What a week. I closed the MICs for July at 4.268% which is a great result considering the whipsaw and challenges that the large gap ups and moves provided towards the end of our last week. It was fortunate we had a big up day today to allow for some volatility to flow out.
The Protector alpha is up about 4% for the year completely hedged vs SPY which is up about 0.6%
My first bearish butterfly went extremely well with a 30% return.
Yet again, another huge range yesterday. Opened to go up to about 207.3 only to fall back down to 204.4. you can see the hourly SPY chart for an indication of this environment. The VIX was approaching 22 and again had an inflationary effect on my MIC trades. For a non-directional trader that has to manage risk, it can be quite a difficult environment. However, every AM, I look at the futures and its consistently going according to my previous end of day plans.
Yesterday, the market fell and I evened out our deltas a bit as I started peeling off some of the trade (I took off about 9 units of 15 put spreads on the RUT MIC right at open). The market proceeded to fall and fall and as it went down, and because I peeled off about 9 units, I had to remove the corresponding debt spreads (insurance I bought to protect the insurance I sold). I thought I was getting good timing as I was taking these off while the market was falling away from where I closed the 9 units. Unfortunately by the end of the day, the market had fallen so much that we ended up approaching our downside adjustments and that meant that the debit spreads I sold would have been worth way more. I could have let the market keep falling and not sold the insurance, but I felt it wasn’t appropriate risk management. If the market should bounce, it’d have hurt the trade and let’s be honest, its volatile as hell right now and I really don’t wanna pick sides intra-day within a channel. I’d rather have been more neutral than lean significantly. Luckily, the futures are up about 23 points right now and that will make for a great day to roll off the July trades.
Right after the markets closed, Greece presented a plan that includes most of the austerity measures European leaders demanded and combined with an amazing China open, that put our futures up for the night. I hope it holds for another few hours so I can get out of some of the SPX when it opens at 4am NY time. Can’t wait to get out of this trade. I had to actually work for my money this month 🙂 But despite the crazy end of trade volatility, we’re going to do well enough on this thing.
I’ve got an M3, Bearish Butterfly and Kevlar trade on-going right now. I love the resilience of the M3 and Kevlar and the returns of the Bearish Butterfly. Strong theta based trades and a great addition to the MIC. They’re similar but with their own advantages/disadvantages. Soon come, I’ll be working on getting the M21 trade going but its quite a bit more complicated and I need a month of concentration.
Another wild day. The Chinese markets had half their equities halted and the NYSE halted trading after a technical error causing a bit of panic in the markets. Volatility reared its ugly head again and the pricing of our Jul MIC options went up. No chance to exit yet and we did have to adjust a bit more on the way down. Both trades are still well within positive territory and only lost a tiny bit through the wild day yesterday if any at all (I can’t tell because the mids are all over the place as is usual in high volatility times like this –Especially in the SPX options).
There is a nice bounce in the futures and Shanghai is up 6% but I wouldn’t expect much more than a bounce here which could only last for tomorrow or it could go for a few days. The CPC (put-call ratio) is extremely high and usually these means more down ahead but we shouldn’t be too far from a bottom. Additionally, the bullish percentages are also quite weak across the board
BPNYA -1.02%, BPCOMPQ -1.48%, BPSPX -0.73%, BPOEX-1.59%, BPENER -7.69% – but BPFINA +1.85% and BPINDU +5.56% are up. Only BPNDX is flat
Heavyweights of SPX: aapl -2.48%, xom -1.09%, msft -0.14%, jnj -1.16%, brk -1.11%, wfc -1.78%, ge -2.19%, jpm -2.05%, pg -0.89% ibm -1.12%, pfe -0.83%, goog -1.56%, sbux -1.81%, amzn -1.61%, t -1.44% (Source: Uempel@Cobra)
In any case, I am going to just start to close the trade on any bounce and call it a day for July. Things are just too volatile to hold much longer, we’ll take what we can get and use any decline to enter more into our Aug MIC. I did enter about 4 units yesterday during a big decline. I was getting decently paid on 200 point (1870/1850s) which is great. If I enter any more in the next days on down, I will be using a ratio of 5:1 for the put spreads to call spreads rather than 3:1. The plan will be to add the other 2 on any large upwards retracement.
What a swingy day yesterday was (50-55 points peak to trough) and it’s not ending anytime soon with the futures now down 30 (1.5%) points as I type this. The big July MIC trades expire in 11 days ( 6 trading days) so we’re right at the end of it and will have to get out before the weekend.
JULY RUT MIC
I made two adjustments. At the start of the day I bought 8 1230/1210 debit spreads and as it kept falling I added 10 1220/1200 debit spreads. Towards the end of the day I had to adjust again but this time on the other side and I had sold 5 1240/1220 debit spreads. A bit of whipsaw experienced here. The futures market for RUT (TF) is now down again about 1.5% so we’ll have a bit of pressure here. I am concerned about a big correction in the next few days and how it’ll affect the exit of our trade. The futures aren’t looking too good right now. I have about 15 units left on this trade.
