All the May trades look fine. They could use a nice pullback eventually.
Below are the april trades, I’ve got them in a fairly neutral position with a bit of downside risk which I’ll immediately correct on any sizeable move. Theta is high for all three relatively and if we close around Thurs-Fri this week we could have some recovery. All in all, I am comfortable with the positions. Note that I had to start new trades for all three so the P/L is of about 1.5 weeks ago and not since the start o the trades.
I closed a bunch of April RUT BB’s on Thursday that I had converted to M3s a while back (thankfully!). Those were either break-even or slightly profitable. I used the pull back on Thursday to get out when they were doing OK.
April Trade 1 (D)
Been traveling and haven’t had time to update the blog. When I travel, I am in constant catch-up mode with both my business and monitoring trades. It leaves little time for this. I’ve been in Barcelona for 6 days and we get ready to board an 11 day cruise tomorrow to hit Tangiers and the Canary Islands.
The April trades are making some headway despite more challenges in the market. It’s just not cooperating. Through out the week I adjusted the trades more and more conservatively without market opinion so that I had the best chance to recover while maintaining solid theta and lower risk deltas. We enter next week with a slight delta negative thus a downside bias. We’re not fully recovered YTD but I am happy with the result. The market moves have been historic and extremely difficult to trade with market neutral strategies. Nearly all the market neutral traders I know (even the “gurus”) have posted losses in the March and April expiries. I mean, what the hell, we started the year with a 22-24% decline in the RUT within a few weeks only to have an absolute epic up move that is a record in its ferocity again in a few weeks. It’s been unrelenting in each direction. It pretty much moved from 1200 to 940 in a matter of days and then moved 18% from 940 to 1105. This all somewhat happened during the April and March trades which were the only ones active this year. Our result? Somewhat negative for the year but if we have any normal decent range bound market, I am talking about like what we’d have 95% of the time, then I’ll start to crush. Handling an absolute nightmare and being down only a little bit is exciting and a testament to the rhino resiliency.
I’ve got great trades setup in May for both the SPX and RUT as well as June for the RUT. Any semblance of a normalized market should get us well profitable in the next month. The market is like a bull in a pen, after it moves a bunch, it tires. We should see less pronounced moves. I’ve got a lot of downside hedges active (very cheaply) and should be covered on most large down moves. I’ve also got some upside hedges using mechanical stock picking to help ease any more upside moves.
Making serious headway with the P/L of the April trades which is nice. I won’t stay in them past Mar 28 and I am eager to close them at break-even and happily call the month a wash. The May trades will do very well if we can have any sort of pullback in the next 3-4 weeks.
So happy to be done with this looming Fed meeting. They are not raising rates today (as expected—>they always telegraph this!) and they’ve lowered the number of raises in 2016 to two from four. The RUT is basically unchanged after the meeting. I neutralized the trades and added some more upside hedges on Monday which I could have gotten a better price for on Tuesday. I also converted my bearish butterflies to M3s as I just had too much upside risk across the portfolio.
I am traveling to London, Barcelona, Canary Islands and Morocco in the next 3 weeks so I can finally add more to the travel section of this blog.
We have 37 DTE and the trade is sitting way outside the main tent. I’ve built up a tent on the call side that helps but the risk vs rewards here are starting to get unattractive. I’d have a much much better T+0 in a May trade. That said, I think as the market gyrates through the next week, I’ll adjust by removing large portions of the trade and getting the risk profile more attractive to conclude the month. It may mean we won’t recover everything in April trade but we will make up for it in a solid May trade (with the capital we would have had in April).
The worst of three is posted below. I have a strong theta, but any move up will hurt and all my profit zone is 6% lower in the tent which is not likely with the fed meeting coming up (things will likely range until then). So I just can’t see much odds for a recovery in this trade vs just unwinding it to a more attractive smaller position and move those funds into a May trade.
The RUT has resumed its downside move and is @ around 1061. This is positive for our trades, it gives us a ton of upside breathing room while maintaining good theta and even a large correction would still be profitable. Lots of room on each side, though we are in the sea of death on one of the accounts. The sea of death is that little dip area between my original Rhinos and the call hedges. In this area the T+0 line will start to sag as time goes on. Ideally we have another 2-3% down move to get us in the tent. I am going to look at how I can correct this a bit. On my bigger account, the goal is to break even and we’ll do this if RUT stays in a decent range and we’ll profit significantly if it falls another 3%. On my other two accounts I should be able to profit decently unless RUT breaks 1105 and continues upwards. All in all, we’re now likely to have a modest month overall with no loss despite the 16% up move after we put the trades on around 950-960. I guess I shouldn’t jinks myself but I am happy if we get out of this at $0. That was a rough start to the year. A 20% correction followed by a 16% up move while in both expirations. Challenging and probably what I’d call a “Trader maker” if you can survive it.
Finally, we got some semblance of a pull-back (-2.5%). It’s what I needed but still I could use another 1-1.5% 🙂
I adjusted in two lots, one at the beginning of the day and one towards the end. When we were at around 1075-1077, I felt it responsible to start adding some call BWBs and some calendars at the beginning of the day. I then added in some more ATM rhino’s to add theta to the trade. I then removed some of my very most bottom Rhinos towards end of day. I obviously wish I adjusted everything towards the end of the day but with the way RUT was moving, I didn’t want to take the risk. The down move allowed us to recover a bit and I added more theta into the trades. Tomorrow, I’ll continue to get the trade more neutral and in a good place for any upcoming move in any direction. I am probably about half way to break-even now on the trade from its lowest point. We’ve got 2-3 weeks and a lot of theta. Crossing fingers. Hopefully we can end the month break-even on a 16% up move.
Looking at May trades tomorrow as well.