Sep 9 – End of Day

Ah what a great day 🙂 It’s nice to be cheering and enjoying a beautiful market fall and even praying for a 3-5% gap down on Monday rather than being stressed out and at adjustment limits with collapsing P/L like I used to be in the modified iron condors days. Obviously, No disrespect or gloating intended. I’ve endured two hard corrections in my life where I wasn’t properly prepared, so I am allowed to say that. So no disrespect or gloating intended re anyone reading this that is long the market. I’ve earned it!

Like I mentioned a few times, I have some Sept Lottos on (specifically 100s of 1050/1100/1140s and 1060/1110/1150s from the Sept campaign that were worthless a few days ago. I had hedged them off the last 2 weeks with call BWBs etc that were all removed. It was cheaper to leave them then to pay commissions closing them. Of course we’re pretty far from 1150 or 1140 but if we got another 7% down before Thursday expiry, they could stand to make a LOT of money. I’ll definitely close most if we get an equivalent -3.5% move on Monday as we had today (it’ll make the Sept profitable) so its probably not actually likely that I’d hit the real big profits as they could, unless we have a mega gap down on Monday. Either way, neat.

All my other trades are doing great. The down move helped a lot. I wish I was a bit quicker removing the remaining upside hedges but it is what it is. I figured we may get back up to 2200 with SPX and 1265 area with RUT before a fall and I didn’t want to expose myself to a runaway up move. Balance. The same day i believed we topped out, I had bought some call BWBs for October. Bad timing but proper risk management. I only use my technical analysis for small things and finer adjustments within my overall parameters.

Ironically, I might actually have to roll down and adjust my Nov trades if we gap down on Monday, which is kinda funny given how much room there was just yesterday. I don’t remember the last time I did downside adjustments, not even Brexit brought me to that. They’ll all be profitable, so it’s welcomed.

Here are my Nov RUT trades which I don’t think I posted. The short strike is at 1200. So as we approach it, I’ll need to roll it down. I may also condorize it or add some call BWBs to help with an upside bounce. I won’t mess about with adjustments if we do gap below 1200 and touch 1190, I’ll be fairly quick to roll down the entire structure. I’ll give it 10 or so points since we’re far away from expiration but not more. If it gapped down the next day and you were at 1190, it’d be on the very slippery left side slope.

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Sep 8 – Trade Plan

Yesterday I had closed off some of my futures hedges at my pre-determined level of RUT @ 1260. So far it seems like a decent close. I don’t see us going much above 1260/1265 area as the upper trend line sits right around 1260 (but is rising hence the 1265/1270 possibility).

SPX Oct-D (Rhino)

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No adjustments here.

RUT Oct-D (Rhino)

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I have to address the upside risks here. I am going to look at some adjustments today at 1pm.

SPX Oct-M (Rhino)

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RUT Oct-M (Rhino)

No upside adjustments required.

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I have to address the upside risks here. I am going to look at some adjustments today at 1pm.

SPX Monster Oct-P (Rhino)

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The monster trade. This one is doing well. I have a solid 8% to the downside before any issues and I’ve got that hedged off on other trades until at least Sept 15. No adjustments needed here.

Apr 29 – Rhino M3 Trade Update

Trade updates below. The P/L might differ a bit through the day. I’ll check again in the next half hour or OV updates. Definite recovery with the down move. I am looking into Jul expiration right now since the vol is a bit higher and I’d like to get some trades on in that expiration. I am looking for 2.9-2.95 as a price.

June Rhino M3 (P)
# of Units: 30
Planned Capital: 750,000
Current P/L : -4,767
Max Draw Down: P/L: -18,000
Current P/L(%): -0.6%

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June Rhino M3 (D)
# of Units: 16
Planned Capital: 400,000
Current P/L: -1,197
Yesterdays P/L: -11,000
Current P/L(%): -0.3%

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June Rhino M3 (M)
# of Units: 25
Planned Capital: 625,000
Current P/L: -2,566
Yesterday’s P/L: -16,800
Current P/L(%): -0.4%

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Apr 20 – Rhino M3 Trade Update

June Trades

I didn’t adjust today Update: At 15:40pm the market pulled back so I used the opportunity to enter some orders for Call BWBs and Call calendars slightly higher than the price I paid for the same yesterday. The RUT oscillated between 1137 and 1148 and is sitting right at 1143 right now after a stronger EOD pullback. Yesterday, I added some upside adjustments and we’re comfortable until about 1152 area where I’ll add more to keep theta higher and to prop up that portion of the tent. My plan is to add modest adjustments on any pullback to keep the negative deltas around -20 or so per unit. This will allow for any pullback but also keep theta in the trade and beef up the right side of the tent.

May Trades
All the May trades I had on are now slightly negative P/L. Any pullback would quickly get those profitable. I’d probably start exiting slowly on each pullback while keeping the upside adjustments alive so that the deltas stay around -15-20 per unit. I wish I was a bit more aggressive on the upside adjustments for all May trades, I’d have added more calendars on the call side around RUT 1130. I’ll take any PB as an opportunity to get May more balanced, though like I’ve said, the upside risk is mostly minimal for these trades.

