broken wing butterfly – Page 4

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)

No adjustments here.

RUT Oct-D (Rhino)

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

SPX Oct-M (Rhino)

RUT Oct-M (Rhino)

No upside adjustments required.

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

SPX Monster Oct-P (Rhino)

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.

Sep 6 – Rhino Trades

I just joined Bruno’s new service for Rhino trades. He has a fresh interesting outlook on the Rhino trade that interests me. I highly suggest it for anyone that trades Rhinos. I think it’s $900 for the yearly membership today. The Baby rhino looks like a nice addition which I haven’t traded yet. I need to diversify a bit and I’d love some more short term trades as I am not traveling and basically at the computer all day. I’ve started to look at some simple rules based trades to add to my repertoire as well. Just something that’s low stress and management that has a very consistent track record. Specifically the super simple spreads which I just saw a 15 year back test that was fairly impressive. I want to add some tweaks of my own (specifically a STT like addition to it).

Coming towards the end of Aug, I felt like my trading and the methodology was “a solved thing” but as I started getting more time late August and I started watching fellow trader videos/presentations and reading group conversations, I found ideas and data that proved that wrong. I’ve been inspired recently I guess. I mean, the Rhino is a very low maintenance type trade that’s both resilient and very powerful. I didn’t really want to put any serious capital outside of it in other trades and I felt like I hadn’t really needed to explore much more on the Rhino trade in specific. Find something that works and is resilient and leave it alone type thinking. But I think there may be interesting things that we can take away from the new Road Trip Trades (RTT) while adding Space trip Trades (STT) in for downside crash protection. The Rhino has a serious problem with runaway markets to the upside and addressing that weakness would be nice while not over exposing the down side. I don’t know if the STT would help in that as it’s meant for Crash protection, but I want to explore it. I also am not loving the calendar adjustments on the upside and have been mostly using call BWBs.

I’ve had a mostly unemotional hands off approach to trading it since the summer. I follow the trade plan and mitigate risk as needed. I haven’t profited much since the meteoric rise from the February lows since it was a 33 % or so move. The way I trade the rhino doesn’t allow for profit in a runaway market like that. I mean, how could I expect to profit much when each cycle had a 5-7% up move. It’s just not possible for me to make money in my trade plan for the rhino if the market has 7% up moves in each cycle of the trade or if it rises 33% in 5 months 🙂 All that said, I am looking to add some strategies for my upside and I’ve started to add some mechanical strategies I used to do.

Here’s my September trade that’s basically closed down pending any significant down move before expiry, it’ll be closed at a loss. If I get a 5% down move ANY time before Sep 20, it’d be a profitable month 🙂 If I get lucky and have a 10% move, I’ll be up massive amounts.

Here’s my October trade

It’s up a tiny bit and I think it’s in a good position for the cycle. My upside risk is quite low and any decent down move will get it right in the tent (hopefully later in the cycle so the T+0 builds in the tent).

Finally my SPX October trade

This one is my biggest trade with the most potential. If we get any 4-5% move in the next 30 days, It stands to make several hundred k. The upside risk is low but I’ll have issues if it sits between 2170 and 2200 and will have to address that sag.

Jul 13 – Rhino M3 Trade Update

Not going to lie, yesterday was uber demotivating even with the experience I have in managing these trades. Both my Aug and Sep Rhino trades entered fairly negative territory with RUT @ 1210 which represents a 120 (11%) point move from just days before at the Brexit bottom. It’s just frustrating since both of those trades were up 4-5% and our balance was finally

soaring

after a very difficult year only to have the yearly profits dwindle down to mediocre levels in just days due to a fairly effed up move. Why was I demotivated? Well, it feels like every trade cycle (45 days) this year has had a challenging 9%+ up move. Those 9%+ up moves are the most difficult type of move to manage in this trade. Since when does the RUT have an up move of 9% or more every cycle? I think RUT is up what 28% from its Feb lows? No matter how you slice it, it’s difficult to profit in a 28% up move in just 5 months and I am getting sick and tired of mediocre results and the “of course its up 11% in a week and half” frustrations. I’d like to have normal cycles with either a down move, a neutral move or an up move of 7% or less 🙂

Anyways, today has given us some respite and on close yesterday I hedged more with 1230 call calendars and some 1180/1230/1260 call bwbs. Today I added more and I grabbed some long IWM @ 119.5 to help on any up move. I believe that we’ll have a small pull back but we’ll be off to the moon eventually. Things look pretty damn bullish but we’re in need of a healthy pull back.

