Looks like a bad day a’ brewing for the markets.
I spent the last few days sick in bed really contemplating my plan going into this week. Having read a lot of really good analysis (like the one I posted earlier), I planned on adjusting quite a bit on any bounce move with the presumption of another leg down. I did just that, not in such a way where I was trading discretionary but in a way to start moving towards getting out of several trade types I no longer want to to do and to position my overall portfolio in an appropriate way (overall deltas etc). I am feeling pretty good on this huge gap down today. I had entered a small amount of April TLT/SPY about 2 weeks ago, I closed out the majority of that yesterday having become sick of the trade and having taken advantage of the bounce in SPY and I also closed off all but maybe 3-5% of the March SPY portion (a small handful). I also adjusted and rolled my protector/anchor spy appropriately. All in all, feel like I used all information to weather this small correction. We probably got the TLT/SPY March trade down to a manageable 15% loss as compared to SOs 41% loss!
The April MIC is obviously affected by volatility right now but we’re managing the trade like a boss. I had entered 15 debit spreads yesterday on the bounce to get the delta closer to about +10. Today I entered another 15 on the fall (I definitely over paid a bit this AM but it was falling fast). I paid 7.00 for 1200/1180s with RUT@1208.5 It’s now 1209.23 and the MID is 6.80.
Current Greeks
Delta: 23
Theta: 83
Vega: 370
The trade is currently positive by about 1%.
Soon come, I’ll probably just be managing protector and MIC trades with the occasional earnings trade. Keeping it simple. Keeping it rule based. The SPY/TLT trade is out for me as is momentum. Don’t get me wrong though, momentum based strategies (or trend following) is a very very good strategy, a place where 99% of the population should put their energies. I put a shit ton of time into learning about it, read about 5-6 great books, been following and listening to a lot of great podcasts etc. It’s got its place but I am a leverage guy, I like to leverage and I can’t sustain even minimal draw downs. So it’s just not for me. I’d highly recommend it to just about anyone that, well simply put, is not me. I leverage, I manage and I understand risks. It’s got buy and hold crushed. You’re getting 14-16% returns and you’re getting max drawdowns in the 12% range. Rotational momentum strategies is the place to be if you’re a regular investor/trader who wants to do minimal trading (once a month. The momentum strategy I followed would rotate between the top 3 of the following ETFs
TLT, VNQ, LQD, GLD, VEU, VWO, IVV, VB, IEF, DBC, BWX, JNK, IJS, IVE, EFV
I stole this from Steady Options. That’s the idea of the returns of the above trend following. 14.55% avg CAGR with a 9.47% Max draw down over the period. It’s solid.