Category: Trades

Mar 9 – Trade Plan

Update:

Premarket : TLT is up to 124.7 from its low of 122.97 on Friday and its close of 123.3.  SPY is up to 207.88 from it’s low of 207.1 on Friday and its close of 207.5.  That should bode well for the closing of the SPY/TLT trade.

 

Wow, what a day on Friday, every thing was down, even our hedges!  Literally, the only thing that did well in my portfolio was the MIC. I lost on the EU, CAD, TLT, and equities. I am posting a blog from Urban Carmel who is probably who I respect the most as a technician. Check it out, it’s a very well-balanced technical look at the current market situation.

http://fat-pitch.blogspot.com/2015/03/weekly-market-summary.html?spref=tw

 

The official SPY/TLT trade at SO is down 40%. Mine is down about 19%. I will remove most if not all on any bounce. I don’t expect downside past the 50 DMA at ~206.5 without a bounce first. I have maybe 16% of the trade left on and the portions left on SPY are mostly OTM but inflated because of volatility. I’ll be monitoring and removing pieces as we go through this week. I am hoping to get out at -10 to -12%. I have 196/191s, 205/200s, 206/201s and small amounts of 207.5/202.5s in SPY and I have 126/121 127/122 in TLT.   I’ll remove the  trade in entirety if SPY falls below 206 and if TLT falls below 122.8.  Those are my cut-offs.

 

Mar 4 – Trade Plan

So far for the April MIC I have about 17 units on. I’d like to get it up to about 30 for the month.  I’ll probably add two more tranches on down days to take advantage of the increased volatility.

170 1140/1120 put credit spreads

45 1110/1090  put credit spreads

26 1120/1100  put credit spreads

19 1100/1080 put Credit Spreads

85 1300/1320 call Credit Spreads

5 1230/1220 debit spreads

4 1220/1210 debit spreads

3 1210/1190 debit spread

1 1210/1200 debit spread

I need to put on another 4 debit spreads to get the trade setup properly.

Futures are down quite a bit as of writing this. TLT is slightly up. I’d like to get out of this pair trade for good.  It’s down about 9% right now.

Mar 3 – Trade Plan

TLT has fallen about 2% yesterday from its Friday close sitting at 126.89 from a close of 129.5 on Friday. We closed most of the TLT portion of the SPY/TLT trade on Friday during the rise and we’re left with about 25% of the TLT portion. Not a great day for TLT but the SPY portion made up for some of the loss on the TLT.  I gather we should still be able to get out of this thing at break-even or slightly below. We’ll see.  TLT has about a 30% chance of double-bottoming at 126. Markets are getting over bought on many indicators so we may see a bit of strength in TLT as we start to stall in the markets and as participants start to accumulate TLT as they usually do during these prolonged topping or perceived topping patterns. After consecutive ups, SPY may spend a few weeks in a range.  During this phase, TLT generally does go up because more and more people start to expect a pullback (during bull markets) buying bonds to hedge an expected pullback is a better way than to short SPY directly.  Going to give what’s left of the trade a bit more time. SO hasn’t closed their trade either (100% of it). I’ve closed 70% of it.

I closed most of my MIC from February. It did well. Happy with it and the new parameters.

The MIC for March is doing well. RUT isn’t really moving all that much which is great for the trade. No adjustments required. I did enter a small amount of call spreads at 1243 yesterday and added the corresponding put spreads after it fell a bit at about 1237. As well, when it rebounded to 1242 I put on the debit spreads.  When I leg in I do it with very tight stops and only small portions. If RUT proceeded to 1246 I’d have immediately added the put spreads.

 

Feb 27 – Trade Plan

That “almost” 3 point fall in TLT and red close for SPY put the pair trade at -7% for the month. I did manage to close probably 30% of the trade during the rise the past few days.

I am closing the trade either today or Monday/Tuesday latest. I’ll probably take most of TLT off it it falls another 0.5 points. We’ll gauge the market.  The most well respected people I follow are looking to get into TLT as a slight hedge. So I am a bit more OK with allowing the trade to go on a bit. Steady options is also still in the trade.  So I’ll use all of that info as a gauge but the most likely thing is taking the trade off in parts.

 

 

Feb 26 – Trade Report

The SPY/TLT pair trade is now at break-even. The trade went from around -23% to ~0% thanks to Yellen. Both the equities and bond market rallied the past few days sending the pair trade into break even status. We’ll likely come out with a slight profit. I’ve been closing portions as it rallies, it’s conservative, but we want to have it closed by Monday latest anyways. No harm in reducing exposure. I’ve closed some at 128.5, 129.5, and 130.  I am not a huge fan of the trade itself mostly for its future prospects and the unknown ongoing correlations with SPY. There are times when they both go down. I have this feeling that SPY/TLT may not necessarily be negatively correlated in the next few years. Rates are super low, spy is at all time highs, it feels like there’s more tendency for downwards movement for both. Who knows though, I don’t know enough about it and won’t pretend to. Probably another reason why I will continue to reduce my allocation whilst increasing the MIC allocation.