On two of my accounts I got off my 1960/2040/2100 SPX Rhinos but I never got filled on my main account. I lost most of the profits on that one.

Most of my Rhinos are 1060/1110/1150 and 1050/1100/1140s with call calendars and call BWBs at 1230.

One other annoying thing, I had some short 1190 and 1210 calls for July that I left on to expire when RUT was at 1100. Lol, I realized 5 days ago that I still had them on and now they’re worth a lot more lol. Expiry was Jul 14 and there was no reason @ Jul 7 to think we’d get that high. My bad. I always close these but felt like there was little risk. I guess RUT is up like 10% in a few days…

Jul 12 – Rhino M3 Trade Update

Struggling here with the massive up move in a short period of time. We’re at ATH on the SPX and RUT is tagging 1190 (From 1088 just a week or two ago). This is the one type of move that stresses me out the most with the Rhino trade.

The Aug trades are now all negative by about 1-2% when they were profitable by about 4% just a week ago. I added call calendars last week and hedged off some of the BBs I put on as downside hedges with calls (converting to M3) and some futures but it’s not been enough and we’re now negative and in a zone of the trade I hate. These things can handle, you know, normal 6-8% up moves in a cycle but when they get up to this range (10%), things start going negative and they start getting annoying to manage as we’ve got to deal with decreasing theta and zones where even pull-backs don’t produce much recovery because of upside hedges put in place. As I’ve switched from old school modified iron condors where I dreaded volatility and down moves, now I dread never-ending 9%+ up moves and wish for corrections, neutrality or a 45 day trade cycle that doesn’t have a 9% up move 🙂

The move is stressing me out because there are a lot of imponderability about it. I don’t know if this is the start of a huge break out because of helicopter CB money (BOE and BOJ are easing) or a typical normal over-reaction short covering from the Brexit event. All breakouts of ATH have an 80% failure rate and thus I am trying to be patient on any aggressive upside adjustments. We’ve got a Bradley turn date, some big negative divergence, volume was down -17% yesterday on index, we’re vastly oversold, the T2108 % of stocks above the 40DMA (69%?), and we’ve tagged upper BBs. The 80% failure rate can take days or even weeks so we’ll have to be patient but with any luck it starts now.

My plan is to add upside hedges on any normal sized pullback (thus getting the trades more balanced) and hold off on adding upside adjustments if we just continue up or pause unless we break 1199 with conviction.Then I will reconsider my plan and probably start taking losses. My guess is RUT stalls around 1190 area and pulls-back, I think John Locke is also recommending being not so aggressive on upside hedges right now and also believes the same thing re 1190 as a reversal zone at least short term. My nagging “back of mind” thought is that these markets aren’t following the usual, we’ve got central banks injecting like mad (BOJ and BOE) and this money has to go somewhere. I fear that these Aug and Sep trades might be in some trouble.

Jul 8 – Rhino M3 Trade Update

Rough week in the markets. The RUT was in the 1130s yesterday and the trades were doing fine though fairly delta negative (just not enough to warrant ANY adjustments). I did have a few TF futures, some long IWM and some calls on as additional hedges, but I removed those at a decent profit throughout the day just not at today’s high by any means. I wish I waited longer. I sold off 1 call per account at 131 (1050s Aug) and TFs at 1157 during the jobs report (damn!) and IWM at about 116.57.

Yesterday, the trades were down about 3% from our all time highs and healthy positive, this was understandable since the market was up about about 4% in a few days and our trades will always suffer in larger up moves. Today they’re down a lot more from the high but still slightly positive over-all. Our upside risk is not so high as today’s move was fairly big and sudden and took away most of that upside risk. Today’s up move was next level and puts the move from the Brexit lows at 8.3% up. This removes most of our profits for Aug but we’ve got limited upside risk and a huge profit tent built underneath. IF we get Any move into the below 1145 in the next 3 weeks, we’ll be singing. IF we continue up..well we’ll enter negative P/L but with not so much upside risk per say. The entire Aug trade now banks on a pullback where we’ll take some off and/or adjust on the upside.

