Mar 8 – Rhino M3 Trade Update

Finally, we got some semblance of a pull-back (-2.5%). It’s what I needed but still I could use another 1-1.5% 🙂

I adjusted in two lots, one at the beginning of the day and one towards the end. When we were at around 1075-1077, I felt it responsible to start adding some call BWBs and some calendars at the beginning of the day. I then added in some more ATM rhino’s to add theta to the trade. I then removed some of my very most bottom Rhinos towards end of day. I obviously wish I adjusted everything towards the end of the day but with the way RUT was moving, I didn’t want to take the risk. The down move allowed us to recover a bit and I added more theta into the trades. Tomorrow, I’ll continue to get the trade more neutral and in a good place for any upcoming move in any direction. I am probably about half way to break-even now on the trade from its lowest point. We’ve got 2-3 weeks and a lot of theta. Crossing fingers. Hopefully we can end the month break-even on a 16% up move.

Looking at May trades tomorrow as well.

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.

Mar 5 – Trade update and Historic run-up

My April trades don’t have that much more upside risk left. They’re all down @ about 5-5.5% on this record 15% move in 15 days. It’s actually a historic move and has broken a few records. A move to about 1100/1105 would bring another 1%/1.5% loss in the trade.

My plan is to add more theta to the trade and hedge the upside a bit with any pull back. I’ll do it in stages. If we get a touch in the 1070s, I’ll add some 1090 or 1100 call BWBs. If we get another touch in the 1060s, I’ll add more 1080 BWBs and so on. I won’t go too far out (probably 20 points above) and try beefing up the theta in the area and hoping for some decent pullback so we have a chance to break even or profit. If by Tuesday, there is no pullback, I’ll start figuring out how to deal with the theta and probably put on some 20 point out BWBs. A 5% pull back anytime in the next week would put us at a decent profit and allow us to re-adjust the trade or even just exit.

As someone posted in our skype group: All the way back to 1997, we have never had a move of this size without a single pull back. A similar pattern happened in 2013, we moved up 114 points on the QE business but that was as close as was found,and right now we’re up about 145 points. Truly a historic move. The RUT RSI is epic @ 91 and all indicators related are as extreme as you can get. The NYMO is now at 350. The all-time record is 375.

My trades are all down about 5% (15% w/ leverage). I expect an occasional 5% loss. Not worried about that. I am a bit frustrated and kinda demotivated by the challenges of the last 6 months. Starting in August, it’s been a silly environment that’s challenged me at every stop. From the Aug 24 crash, to the subsequent V reversal in October to the 22% fall from Dec 31 till Feb 11 and now I am dealing with a 15% straight rise (without break or consolidation). These challenges and dealing with larger money can suck the life out of you at times but to be fair, it’s been quite extreme environments that should train me to be a more astute trader. I am now looking over my plans to see if I faltered in how I managed the trades. I don’t know. I mean, I did use some technicals to my disadvantage and I guess around 1040 I would have added bit more upside hedges but nothing substantial was warranted. My play by play is that I was at -25 delta when Rut was at 1035. I added some BWBs and calendars, when it touched the 1040 area bringing it back down to the 22-25 delta area. I was satisfied, but then the last 15 minutes, we had a move to 1053 and my delta moved right to -25 delta again. The next day, I was convinced we were about as overbought as we could get and since I was hovering around the limits, I decided to wait for a pullback. The next day I got a little move down and put on a few more upside adjustments, again not much (enough?), RUT moved up again in the last 15-20 minutes to 1063 area. Super overbought. I haven’t really touched it since (a few additions). Now we’re at 1087 and down 5/6% with not a whole lot of upside risk left. Is my plan on waiting for some decent pull-back wrong or am I deer-in-headlights’ing it?? I think the odds of another sustained run is low and the odds of a decent pull-back eventually in the next 5 days is high. Without that much upside risk left, I believe the best is to wait. I mean we are at insane extremes. I continue to be patient as I was during the fall. Maybe this time it catches up with me.

I may even add some bearish butterflies if we touch 1090 🙂

Mar 3 – All Trades Update

The touch of 1073 had me a bit stressed out. My gamma is positive and the loss on a big up move is quite static though significant. We’re now up 14% or so from the Feb 11 bottom (that’s like 2 weeks ago!). Everything is over-heated and I am trying to exercising patience in this up move while still managing risk. I did the same thing on our down moves and it worked out well. These moves are quite historic and really difficult to deal with. The great thing is that the Rhinos I bought back in the 950s were so cheap so that on the up move, it didn’t hurt as bad as it could have. Still from my year ATHs, I am down about 10% on equity and mostly from the move up from 1040 to 1070.

Right now the RUT has dipped to about 1067 now and unfortunately that’s still higher than yesterdays close which was painful in and of itself. I feel that I should throw on a few call BWBs despite waiting for 1055 vs 1075. I wanted to adjust at 1055 and the price of the BWB at that point was about 18.80-19.20 so if I am only paying an extra 70-80c then I’ll take it. I am bothered by the fact that SPX etc is weaker today but RUT continues its strong push up. Even if the expected fall to alleviate extreme NYMO (in SPX) comes to fruition, will RUT fall hard as well? Today, SPX was down what nearly 0.5% and RUT was making new highs at 1073. That’s concerning. So I am thinking I should probably be more prudent with a half upside adjustment.

I looked at the historic pricing of the BWB in OV for the past few days and I’ve got an order in at about 19.90 which I consider a decent price. I went a bit more closer to ATM with this since I have somewhat a market opinion.

