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.


Dec 15 – Trade Plan

==Update Market Close ==

Another roller coaster day.  During the open I just couldn’t get good prices for the spreads. It made sense, the market fell about 30 points and then recovered. We add a lot of adjustments and we’re heading into tomorrow.  We’re slightly delta negative (we don’t like too much “up”)  and we have an extreme amount of daily time decay. I’ll close tomorrow regardless.  I can’t wait to get out of these large MIC trades. Getting tired of them.  Looking forward to a nicely diversified lower maintenance portfolio.


==Update 9:36 Am EST==

What a perfect open.  Looking at winding down the trade.

At close on Friday I bought a bit of VNR (vanguard natural resources) as it was trading below book value.  It was good for about 1500 profit today.


It’s an hour before market open and the futures are acting perfectly for my trade.  I’ll close today or latest tomorrow depending on the volatility collapse in the pricing as we edge near expiration. I’ll likely scale out through out the day but I don’t want to over pay to close the ‘way out of the money’ credit spreads. They expire Thursday and we’ve got room but at the same time, things  are volatile and can turn on a dime. I’ll weigh the options at open (no pun intended)

Right now on SPX we have (SPX currently sitting at 2012)

1920/1940 Credit Spread

1930/1950 Credit Spread

On RUT we have (RUT currently sitting at 1157)

1055/1075  Credit Spread

1110/1090 Credit Spread

They should be able to be closed at a very good prices. I suspect I can end this trade at a very healthy return.

Dec 13 – Weekend Post –


This marked the worst week of the year.  The market fell ~4% or 70 SPX points right at the tail end of our trade.  The silver lining is that it’s the best time cycle of the MIC to have been in. If it was the beginning or the middle, it’d be a lot worse.  In fact, if things smooth over or if there is little downs  we’ll likely end up with a much higher profit than possible before because of all the debit spreads (insurance) we bought on the way down. As long as the market doesn’t fall too much more in after hours as it already has, we’ll be A-OK.

Now on to Friday: Everything was good until about the last 20 minutes of trading. SPX was at about 2024 a very ideal and delta neutral area for us. I was very happy and looking forward to enjoying the rest of my night.  All was good. All setup for the weekend. However, the market had other plans, It then proceeded to fall to about 2015 within 5 minutes. We started to prepare for an adjustment with 10-15 minutes left to go in trading. We got one through making us decently positioned @ 2015 with our next adjustment at 2000. However, in the last 2 minutes the market just collapsed and fell to 2003 and the VIX surged. 2003 is near but not quite our next adjustment point. I wanted to do another adjustment to get us right delta neutral before the weekend but the market fell so fast and within only a minute or two of close.  In after hours trading the marketing fell another chunk to 1997 unfortunately, the market was closed and but we weren’t able to adjust.  So within 20  minutes the market fell from 2024 to 1997. Not ideal. I am not hating our position as the next week is one of the most seasonal bullish weeks of the year but I don’t like going into a weekend being right at an adjustment point. It seems no matter how hard you plan to be risk averse, things can still bite you in the ass.  The great thing is our theta is extremely high and should offset any movement.


Dec 12 – Trade Plan

==Market Open Update==

The market opened up kindly for us.  We made some small adjustments on both the RUT and SPX MIC at a good price as both rose.  We’re now delta neutral for both with a very large  THETA (time decay) PER day heading into the final weekend.  We’re looking good. RUT has no upside risk as we’ve removed the call spreads.  SPX has very little upside risk (45 or so call spreads still on).  We’ll be holding till Monday but at end of day today we’ll be adjusting so we enter at relatively delta neutral with a large window to alleviate as much risk as possible heading into Monday.   Hopefully it’s a stress free final day of market risk for this month


