Dec 16 – Trade Plan –

==Update Market Open==

Since my opening post, the futures had fallen about 30 points and are now recovering. The high was 1994 and it had fallen to 1961.50 and currently sits around 1977.25.  Another perfect open for us. Now we try and exit the trade.

I follow a few sources that I use when I have to make close call decisions on adjustments. The first is a market breadth indicator that I follow at and the other is cobrasmarketview.  Right now the summation of all the info is suggesting a bit of a bounce right here.  I am going to start scaling out of the trade.


== Update 9:05 am European Time ==

Futures are up about 0.4%. We’re entering the day a bit delta negative.  We will be closing the trade throughout the day. We are looking at about a 5-6% return for the month.  Not bad considering the SPX has fallen about 80 points in the past week.  It helps offset the 9% loss I had last month.

We’re perfectly balanced on the anchor trade. An Anchor trade is where we buy the market (RSP), buy equal amount of ATM Spy Puts (insurance) a year out, then buy about 30% more insurance and sell an equal portion of weekly spy puts (30%) against this each and every week. When you sell insurance you get a premium which we call time decay. You get paid for the risk of selling insurance. We target enough premium each week to pay for the entire 130% of long insurance we purchased a year out. The idea is at the end of the year you have paid for the insurance and thus have had a relatively low risk way of having market exposure. The returns are quite astounding.


Screen Shot 2014-12-16 at 9.12.50 AM

Refer to the ETFs hedged column. The results are even better as we’ve added new rules to how we sell the short puts that eliminate a lot of the whip saw you’d experience.  We’ve bumped up 2011 performance and 2008 performance quite a bit.

Today will mark the day where I start to diversify away from being primarily focused on the MIC (modified Iron Condor) trade and more diversified into 5 different complementary trading strategies. I am looking to alleviate the time requirements of managing a heavy MIC trade. It’s something I am very looking forward to.


5 thoughts on “Dec 16 – Trade Plan –”

  1. Don’t suppose you’d like to share the tweaks you mentioned (i.e. the new rules you added for selling the weekly puts)? 🙂

  2. Your brief description of the Anchor Trade is tantalizingly brief. In particular, it would seem that short selling Weekly Puts to finance the long Put hedge would only have the desired outcome if the market goes up for that weekly period. What happens if the market goes down? You are long stock, long 130% protective puts and short a few puts. How do the extra long term puts protect the weekly shorts? In brief, what’s your move if the market goes down?

    1. Been SO long since I’ve done anchor. If the market goes down and continued down the longs would increase in value to offset the intrinsic value of the short losses, the puts you sold would lose their premium and reach zero premium (extrinsic), so you still “get” the premium. The issue is if the market whipsaws continuously in an exact pattern and timing as you could imagine.

        1. Try backtesting current anchor, you’d be surprised how variant it is (at least how I tested it..using Steady options new methods). The variance/risk to return was to high for me relative to other strategies.

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