The September trades I entered are now negative which is understandable since they’re a mix of 1150/1110/1060 and 1140/1100/1050s. I’ll have to add some call BWBs sooner or later if we continue to be at 1170 or above. I would like to wait for some cool down first. I want to see how this next week proceeds. I would have thought the EU bank risks were bad news but maybe EU money is now flowing into the US market. The internals today were insanity. That worries me a bit re continued up moves.

Jul 2- Rhino M3 Weekend Update

I managed to get some calls and call BWBs in on Friday during the dip and luckily, pretty much right at the bottom of said dip.

Trades:

2 x 1050 calls at $106 to hedge my Bearish Butterflies I put on as a hedge pre-brexit (converting them to an M3). I have 1160/1110/1060 and 1150/1100/1050 Butterflies x 15 and 2 x 1050 calls. Note: Earlier on the week I had bought the same calls for 90 and sold at 99 when I thought the RUT was exhausting itself. I had to rebuy at 106 when that was proven wrong though the same calls touched $114 on the height of the RUT move. So I was pretty much in M3 configuration the entire up move except from 99 to 106 re cost of the call.

15 x 1210/1180/1130 Call BWBs to hedge the Rhinos @ 18.33

The trades are mostly hedged to the upside now and though I expect some weakness into next week, I also expect the markets to quickly resume its uptrend. On dips, I’ll start taking off some Aug trades and hedge a bit more with call BWBs or Calendars. I’ll be quick to take profits on Aug. I had built up a lot of profit in Aug expiry and though some of it was taken away in this most aggressive up move, I still have a lot. My overall balance is about 6% from its earlier and max highs on Monday. I am very happy I took off all of July on Monday as those wouldn’t have fared well in the maniacal three day bounce. I was quick to take profits on those 🙂

As for September, I am only somewhat entered. I have 1150/1110/1060s and 1140/1100/1050s. I am looking to add some call calendars or call BWBs to protect on the upside. Waiting to see what happens post Jul 4 weekend. I got a bunch more on thursday @ 2.90 which isn’t a great price. I won’t pay much more than that so if the volatility continues to fall and the BWB prices go above 3.15, I’ll sit out and manage what I have on and wait for a high volatility day to enter more @ better prices. If we don’t get a high volatility day in the next 20 or so days, then so be it. I struggled with July due to bad prices and won’t repeat the same thing again. Trading well means getting good prices and being willing to sit it out until you do.

Jun 14 – Rhino M3 Trade Plan

On this mornings bounce I sold off some upside hedges I had (1 TF future per account) and (10 2125 call hedges for SPX) and the market proceeded to sell off through most of the day making the decision look great. That said, it did end up bouncing towards the end of the day. I took the bounce as an opportunity to add some Bearish butterflies (Jul Expiration) at such a good price (If I recall, they were 10.60 for July expiration!). The steep option skew has made butterfly pricing very attractive these past few days. As I said yesterday, it was different and kinda unusual. Volatility increased and usually vol skew flattens out but this time around it actually did the opposite. This made pricing great for entry but negatively affected BWB and BB trades already entered. My OV risk profiles were not as expected going from Thursday till today. However, it got better towards end of day.

There is a lot of doom and gloom right now, we cut 2080 like butter and kept going. The selling is relatively emotional and fearful and until we have resolution in the events, we can expect some more uncertainty and volatility. The Brexit is mostly about immigration and I’d guess that on an exit, the politicians would keep the same trade agreements in place. So probably ‘much ado’ about nothing that has any real effects on the economy.

My gut says we’ll have a bounce tomorrow re the Fed meeting and probably into OPEX. I might hedge with some cheap weekly calls. I don’t know yet. We’ll see how it plays out.

Here are the risk profiles of the three Jul Rhinos. The P/L aren’t accurate as I hadn’t updated pricing on a few adjustments but the profiles are correct.

