Trade Update – STTBWB+BSH

The little up move at the EOD and its continued move pre-market has lowered Vol and as well, skew has changed to the point where the current STT trade has now hit the -100k range from -160k or so that it was yesterday. I’ve also got the profit from the dynamic ES hedges I put on that isn’t counted in that.

The environment is pretty wild, I mean, we are in an environment where one tweet can cause a flash crash down or a flash crash up. Anyways, despite that, the P/L comes back in quick on vol relief/up moves due to the trades maturity (they are all pretty old now). VIX was 21 yesterday and VIX/Vol increases are directly linked to time and what it really does is make a trade that’s in 120 days to expiration act like its 150 days to expiration but that has to mean revert and that force gets stronger with time. Just a week ago the trades were at +60k and with Vega increase it caused a draw down to -160k but that wants to mean revert and that force gets stronger and stronger each day. The trades then basically convert theta to P/L pretty quickly and more strongly. Time is a ticking’. We will have quick reversion in P/L with any vol relief and mean reversion in skew. If we, for instance, could fast forward a week or two, the market would have to work much harder re vol and delta move to cause the same loss in the trades. They become much more resilient as time moves on and eventually down moves even become welcome. The older trades hedge the newer ones. in ES shorts etc so my loss could hit break even by Thursday which would be nice.

I am really unsure as to what I’ll do pre Sep 1 when Trump is supposed to put the first round of tariffs through. We have a holiday on Monday (labour day) and that includes the futures markets so I guess the first trading day is Tuesday Sep 3 which just happens to be my 40th birthday and that’s when we’d have reactions to the trade war headlines. Do I lock in a slight gain or break even and sit out the event for the most part or do I try to get greedy with all the juicy theta in the trades currently. I think I might start rolling STTs about or removing them with the intent to add equivalent on a large down move. Right now and as we go forward, I don’t love HUGE up and since I am neg vega, I don’t love a big down (short of a crash). September and October have a load of volatility events and they’re seasonably pretty weak so I don’t know if I wanna keep a load of risk on. I’d rather have dry powder for vol spike entries.

2 thoughts on “Trade Update – STTBWB+BSH”

  1. Just curious if you trade anything else besides the SPX? I have portfolio margin and while I am not trading your size, I have really struggled with whether I need to diversify away from the SPX (which is all I trade). Dividend stocks, CEFs, diversified basket of etf’s, etc. Every time I head down one of those paths I realize that I would be better off sticking with the SPX and my option trades and leave the bulk of my account in cash. Just wondering what you or others do.


  2. I am trading LTI stuff ..I’ve created a blend over at allocate smartly, I like Larry connors stuff and I also like some low volatile bond rotation/momentum stuff.

    I basically have a blend of 7 things that I am working on that gives something like 10-12% with a 5% MDD. Other than that, not much else.

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