Not going to lie, yesterday was uber demotivating even with the experience I have in managing these trades. Both my Aug and Sep Rhino trades entered fairly negative territory with RUT @ 1210 which represents a 120 (11%) point move from just days before at the Brexit bottom. It’s just frustrating since both of those trades were up 4-5% and our balance was finally
after a very difficult year only to have the yearly profits dwindle down to mediocre levels in just days due to a fairly effed up move. Why was I demotivated? Well, it feels like every trade cycle (45 days) this year has had a challenging 9%+ up move. Those 9%+ up moves are the most difficult type of move to manage in this trade. Since when does the RUT have an up move of 9% or more every cycle? I think RUT is up what 28% from its Feb lows? No matter how you slice it, it’s difficult to profit in a 28% up move in just 5 months and I am getting sick and tired of mediocre results and the “of course its up 11% in a week and half” frustrations. I’d like to have normal cycles with either a down move, a neutral move or an up move of 7% or less 🙂
Anyways, today has given us some respite and on close yesterday I hedged more with 1230 call calendars and some 1180/1230/1260 call bwbs. Today I added more and I grabbed some long IWM @ 119.5 to help on any up move. I believe that we’ll have a small pull back but we’ll be off to the moon eventually. Things look pretty damn bullish but we’re in need of a healthy pull back.
On two of my accounts I got off my 1960/2040/2100 SPX Rhinos but I never got filled on my main account. I lost most of the profits on that one.
Most of my Rhinos are 1060/1110/1150 and 1050/1100/1140s with call calendars and call BWBs at 1230.
One other annoying thing, I had some short 1190 and 1210 calls for July that I left on to expire when RUT was at 1100. Lol, I realized 5 days ago that I still had them on and now they’re worth a lot more lol. Expiry was Jul 14 and there was no reason @ Jul 7 to think we’d get that high. My bad. I always close these but felt like there was little risk. I guess RUT is up like 10% in a few days…
Struggling here with the massive up move in a short period of time. We’re at ATH on the SPX and RUT is tagging 1190 (From 1088 just a week or two ago). This is the one type of move that stresses me out the most with the Rhino trade.
The Aug trades are now all negative by about 1-2% when they were profitable by about 4% just a week ago. I added call calendars last week and hedged off some of the BBs I put on as downside hedges with calls (converting to M3) and some futures but it’s not been enough and we’re now negative and in a zone of the trade I hate. These things can handle, you know, normal 6-8% up moves in a cycle but when they get up to this range (10%), things start going negative and they start getting annoying to manage as we’ve got to deal with decreasing theta and zones where even pull-backs don’t produce much recovery because of upside hedges put in place. As I’ve switched from old school modified iron condors where I dreaded volatility and down moves, now I dread never-ending 9%+ up moves and wish for corrections, neutrality or a 45 day trade cycle that doesn’t have a 9% up move 🙂
The move is stressing me out because there are a lot of imponderability about it. I don’t know if this is the start of a huge break out because of helicopter CB money (BOE and BOJ are easing) or a typical normal over-reaction short covering from the Brexit event. All breakouts of ATH have an 80% failure rate and thus I am trying to be patient on any aggressive upside adjustments. We’ve got a Bradley turn date, some big negative divergence, volume was down -17% yesterday on index, we’re vastly oversold, the T2108 % of stocks above the 40DMA (69%?), and we’ve tagged upper BBs. The 80% failure rate can take days or even weeks so we’ll have to be patient but with any luck it starts now.
My plan is to add upside hedges on any normal sized pullback (thus getting the trades more balanced) and hold off on adding upside adjustments if we just continue up or pause unless we break 1199 with conviction.Then I will reconsider my plan and probably start taking losses. My guess is RUT stalls around 1190 area and pulls-back, I think John Locke is also recommending being not so aggressive on upside hedges right now and also believes the same thing re 1190 as a reversal zone at least short term. My nagging “back of mind” thought is that these markets aren’t following the usual, we’ve got central banks injecting like mad (BOJ and BOE) and this money has to go somewhere. I fear that these Aug and Sep trades might be in some trouble.