Jul Rhino M3 (P)

Jul Rhino M3 (M)

Jul Rhino M3 (D)

Here are the other three which started off more as an Broken wing condor.

Jul Rhino M3 BWC (P)

Jul Rhino BWC M3 (D)

Jul Rhino BWC M3 (M)

Here are August trades, which are a testament to the whole Vol skew issue. These should have had a massive P/L increase on the fall. We were outside the tent and entered in, the OV mdoel would have suggested a large increase in P/L. This will self correct. But I kinda learned something, I was or had a tendency to add Rhinos at perceived tops and I did this fairly well timed a week to two weeks ago when RUT @ 1180-1190 and I’d have expected that with heavy negative deltas and a bearish bias, that I’d not be down right now. but I am, at least for now, because of Vol Skew. The pricing on the BWBs were about 3.30-3.40. Not great. I don’t think I’ll be as excited to enter on big up moves, rather, I’ll be more excited to enter during down moves where vol pops and skew is favorable.

Aug Rhino M3 (P)

Aug Rhino M3 (M)

Aug Rhino M3 (D)

I have a bunch of SPX ones as well but I’ll post those later. They were purchased at much better prices and are doing well.

Jun 13 – Trade Plan

It’s been a while since I posted….I was traveling for work and had minor surgery which put me out of commission re posting. I ended up closing the June trades for a great profit about 1-2 weeks ago.

I am in the July and Aug trades all of which are about break-even at the moment. They were all pretty heavy delta negative a week ago and according to OV, we should have expected some significant paper profits because of the RUT falling from 1188 to 1153, but we haven’t. Completely different position than the models suggested. I understood this and sort of expected it with any decent IV rise but not quite as pronounced as it is right now. Usually, if things calm down just a little after an IV spike, the skew changes and time decay floods in and positions start to match the expected model. This time around, this won’t happen until we pass the two big events that are causing the IV spike — Brexit and the Fed meeting. The recent terror attack and the politics surrounding it also presents some issues. For now, market makers will keep pricing inflated. Not forever, since all premium must come out but at least until those events pass and there is some breathing room. Seen it before many times. For now, I am taking the opportunity to add more bearish leaning BWBs to the trades as they’re much more decently priced. I just paid 2.70 for a BWB whereas I was paying 3.40 just a week ago. So not only are they cheaper, but they’re helping hedge to the downside.

RUT has been a bitch since Aug of 2015. We’re having outsized moves and it’s made trading challenging. It’d be nice when the beast settles down a bit. This year alone, we had a 22% decline from Jan to Feb which was followed by a 22% rise up till Apr 28th. Making money in the Rhino trades during that environment is almost impossible. Following that, we had a 7% drop into May 19 followed by a 10% rise to Jun 8th (a 25% for the entire year @ Jun 8). Again, this trade can handle 7-8% fairly decently in any given trade period of 30 days, re not LOSING money but when you get a quick 7% drop followed by anther 10% rise, you start to have challenging trade management. Despite that, June did very well especially since we got out of most of it before the 10% rise. It’s really not normal to have 8-10% moves each month with whipsaw. I cannot wait for an environment that has normal moves 🙂

Our Jul and Aug trades should be able to handle any bearish fall so long as it’s not like 10-15% overnight. They’re all good till about RUT @ 1100. The position they’re in now, ANY stabilization or drop in IV will get them to probably max profit pretty quickly. We’ve got 35 days left and lots of room to the downside and lots of theta since we’re under the tent. Should be a good month unless we have a large correction.

I am traveling for 2 months again starting June 27. We’re doing:

Vienna (7 days)
Krakow (5 days)
Dresden (3 days)
Regensberg (3 days)
Salzburg (3 days)
Munich (5 days)
Freiburg (3 days)
Salzburg (4 days)
Arona (6 days)

10-15 days left unplanned

Undetermined whats after this..maybe south of France or north Italy. Any suggestions?

May 11 – Rhino M3 Trade Update

The June trades are doing well now. We’re at about 4% on planned capital and we are 37 Days to expiry (DTE). We started off pretty rough with this expiry and I am not interested in taking too much more risk with them now that we’ve got some profit. We paid a lot at the beginning as it was low-volatility as such I have reduced profit targets. So I’ll start peeling off as the market moves through the next 14 days. Right now, they are delta negative by about -10 deltas each unit.

