Yep, it’s a game changer. Horny Communist!?

Spent most of the day backtesting and working with the group on slight tweaks to the new trade as well I looked at parameters for adjusting, profit taking, margin expansion and so on. (Some tweaks are basically using different synthetics to better the greeks and so on IE you can short the market directly or you can create the same thing with a short call and long put at the money. But you then have some benefits re VEGA (vol) if the market falls re the long put) So you play with that stuff to get a better reacting trade while keeping the profiles relatively the same..long story short—>Buh-Bye STT and BSH. This thing is it. I’m saying hi to an old friend named optimism. I was down in trading mood this week and It think it showed. I guess at the same time, I mean, I didn’t have my combos on yet (PC2) and I was still struggling with the financing and so on which there was a light at the end of the tunnel. I just wasn’t feeling it. Now I am.

Like I said in the previous posts and above which might not have been obvious, the bulk of my current trading portfolio was still in individual BSHs, STTs and financing there in, NOT combos. A true struggle it was for me. I had not gone live with combos yet (not with any large amount). Had I, it would be just fine (not close to as good as the new stuff, but good). So I’m still old school and am suffering with poor profits from being unable to finance the BSHs in this environment. My reverse calendar financing DID not do well, my NPs were barely existent in some of my BSH financing and my STTs are suffering from bizarre option skews (OTM puts holding value). This whole thing was kinda a mess and resulted from a lot of things not going my way. Still, I am profitable, I just sucked.

So right now, I mostly kept backtesting the new parameters (when do we take profit, what if we move an option here or there and so on and playing with all sorts of dates to see how to setup the profit taking in the trades and to get a feel for draw-downs and so-on. I couldn’t keep up with the developments in the group and in the trade itself re parameters. So I probably backtested this thing in various small forms across every date possible 🙂 It’s using very familiar parts that I’ve traded a millions times before, so it’s not as if its going to do something unexpected but still diligence is required. I think we’ve nailed it now.

I’ll have a solid basket of 5-6 trades all working together and I am going to go live this upcoming few weeks. I’ll be going from the cumbersome financing BSHs, STT mess skipping over the combos and into the efficient versions of said combos that have accomplish the same things with elegance and ease w/ better profiles and greeks. The key thing is these things will be a blessing to manage. Looking forward!

The title had Horny Communist in it. That might be the name of the trade variant as a member noted that the Leftie tent was so big, he kept thinking of lefties/commies and we added a small tiny horn at the front (stolen from the Rhino trade) hence the name Horny Communist :). I kinda like it. This trade mixes ATM style properties but with built in black swan protection.

One thought on “Yep, it’s a game changer. Horny Communist!?”

  1. I agree, it is a good looking trade and in backtesting all versions including Ron’s original have a very stable T+0 on the upside which has been the issue with a lot of atm trades out there. The only thing I have found in backtesting is that on a down move, PM margin would jump considerably if we have a vol pop with the move and then the volatility subsides causing the T+0 to droop. Especially later in the trade. Can be easily fixed with some 30dte puts/verticals that are so far otm they are super cheap. I feel like a broken record with the shorter duration puts as protection but I find that the vomma profile can’t be beat. Very stable trade, less contracts, pushes risk very far otm, there are few things not to like. The only thing I see is that being that far away dte, skew can do some funky things to far otm pricing. But add in some harvesting principles and you can do many things with this one structure.

Leave a Reply

Your email address will not be published. Required fields are marked *