Update: I added several 1200 call calendars for August/Sep as I got a relatively decent price on this end of day shallow pullback that lasted 7 minutes. I paid 7.92 and the daily price was hovering around there.
Rough week in the markets. The RUT was in the 1130s yesterday and the trades were doing fine though fairly delta negative (just not enough to warrant ANY adjustments). I did have a few TF futures, some long IWM and some calls on as additional hedges, but I removed those at a decent profit throughout the day just not at today’s high by any means. I wish I waited longer. I sold off 1 call per account at 131 (1050s Aug) and TFs at 1157 during the jobs report (damn!) and IWM at about 116.57.
Yesterday, the trades were down about 3% from our all time highs and healthy positive, this was understandable since the market was up about about 4% in a few days and our trades will always suffer in larger up moves. Today they’re down a lot more from the high but still slightly positive over-all. Our upside risk is not so high as today’s move was fairly big and sudden and took away most of that upside risk. Today’s up move was next level and puts the move from the Brexit lows at 8.3% up. This removes most of our profits for Aug but we’ve got limited upside risk and a huge profit tent built underneath. IF we get Any move into the below 1145 in the next 3 weeks, we’ll be singing. IF we continue up..well we’ll enter negative P/L but with not so much upside risk per say. The entire Aug trade now banks on a pullback where we’ll take some off and/or adjust on the upside.
The September trades I entered are now negative which is understandable since they’re a mix of 1150/1110/1060 and 1140/1100/1050s. I’ll have to add some call BWBs sooner or later if we continue to be at 1170 or above. I would like to wait for some cool down first. I want to see how this next week proceeds. I would have thought the EU bank risks were bad news but maybe EU money is now flowing into the US market. The internals today were insanity. That worries me a bit re continued up moves.
I managed to get some calls and call BWBs in on Friday during the dip and luckily, pretty much right at the bottom of said dip.
2 x 1050 calls at $106 to hedge my Bearish Butterflies I put on as a hedge pre-brexit (converting them to an M3). I have 1160/1110/1060 and 1150/1100/1050 Butterflies x 15 and 2 x 1050 calls. Note: Earlier on the week I had bought the same calls for 90 and sold at 99 when I thought the RUT was exhausting itself. I had to rebuy at 106 when that was proven wrong though the same calls touched $114 on the height of the RUT move. So I was pretty much in M3 configuration the entire up move except from 99 to 106 re cost of the call.
15 x 1210/1180/1130 Call BWBs to hedge the Rhinos @ 18.33
The trades are mostly hedged to the upside now and though I expect some weakness into next week, I also expect the markets to quickly resume its uptrend. On dips, I’ll start taking off some Aug trades and hedge a bit more with call BWBs or Calendars. I’ll be quick to take profits on Aug. I had built up a lot of profit in Aug expiry and though some of it was taken away in this most aggressive up move, I still have a lot. My overall balance is about 6% from its earlier and max highs on Monday. I am very happy I took off all of July on Monday as those wouldn’t have fared well in the maniacal three day bounce. I was quick to take profits on those 🙂
As for September, I am only somewhat entered. I have 1150/1110/1060s and 1140/1100/1050s. I am looking to add some call calendars or call BWBs to protect on the upside. Waiting to see what happens post Jul 4 weekend. I got a bunch more on thursday @ 2.90 which isn’t a great price. I won’t pay much more than that so if the volatility continues to fall and the BWB prices go above 3.15, I’ll sit out and manage what I have on and wait for a high volatility day to enter more @ better prices. If we don’t get a high volatility day in the next 20 or so days, then so be it. I struggled with July due to bad prices and won’t repeat the same thing again. Trading well means getting good prices and being willing to sit it out until you do.
Markets are on a tear. Rut is up something like 8 percent since Tuesday. I closed all my Julys for a nice profit but my Aug and Sep are now half of what the profits where. I’m close to adjusting the upside but I’m waiting till Tuesday. Markets tend to run up on July 4 and also it was quarterly rebalancing and it might be a massive short squeeze. I could use some down move to adjust 🙂