I have some concern for the downside as downside moves can be swift and more difficult to adjust and with potential negative news in after hours, I’d rather have a nice cushion. We just fell from 1155 to 1115 and I’ve got a lot of upside hedges on. These have to start coming off if we fall much more, else I’ll have too much exposure to the downside. Up moves are a bit easier to manage (re fills and size of moves especially after a big run up) and generally there’s less explosive positive news in after hours that could get us in trouble. Plus, we have way less upside exposure in the T+0 line. I have a bearish bias at least around May expiration (May 20) and onward. We’ve got 7-14 days left and if the market continues to fall, I’ll remove upside portions of the trade more aggressively which will remove my downside risks and expand the tent. If, for some reason, we should get whipsawed hard, I’ll then remove the downside portions all while keeping things fairly delta negative. Thus unwinding the trade while allowing theta to work for us while keeping the goals of protecting the downside. I’ll continue like this over the next few weeks, seeking out more and more theta and unraveling the trades.

I don’t have the full unit exposure on July trades as I couldn’t get fills. If things get more volatile, we might be able to get great pricing this week or next. The more volatile it is the more closer to expiry pricing acts. I.E what you pay for a BWB @ 72 DTE in a low vol market would be similarly priced 55-60 DTE in a more high volatility market.

June Rhino M3 (P)
# of Units: 30
Planned Capital: 750,000
Current P/L : 27,092
Max Draw Down: P/L: -18,000
Current P/L(%): +3.6%

June Rhino M3 (D)
# of Units: 16
Planned Capital: 400,000
Current P/L: 13,356
Max Draw Down P/L: -11,000
Current P/L(%): +4%

June Rhino M3 (M)
# of Units: 25
Planned Capital: 625,000
Current P/L: 25,547
Max Draw Down: -16,800
Current P/L(%): +4.0%

May 7 – Rhino M3 Trade Update

Here’s the trades from yesterday at 2:30pm. I had a few call BWBs close on auto orders that I haven’t included here near EOD on the ramp up. Slightly exposing on the upside but given the sharp down and deteriorating technicals, I wanted to get things more delta negative though. Profits are coming back in nicely. After next week, I’ll be aiming for 7.5% to close the trade. If we make it to about 27 DTE, I’ll take 5-6%.

BPSPX indicates that the upside move is not to be believed. It’s deteriorating rapidly and suggesting more downside as are the other bullish percentages. The past 18 months I’ve tracked the BPs closely and to be honest, it’s probably now my favourite indicator. I used to loathe them because often they’d be in the opposite of my market opinion and where I needed the market to go in order for my trades to do well. So much for market neutral trades being market neutral eh, being market neutral is a myth in extended markets (up or down) when your trades get out of the zones. However, we’ve rallied into OPEX quite consistently and smart money hasn’t moved this week or gone sharply short. The DAX is at a perfect position for a bounce. Maybe we have a little downside this week towards SPX 2019 and then bounce into OPEX. I think we’re going down after that though. But that’s all just gut feeling and bias based on everything I read and follow and based on technical indicators that I use. How does it affect my trades?? Not a whole lot other than I might be more biased to take off some upside calendars and BWBs on big bounces.

I wasn’t able to really get any good fills for the remaining July trades despite the increased volatility of the week (you’d expect better prices). I did get filled well on some SPX trades earlier in the week but I haven’t bene able to get a fill anywhere near since.

June Rhino M3 (P)
# of Units: 30
Planned Capital: 750,000
Current P/L : 19,550
Max Draw Down: P/L: -18,000
Current P/L(%): +2.6%

June Rhino M3 (D)
# of Units: 16
Planned Capital: 400,000
Current P/L: 13,356
Max Draw Down P/L: -11,000
Current P/L(%): +3.39%

June Rhino M3 (M)
# of Units: 25
Planned Capital: 625,000
Current P/L: 19,007
Max Draw Down: -16,800
Current P/L(%): +3.0%