find support at 1210 area and it appears it did. I have no idea how this will go but the China situation could cause pain after what I expect will be a brief oversold bounce. I am so glad I realized a few weeks ago that we were not getting paid for our risk and kept the mic allocation below 50 percent.
We had another RUT down day yesterday so I entered some more Aug MIC since the prices were good enough. It’s pretty damn close, and I don’t usually enter the trade this close (32 DTE) but the prices were decent and I am going to keep my profit targets on that part of the trade a bit lower. The futures are down again and I might enter a final part today bringing our allocation to 50% for the month.
I closed about 75% of the SPX MIC put credit spreads when it touched 213. It appears it was great timing as the market just fell a bunch since then. Yesterday I sold more to get the delta’s in line and to replace the ones I bought back. Trade is looking great.
The RUT MIC is doing fine as well. I think it’s up 3-4%.
All in all, we are just holding our ground. The protector alpha shorts got a bit over-run and I had to adjust a few days ago – Only to have the market reverse 🙂
My bearish butterfly for Aug is up about 20% (the return is calculated a bit differently than the MIC returns).
Aug Kevlar trade is up nicely
Aug M3 trade is up 5-10%
All in all, sitting at all time highs and getting ready to enter the next trades.
Been a while. We were in Copenhagen for 7 days followed by Stockholm for 8. We’re now making our way to Hamburg with a 2 day stop in Roskilde, Denmark. We decided against driving through Norway and opted for a Norwegian Fjord cruise on Holland America to end this whole thing in August. We booked which what we were told was the last room and it was an obstructed ocean view and somehow got lucky with an upgrade opportunity to the Neptune suite (booking cancellation?). Before that though, we are going to go back to where we started which was the Lake Como/Arona. It’s our favourite region in Europe. We’ll stay there for 9 days and then head up and stay in Strasbourg and then Bruge before going to UK to board our cruise.
The rest of the itinerary looks like this:
Lake Como/Arona, Italy
All of Norway by cruise
Cayman Islands (Home)
I don’t think there is any chance for much more than the 30% allocation I have on for the MIC entry this month. The VIX fell from 22 back down to the 12s which is an insane volatility drop. What does that mean? Well, we are going to get paid shit all for our risk and the market is likely going to keep going up and up on a v-shaped rally fuelled by shorts covering and side lined money afraid of missing the boat. This is a difficult environment to deal with especially with an extremely low variance entry and, well, the market risks are still present aren’t they? Greece and China issues both didn’t just disappear, they could rear their ugly heads again and with the VIX at 12.98, we’re not getting paid for those risks. I sit out on the MICs until we get a big down day but unfortunately that has to happen before Friday, which doesn’t look good.
I might look at putting on a conservative M3 trade instead..it’s more conservative than the MIC.
Not much going on, I exited on Friday and I have about 30% allocation on for August and need a bit of a down day to enter the rest. I’ve got not a whole lot of time to enter being already 38 DTE, but the conditions aren’t right to enter on such a big up move. If we can’t enter by the end of this week, we may have to go lighter for August.