Apr 18 – EOD Rhino Trade update

June Rhino M3 (P)
# of Units: 30
Planned Capital: 750,000
Current P/L: -15,000
Current P/L(%): -2%
Loss @ 1145: -17,200

June Rhino M3 (D)
# of Units: 16
Planned Capital: 400,000
Current P/L: -9,600
Current P/L(%): -2.4%
Loss @ 1145: -11,500

June Rhino M3 (M)
# of Units: 25
Planned Capital: 625,000
Current P/L: -14,000
Current P/L(%): -2.24%
Loss @ 1145: -18,000

I got partial fills for the 1160 BWBs when price dipped to about 1128 for (P) and (D) trades but none filled on the (M) trade. I upped the price a bit and waited for the day but got no fills (not surprising since RUT pretty much moved up and up the entire day). We’re testing a huge downtrend resistance line (RIGHT NOW) and are extremely overextended. My guess is we’ll turn around around 1140 to 1145 ish area (overshoot and fail). I am hesitant to adjust more right here right now without even a 4 point pullback because of how much the RUT has travelled. The technicals are all quite bullish but we’re historically over-extended and haven’t had any reasonable pull back. I’ve said this a thousand times, but this move is truly historic. I do have have positive gamma and my negative deltas are decreasing as we go up. I am going to give it till 1145/1147 area before throwing in the towel and adjusting heavily. If we fall, and as we fall, i’ll be adding adjustments for the negative deltas to get the trade balanced. I think the risk/reward favours a hold-off for more favourable conditions for upside adjustments.

The may trades are all approaching break-even and don’t have too much upside risk. Though as it moves up it does remove my profits to date. Still, as May expiry approaches, any 3-4% pullback will put the trade in such a great situation. I mean, if you wanted to map out a perfect trade, it’d be putting the trade on and having the market rise and hold for 20-30 days only to fall back within the tent right near the time to take it off. So I mean, we really are not sitting too poorly from a R/R standpoint. If it bumps around 1130-1140 for a while and then falls towards 1100 in a few weeks. I mean we couldn’t ask for a better result. Anyways, I had removed the 1120 call calendars on Friday which removed some of the upside risk. I added some 1160 call calendars in their place but I want to add more on a pull back.

So IF we had a 3-5% down move any time in the next 50 days, the May and June trades would profit very nicely. I’ll continue to put on Rhinos for July and onwards as we go and when we do get that pullback, we’ll be sitting well.

We’re four months into the year and have no profits but given the market conditions and just how bad they are for this type of trade, well, I guess I can’t complain, these sorts of conditions are incredibly rare. I feel a lot of pressure to have the trades perform but I think it’s most important to focus on trade management and risk than it is to try to force anything. The trades can handle an 8% move within the time period but they just can’t really handle 22% moves well in general (especially when we’re whipsawed around). I don’t think anyone managing these trades appropriately could have done well in those periods. Even our March expiry trade would have done extremely well if RUT just moved 8% up instead of a straight shot to 1070 from 940. So essentially, our March expiry did slightly negative, our April expiry did slightly negative to break even and now our May expiry is approaching break even while our June expiry is ~2.2% negative. Not a great year.

Here’s the RUT chart that I am looking at:

Screen Shot 2016-04-18 at 3.43.43 PM

My thesis is that we’ve run up too quickly to adequately break the downtrend line and maintain a sustained break of the 200SMA. If we get up to RUT 1145 and hold for a day or touch 1151, I’ll have to rejig all the trades. That’s my plan. IF we get any sort of pull back, I’ll be adjusting on way down to get things balanced for any potential bounce.

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