Market
The market looked primed for a small roll-over earlier today but some bogus Oil headlines came out which shot the markets up aggressively. However, we’ve come too far too quickly and the risk is to the downside at these levels. The market will do what it wants, and any technician is merely playing the best odds. The odds favour risk to the downside. Things do look bullish over all, and I’d expect any pull-back to just be a short term thing. If it goes much past 1155, then the market is doing something quite abnormal and extraordinary and I’ll have to consider getting more aggressive with adjustments. Any modest 2%-3% pull back in the next 30 days will get us profitable. I won’t have any gamma issues for my May trades, so it’s likely I’ll stay in longer than 21 DTE in search of a pull back. If we can get the May/June trades profitable that would be a fantastic result.

June Rhino M3 (P)
# of Units: 30
Planned Capital: 750,000
Current P/L: -16,425
Current P/L(%): -2.2

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June Rhino M3 (D)
# of Units: 16
Planned Capital: 400,000
Current P/L: -9,643
Current P/L(%): -2.4%

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June Rhino M3 (M)
# of Units: 25
Planned Capital: 625,000
Current P/L: -16,206
Current P/L(%): -2.59%

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Apr 18 – EOD Rhino Trade update

June Rhino M3 (P)
# of Units: 30
Planned Capital: 750,000
Current P/L: -15,000
Current P/L(%): -2%
Loss @ 1145: -17,200

June Rhino M3 (D)
# of Units: 16
Planned Capital: 400,000
Current P/L: -9,600
Current P/L(%): -2.4%
Loss @ 1145: -11,500

June Rhino M3 (M)
# of Units: 25
Planned Capital: 625,000
Current P/L: -14,000
Current P/L(%): -2.24%
Loss @ 1145: -18,000

I got partial fills for the 1160 BWBs when price dipped to about 1128 for (P) and (D) trades but none filled on the (M) trade. I upped the price a bit and waited for the day but got no fills (not surprising since RUT pretty much moved up and up the entire day). We’re testing a huge downtrend resistance line (RIGHT NOW) and are extremely overextended. My guess is we’ll turn around around 1140 to 1145 ish area (overshoot and fail). I am hesitant to adjust more right here right now without even a 4 point pullback because of how much the RUT has travelled. The technicals are all quite bullish but we’re historically over-extended and haven’t had any reasonable pull back. I’ve said this a thousand times, but this move is truly historic. I do have have positive gamma and my negative deltas are decreasing as we go up. I am going to give it till 1145/1147 area before throwing in the towel and adjusting heavily. If we fall, and as we fall, i’ll be adding adjustments for the negative deltas to get the trade balanced. I think the risk/reward favours a hold-off for more favourable conditions for upside adjustments.

The may trades are all approaching break-even and don’t have too much upside risk. Though as it moves up it does remove my profits to date. Still, as May expiry approaches, any 3-4% pullback will put the trade in such a great situation. I mean, if you wanted to map out a perfect trade, it’d be putting the trade on and having the market rise and hold for 20-30 days only to fall back within the tent right near the time to take it off. So I mean, we really are not sitting too poorly from a R/R standpoint. If it bumps around 1130-1140 for a while and then falls towards 1100 in a few weeks. I mean we couldn’t ask for a better result. Anyways, I had removed the 1120 call calendars on Friday which removed some of the upside risk. I added some 1160 call calendars in their place but I want to add more on a pull back.

So IF we had a 3-5% down move any time in the next 50 days, the May and June trades would profit very nicely. I’ll continue to put on Rhinos for July and onwards as we go and when we do get that pullback, we’ll be sitting well.

We’re four months into the year and have no profits but given the market conditions and just how bad they are for this type of trade, well, I guess I can’t complain, these sorts of conditions are incredibly rare. I feel a lot of pressure to have the trades perform but I think it’s most important to focus on trade management and risk than it is to try to force anything. The trades can handle an 8% move within the time period but they just can’t really handle 22% moves well in general (especially when we’re whipsawed around). I don’t think anyone managing these trades appropriately could have done well in those periods. Even our March expiry trade would have done extremely well if RUT just moved 8% up instead of a straight shot to 1070 from 940. So essentially, our March expiry did slightly negative, our April expiry did slightly negative to break even and now our May expiry is approaching break even while our June expiry is ~2.2% negative. Not a great year.

Here’s the RUT chart that I am looking at:

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My thesis is that we’ve run up too quickly to adequately break the downtrend line and maintain a sustained break of the 200SMA. If we get up to RUT 1145 and hold for a day or touch 1151, I’ll have to rejig all the trades. That’s my plan. IF we get any sort of pull back, I’ll be adjusting on way down to get things balanced for any potential bounce.