JULY SPX MIC
In the off hours, on the big up move, I was able to get out of 71 1950/1930 credit spreads which was nice. During the early part of the day, I was actually quite a bit above my adjustment point on the upside and had to reluctantly adjust. I sold two 2070 puts as a placeholder move to help correct my delta as well as sold 12 2090/2080 debit spreads. This was done when we had solid down move in the AM, so I didn’t get terrible prices, the problem was this down move continued on at least for half the day. Made me wish I took more time making adjustments when the markets or volatile like this but we have to manage risk. When the market rebounded I bought back 2 2030 puts thus levelling off our debit spreads. We ended the day up quite a bit on the SPX trade and as well we were pressured on the upside. I decided to leave the upside risk in this volatile market. Good timing I guess, since the market is selling off right now. Still, like the RUT MIC, the increased volatility in the trade will probably make things difficult for us. I have about 18 units left on this trade.
Bearish Butterfly
I added some 1210 butterflies to even out the delta on the big move down. I then removed some of the 1270 butterflies on the big bounce. Ended the day with downside preference. Good timing again, I guess.
M3 Trade
Very resilient. No issues or requirements to adjust yet
Kelvar Trade
Very resilient. No issues or requirements to adjust yet
Anchor Trade
A lot of the mechanical picks weren’t that affected by the big down move. I think its up about 5% as of close last night for the year. Not much else to report.
Aug MIC Trades
Had to adjust the small amounts of MIC AUG trades I had on. I *think we might be in a great position here. I’ll be closing off July trades and entering Aug trades at super high volatility. I’ll be entering AUG trade this week.
We’ve made it to Copenhagen.
Like the city and its vibe quite a bit but its damn expensive. Seriously.
Berlin was a very bizarre city. I really have no idea how to quantify it or my experience there. I really don’t. We happened to stay in a vegan neighbourhood which was awesome! That was a total fluke as well. Glad we stayed in that part of town, it happened to be the best part, super artsy, lively and kid friendly. At first it was intimidating, the characters there are bizarre and it looked like we were in gangland with all the spray paint. After a day, you realize it’s harmless. Overall, I can’t see myself ever returning to Berlin. It was not a favorite.
I had the unfortunate experience of watching a man die. It was really messed up. We were walking to our segway tour and a man was on the ground with a worker outfit getting CPR, his legs were twitching and stopped and they seemed to give up on the CPR with shrugs and looks of hopelessness. Very eery. The thing I remember most is all of the bystanders faces. Just blank. I don’t know what happened but I’d guess maybe electrocution or heart attack.
We toured the Berlin wall, saw the holocaust memorial museum which was the most impactful of its genre. I’ve been to a concentration camp and other sites but this one was next level with its presentations of individual cases/experiences. Very impactful. Highly recommended everyone sees that some day. What an atrocity.
We drove and ferried from Berlin to Copenhagen and arrived in good time.
More to come
Well, don’t have much to say on the markets the past week. It was what it was. China was in a crash and Greece votes “Oxi”. The markets closed well yesterday despite this and the theta locked up in both MICs started to seep out yesterday. The after hours action was pretty intense with SPY reaching 207.5.
The MIC trades are up 3.5% which is amazing given the events. I had adjusted probably 6x on the way up and down and we were victim of some whipsaw. Was by far, not an easy month. I am going to slowly close the trade out this week and I expect to reach around 5-6% when it’s all said and done. Any big events can obviously change that but I think we can handle it by careful managing of the deltas and given that we aren’t holding through next weekend, all we have to do is carefully manage it throughout the trading week. Who knows though, any big scare, and I’ll probably be quicker in taking off this close to expiry. 3-5% is nothing to sneeze at with the moves we’ve seen.
The SPX trade has risk to the upside that I have to alleviate this AM via its debit spreads (the insurance I bought to offset the risk on the insurance I sold). I am reluctant to do too much to the upside given the volatility and the headlines still present. I am going to carefully monitor and probably just start slowly rolling off the trade as soon as today.
The RUT trade is up more than the SPX trade. It wasn’t as affected by the whipsaw. Slowly taking it off. I am relatively delta neutral right now with this trade.
For August, I’ve got an M3 trade on, a Bearish Butterfly, an MIC trade, a long term GS Calendar and finally a Kevlar trade. Starting to diversify my theta based trades but man does it take some planning.
The market is up about 18 points (SPX) today and volatility is down about 12%. As I thought on Monday, a bit of consolidation or a bounce will deflate the volatility and our trades will do well, my account balance is at all time highs again and the MIC trades are now well positive. I closed the SPX call spreads when we were at lows (for 0.15c) and now our only upside risk in the SPX MIC is due to the put debit spreads we bought on the fall (we bought a lot of these). Still, even with these, our upside risk is quite limited. At this rate, I’ll probably close them on Monday but if I can get out of the put sides reasonably before then, I will.
My bearish butterfly for Jun is up about 30% and the bearish butterfly for Jul is up about 5%. Will be scaling out of those.