Feb 25 – Trading Report

Simply said: Yellen was dovish

I watched the testimony and essentially they don’t anticipate raising the rates in the next few FOMC meetings but reserve the right too if the data supports it.  As of now, the data does not support it and they do not want to hinder the recovery process. It’s unlikely that rates will be raised in H1 2015.  This sent bonds/treasuries flying. TLT hit 129.5.

The SPY/TLT trade is only down about 2% now. I closed off about another 8-10% yesterday.  Just being cautious.  I was going to close it Friday or Monday any how. We should get out at break-even or slightly higher. If we have any luck maybe we come out with 10%. Would only take another 2 point rise in TLT.

My Feb RUT MIC is up 5.5%. I just put on a small one this time around (15 units). I’ve made one adjustment (took off some call spreads yesterday during the testimony) It was a conservative move but I felt that the market could move around pretty quickly as it sometimes does during these types of events. My short call had 1.5x in value and it was in my 1.5 week window. I followed the plan. Of course, I closed it right at the RUT peak but a plan is a plan and the trade is still up 5.5%. Any quick up move and I’ll be chilling without worry while if I hadn’t I’d be stressing overnight.

I saw some results from another person (Amy Meissner) doing the MIC trade style. I posted her results below:

 

Screen Shot 2015-02-25 at 9.20.34 AM

 

She sets it up just a bit differently. She has a much lower ratio of call spreads sold. This would have helped a lot during the period she traded.   The thing is, downside is easier to adjust, so starting off with less calls is kind of interesting. She uses 10 puts to 2 calls.  I use 15 puts to 5 calls.  So it’s a 1:5 ratio vs a 1:3 ratio.  I am kind of interested in that or at least exploring using specific kinds of setup depending on the current environment situation. If we’ve just come off a big correction/drop, I’d probably opt for a 1:5 ratio but if we just came off of a large run-up and things were getting over bought on a variety of metrics, I’d probably opt for the 1:3 ratio.  Right now, according to sentiment trader, we’re kind of over-bought on a lot of metrics. So I’d be looking at a 1:3 ratio setup, as an example.  Each type, whether it is 1:5 or 1:3 has its own style. As long as the plan is set in place before hand, and you manage it correctly. There’s no real discretionary issues.

Her results are quite good and based on REG T margin. All of my backtesting shows around the same overall result 3.5%. Use Portfolio margin, lever it up a bit, and you’re getting 9-10% returns. The idea with that is, use less capital to get similar returns.

 

 

Feb 24 -Results

Update:

The Feb pair trade is obviously recouping a lot of the loss as TLT marches up to 129.25. I believe we’re close to break even on that trade now. I’ll be able to tell tomorrow when I can do the calculations on the reports. Oh how nice it would be for it to bounce up to 131 right in time for closing. Might even be able to pull in a profit on this one.

With leverage my entire account is up about 12% for the year.

—-

So far this year :

Alpha Portfolio: 3.2415% (with the equity portion being 4.78% vs SPY 2.3%!!!)

SPY/TLT Pair Trade (January): 10%

Momentum: 2.159%

Our SPY/TLT February is down about 10%. I’d love to get out at break even.

The alpha protector is sitting at 3.2415% (4.78% in equities less 1.538% for hedge cost) for the year so far. The Hedge portion is down about 1.538% as expected in a rising market. The goal is for the hedge to pay for itself but it takes time. It’s a full year strategy. Each week we target enough extrinsic to eventually pay for the hedge.   The alpha portion is almost double SPY!  Awesome.  Especially given our early results with OCN and QCOM.

The momentum portion as of yesterdays close is up about 2%. We were up about 10% in January but it’s been a bad month for TLT.

Feb 22 – Update

My portfolio has hit a yearly all time high.  Not bad considering our SPY/TLT is down about 19%.  I am going to wait for a bit of a down day next week to roll up our spy pair for more credit.  Any movement up in TLT will get the trade towards the profit zone (captain obvious). This is a smaller portion of our portfolio and we expect these sorts of swings.

The momentum portion is still positive but just barely

The alpha protector is doing very well.

TLT roared to 128 on Friday and closed back down to 126.65 after news of a Greece deal. This also pushed up SPY about a half percent in a minute. At 128, I think our pair trade was only down 10%.

I think I personally will start to increase the MIC (modified iron condor) portion to a significant amount of my portfolio (20%). My portfolio will mostly consist of MIC (20%), Alpha Protector (40%) and very small leveraged portions of momentum rotation (10%), earnings based volatility trades (10%) and a small portion of spy/tlt pair trades (10%) and some bond rotation (10%). I’ve also got a  position in the optimal fund at Covenant capital but I don’t include that in the above percentages. I gotta say, I am kind of excited about the optimal fund, I like the way they approach risk and volatility. The idea is to use a lower amount of capital with a higher volatility trade style to achieve the same results. I am looking forward to seeing how this performs in 3-5 years.

I will post all my MIC trade entries and adjustments on this forum under the heading “MIC – Month”.  So anyone who is interested can follow along.