Apr 18 – Trade Update

The market is now very green. I’ve heard that this is the strongest up-move since the great depression bounce, especially in the RUT. To start the year, we had a 22%+ decline (from 1200 to about 940) within a very short period followed by a 22% up move, again in a very short period (strongest in history) and preceding those two events we had the Aug 24 crash and THAT subsequent huge move up. I posted the SPX graph earlier, note that the RUT chart is much more pronounced and extreme. As you can imagine, this is the most frustrating 6 months imaginable for trading market neutral strategies. It can, hopefully, only get better. I’ve heard in groups and chats that many people have given up (frustrated) and I’ve felt like that at times recently too. I understand the environment is extreme and it’ll pass so I am trying to just manage risk and get out of this thing profitable – Easier said than done. If you backtest the Rhino back 7 years and you backtest it through the latest period, you’ll see that it truly has been a terrible period to trade these things. The RUT is now at 1134 (nearly 200 points from its Feb low) and nearly 22% up in 2 months our June trade are underwater and our May trades went from decent profits to about break-even or slightly above. If we get ANY pullback of 2-3% in the next 20 days and don’t rise too much above 1134, we’ll be profitable for the year. If we continue onwards and upwards, we’ll be negative by some amount. Again, its short-term pain but as volatility re-enters the market and if we are at any sort of top, that’s when we’ll start making a lot of money in the trades. It’s not unusual to get 8-10% returns in the Rhino if we’re under the tent. A few of those and we’ll be at expected value for the year.

Mar 16 – Rhino Trade Updates

Making serious headway with the P/L of the April trades which is nice. I won’t stay in them past Mar 28 and I am eager to close them at break-even and happily call the month a wash. The May trades will do very well if we can have any sort of pullback in the next 3-4 weeks.

So happy to be done with this looming Fed meeting. They are not raising rates today (as expected—>they always telegraph this!) and they’ve lowered the number of raises in 2016 to two from four. The RUT is basically unchanged after the meeting. I neutralized the trades and added some more upside hedges on Monday which I could have gotten a better price for on Tuesday. I also converted my bearish butterflies to M3s as I just had too much upside risk across the portfolio.

I am traveling to London, Barcelona, Canary Islands and Morocco in the next 3 weeks so I can finally add more to the travel section of this blog.

Mar 10 – April Rhino Trade Update

The RUT has resumed its downside move and is @ around 1061. This is positive for our trades, it gives us a ton of upside breathing room while maintaining good theta and even a large correction would still be profitable. Lots of room on each side, though we are in the sea of death on one of the accounts. The sea of death is that little dip area between my original Rhinos and the call hedges. In this area the T+0 line will start to sag as time goes on. Ideally we have another 2-3% down move to get us in the tent. I am going to look at how I can correct this a bit. On my bigger account, the goal is to break even and we’ll do this if RUT stays in a decent range and we’ll profit significantly if it falls another 3%. On my other two accounts I should be able to profit decently unless RUT breaks 1105 and continues upwards. All in all, we’re now likely to have a modest month overall with no loss despite the 16% up move after we put the trades on around 950-960. I guess I shouldn’t jinks myself but I am happy if we get out of this at $0. That was a rough start to the year. A 20% correction followed by a 16% up move while in both expirations. Challenging and probably what I’d call a “Trader maker” if you can survive it.

Mar 7 – Trade Update

The RUT marches on, it’s now 16% up in 2 weeks. All the trades are suffering. The April ones don’t really need adjusting on the upside but I have to start looking at the lower Rhinos and moving them up. I bought some 1040 Rhinos for April today. On any down move, I’ll take off the equivalent amount of 920s (for something like $1). This will add theta into the trade and hopefully on any pullback we can get back to an even status. Right now we’re down around 6% on the trade (18% leveraged). That’s expected on the upside with a move like this, backtesting this in 2013 yields similar in those big big up months. Not much I really could have done and given the technicals, it wouldn’t have made sense unless in hindsight. The risk profile on the upside isn’t as pronounced as the downside, and I wasn’t in a rush to OVER adjust. I adjusted but maybe not enough. The moves happened quickly right at end of day after my adjustment time and i was slow on the draw on Mar 3 and 4 to further adjust due to the odds of a pull-back. Also patience pays in volatile periods which it was until a week ago. Obviously, this time it didn’t (at least not yet). These trades hurts the balance, it sucks but it should setup a nice trade for the following month being over-extended etc. The March I still have on are getting gobsmacked I am waiting for ANY pullback to get them off, again still limited upside risk but..still can be more painful.

I sort of expected today to be another up-day re momentum and my time frame to exit the existing March and to adjust the April trades are sometime this week but ideally on a fall either before or after the ECB meeting. We’re as over-extended as you can get so I think an uncorrected upside movement of another of above 1.5% is low. I have somewhat limited upside risk but when I say that, I mean in terms of additional losses, the more it gets up the less effective any down move will be in recovering that already existing loss. I am going to try and add more theta to the trade and put some concentration on this tomorrow and Wednesday. If it continues up and there is no pullback, I expect a really shitty month. This is I believe the strongest up move in that duration ever and if it continues, then its truly an historic event. I remain patient, though, stressed as any pullback will now be that much further away from our optimal. Trying to be patience at these nose-bleed levels. I am looking at some creative adjustments now.