==1030am Update==

Today (Friday) should be challenging. The futures are down 19 points. Yesterday opened at 2032 and within an hour hit 2055. That’s a large move up. Then it proceeded to fall all the way to 2031 by market close. A complete reversal (see white chart below). We’re looking to open around 2019.  From yesterdays peak to trough that’s about 40 SPX points in a few trading hours. We’ve got an adjustment to do around the 2020 mark.  We’ll add a full debit spread. If it opens much lower, we’ll buy back some puts on the credit spread. That’s the most aggressive adjustment. We’ll gauge on open.  I don’t love doing this so close to the end of the trade but it’s necessary.   The next adjustment point would be 2010.   We should be able to get most profit out at about 2012-2040 range on Monday, Not an easy environment for the MIC especially so close to the expiration but it’s better than having opened one a week or two ago.



That was a first for me and I’ve seen a lot these past few years.  The size of the swings and the timing is quite astounding.

Luckily the whipsaw did not affect our position directly since it was so close to the end and we had a huge range and we hadn’t needed to adjust. However, the volatility increase is making it annoying to close the trade. We’ll likely need to wait until Monday or Tuesday.  As theta and vega start do deflate from the trade. We have that luxury with the trade being so delta neutral.  Right now there is a lot of fear in the market and it reflects in the price of the insurance we sold despite it being very close to expiry and far away from the strikes. Friday and the weekend should deflate most of that value away. We’ll want to enter the weekend fairly delta neutral as a way to mitigate all potential risk.

I am excited to close up the year and reset my trading portfolio in January. It’ll be both a lot less active maintenance and a lot more diversification. This year was an active trading year as I was nearly 80% MIC and heavily focused on small active adjustments to avoid whipsaw. This backfired in the huge 250 point run we had from 1820 to 2070


Screen Shot 2014-12-11 at 10.23.38 PMScreen Shot 2014-12-11 at 10.37.22 PM




Modified Iron Condor * Guide *

Modified Iron condor (MIC)

The MIC is a non-directional strategy where you sell both ends of the spectrum and buy insurance in the middle. Essentially, you’re a market insurance salesmen. The upside is usually the biggest problem with the MIC and the anchor likes up, so they tend to hedge each other. The EV trading loves volatitlity increases and helps on the down as does the standard adjustments you’d do in the MIC. Down and up are generally covered.

This is how you’d setup an MIC

Setup:The shorts start at approximately delta 8-10 and are 20 wide. The call side

is uneven and typically one unit represents 5 on the call side and 15 on

the put side. To balance vega/delta further I add a close to ATM put

debit spread and 2 black swan puts. The call spreads are smaller because of volatility

skew and it makes it easier to manage on the upside.

Adjustments are made at 20-25 delta.  Essentially you sold insurance on both sides for a significant amount and through the month you manage your delta (risk).

On the upside an adjustment would remove a portion of the call spreads

on the downside an adjustment would be to widen the debit spread, buy

more debit spreads OR buy a long put in a fast declining market


Sell to open 15 January 17 2014 1025 put

Buy to open 15 January 17 2014 1005 put

Price: $.90 credit

Sell to open 5 January 17 2014 1200 call

Buy to open 5 January 17 2014 1220 call

Price: $1.15 credit

Buy to open 1 January 17 2014 1125 putSell to open 1 Jaunary 17 2014 1105 put

Price: $6.65 debit

Buy to open 2 January 17 2014 920 put

Price: $.90 debit

RUT at 1128.  This represents 1 unit.

Dec 11 – Trade Plan

Wow, what a day in the markets. It was one of the worst days of the year. The SPX fell 2.5% from peak to trough and the VIX surged 25%. Something you don’t often see is the TRIN exceeding 3. The Trin measures the advancing vs declining issues in the market. When it’s this high it usually signals a reversal on oversold conditions.  7/8 times it’ll reverse. Though it can also signal a big fall (2008/2011).

The volatility increase caused a temporary loss to our MIC. As volatility surges and unsurity increases, our way out of the money credit spreads increased by probably 3-4 fold. We’re still a very far way away from our spreads so we’ll just keep adding debit spreads until Monday if the market should continue to fall. Volatility will have less and less of an affect as we’ve only got 5 trading days left in the month. It’ll quickly dissipate and resolve and all the while our theta is very high. We’re likely holding till Monday unless we have a huge up day on Thursday or Friday along with a volatility collapse. Managing risk over the weekend is key. We’ll want to make sure our delta’s are close to even and make sure we’ve got a nice long range. We’ll let theta and vega work to our favor.  As it stands now,  our curve is quite safe and our deltas are just slightly positive. All in all a great position to be in. Both our debit spreads and the credit spreads should profit resulting in a nice gain on the month.

I took the down turn as an opportunity to sell some of my year out puts used in the Anchor. This is in prepration  to rebalance for our January trading portfolio. It would seem I was a bit premature. I sold about 10% of the puts at 205 and the spy reached 202.98.  Ah well.

Today I’ll be just managing our deltas and make sure there is no great exposure.  I’ll be on high alert today.


Dec 10 – Trade Plan

Update: A market breadth indicator I use has triggered a short at spy  205.4 with a target of 204.9. I’ve sold 2k shares of spy and put an auto close at 204.9. These trigger probably 25x a year and are good for about 25-30% return unleveraged.  They usually trigger 5-10 min after market open.

**Update 2** I closed at 204.92 and we made out with ~1k profit


I’m in the midst of rebalancing for the month of January.

I’ve decided to do

25% Modified Iron Condor

25% TLT/SPY Pair Trade

25% Anchor

15% Momentum

10% Volatility

I’m overbalanced in MIC and waiting for the Dec trade to close this Friday or Monday (latest). I expect to do about 5% on that trade. Once this closes, It’ll release a lot of margin which I’ll use to enter momentum, another MIC and the rest will be dry powder for the next TLT/SPY pair trade.

I had a margin issue yesterday that imbalanced me on the anchor trade which I have to correct. It’s an issue of being over leveraged without accounting for large volatility increase which can throw off the portfolio margin calculation that occurs every night.  The solution! Less leverage!  There’s nothing more stressful then being caught up in trying to become compliant during the first 15 minutes of trading. It throws everything off. You end up chasing to correct offset the entire day.  Won’t happen again.

Right now I am in the TLT/SPY pair trade, over balanced in the MIC trade and slightly overbalanced in the anchor trade. The MIC overbalance will be corrected within the next 2-3 trading days as we exit the position.


Welcome to Travel and Trades

I figured it was about time to start sharing some of what may be an unorthodox lifestyle. I do a lot of traveling and a lot of trading.  This blog will document my trades and at times my travels and the challenges therein.



I typically follow a non-directional trading style having mostly traded a few strategies

1. Modified Iron Condors (MIC)

2. Earnings related volatility trading

3. Fully hedged Anchor strategy for a long term portfolio

My focus and research/backtesting has been focused on how to maximize leverage in a safe/conservative way.  I’ve determined that non-directional strategies tend to work best for this.

Modified Iron condor (MIC)

The MIC is a non-directional strategy where you sell both ends of the spectrum and buy insurance in the middle. Essentially, you’re a market insurance salesmen. The upside is usually the biggest problem with the MIC and the anchor likes up, so they tend to hedge each other. The EV trading loves volatitlity increases and helps on the down as does the standard adjustments you’d do in the MIC. Down and up are generally covered.

Recently, I’ve decided to further diversify and am doing somewhat equal parts of MIC, Pair trade credit spreads of TLT/SPY,  LC 15M (momentum based trading style based on Meb Fabers research), Volatility trading and finally the Anchor strategy

1. MIC

2. TLT/SPY Pair trade

3. LC 15 M (Momentum)

4. Earnings volatility trades

5. Anchor Strategy

My belief is that this will end up in a very well rounded leverage based trading portfolio.