1080 BWB pricing

19.75 @ 1062
19.70 @ 1061
19.45 @ 1058
19.20 @ 1057
19.40 @ 1058
18.50 @ 1050
18.05 @ 1048
18.00 @ 1047

1080 Call Calendar Pricing (for comparison)

9.25 @ 1047
9.65 @ 1051
9.95 @ 1062

March 2- EOD

The RUT closed at 1065. Just above its 50% retracement and closing in on some very big resistance in the 1070 area. It’s now up 13% in 13 days. It’s at the historical upper end of bounce size.

There’s only been 5 cases since 2006 that NYMO closed above 290. It’s very likely we will soon see a relief, but who knows. Cobra (a great technician) suggests that NYMO is pretty much the only overbought indicator you can really rely on in extreme environments.

Ideally we can get any sort of pullback in the next few days without the market screaming too much higher. I removed most of my calendars today (as I mentioned) which actually helps with the upside risk (since they were all just about breached). I can withstand a move to 1080 without much more pain (still painful). I am going to do a lot things to the Rhinos if I can get a move to about 1045/1050 area which is only 1% away. If we get to late Friday and we don’t have any down move, I’ll have to start managing the upside risk and accepting the loss. Any move to the 1040 area puts my trades profitable, any sustained move above 1070 will likely make this a moderate losing month.

How do I think I did since last week??

Let’s start with March:

I kind of played this from an odds-perspective, the RUT move was quite extreme and very over-extended. I kept getting out of things on little dips and I got almost 50% of the trade off on one particular dip 3 or 4 trading days ago. I am glad I did, that was @ RUT 1033. However, I still have about 15% on and though I had low negative deltas and almost no gamma, this move up to 1065 at delta -200 and low gamma is still a 6k-10k loss if I closed it all now as opposed to 4 days ago. The odds were and potentially still are in my favor for a pull back sometime in the next 3-4 days. I don’t have any risk to the downside and almost no gamma, I have defined static upside risk so I am going to let this thing play out a bit longer. On one side, the odds were with me on waiting but on the other side, its 17 DTE and I could have just closed the thing down. I had low gamma, we were approaching extremes and I felt I had better opportunities to exit. I regret just not closing it down especially now that I see the RUT close is 1065! Even 1055 and hovering around there for another few days would have probably been net positive with the Theta.

Now April:

I’ve had pretty high negative deltas these past few weeks and I added some call BWBs and calendars to hedge. However, I think I should have probably added more at around 1045, but it wasn’t quite at the place I needed to add and for all the other technical reasons, I wasn’t in a rush to add. The big big run-ups have been happening in the last 15 minutes and much after when I do adjustments. I never like to do adjustments in the last 30-45 minutes. So when it hit 1050 yesterday, I’d have added if it was intra-day towards 1-2pm but it wasn’t. When it opened today, I was patiently waiting any modest pull back to add in more and while doing that, I reduced upside risk by removing most of the calendars that were starting to get over-run. Today it ran up again last 15 minutes and now it’s at RUT 1065 and my April trades are suffering.

Having looked a the run up and considering the NYMO information from yesterday, I figured that we would have a pull back to alleviate those extremes. Unfortunately now the pull back will start at RUT 1065 🙂 and I’ll be in the same place as before when we make that adjustment. I now have to keep on that plan of waiting for a smallish pull back as the upside risk is defined and manageable to about 1080 which, I cannot see happening before we retest 1045/1050. The run up has been too extreme and there’s just too much resistance in the 1070 area. If it gets to 1080, this market is doing something very different and I simply don’t understand it. At that point, I’ll have to start taking loss and adjusting the trade. So my plan for now is adjust at RUT 1045/1055 area or adjust at RUT 1075/1080 area whichever comes first.

Mar 2 – All Trade Update

April

    I’ve removed most of the 1050/1060 call calendars from my April trades which helps with the maximum upside risk. I am waiting for any pull back to the low 1050s to put on a 1030/1080/1110 call BWB. I might put on a more ATM BWB as well to increase theta. Right now, re upside, I’ll take my chances since I’ve got limited upside risk. With RUT at 1062, we’re at the 200% fib extension which corresponds with a 50% retracement of the down move. This is about 120 RUT points (12%) in the matter of 10 trading days. Incredible. I find myself amazed at market moves lately both in currency and in equities. Historically this up leg on the RUT should pause retrace some. This is a giant move. If you follow Lockes BB strategy, we’re at the 120 point bounce “What the hell are you waiting for, put on some bearish butterfly” stage right now which is very rare.

    Unfortunately, all April trades are down into negative P/L territory but any pull back to the 1030s would put us profitable. My plan now is to wait for any pull back to add some call BWBs, a few ATM BWBs to increase theta and to perhaps roll up some of the bottom BWBs.

    These past 60 days have been incredibly frustrating. Massive down moves and now I am dealing with a massive up move. 12% since Feb 11? Really? Annoying.

    March

I’ve got no movement here except I removed some call calendars. Waiting for better opportunity. Deltas are negative but fairly low and with low gamma. Waiting for better opportunity. I am glad I got out of nearly all the March trades last week but now what is remaining is losing $. Any pull back to even the low 1050s would be helpful. Upside is limited risk but still can lose some more $. I am more apt to be patient right now with this strong of an upmove. IF it happens to keep going past 1070 without a pull back, well I’ll take that risk.

All Trades Update

The NYMO is at extremes. The NYMO daily is above 280 and the intraday hit 91. The internal was weak and the NYSE UP to down volume was low (3.65). All previous cases happened in the bear 2008 and all gains were eventually erased (but it could take months). Another thing, Spy was up 2% and TRIN was above 1. 73% chances it closes red next day. Thanks to Cobra for that information. On the contrary, bullish percentages are very strong and the ascending triangle suggest more upside. Could this be a repeat of the 2014 Oct rally? I don’t know. In my plan, I always hold off on upside adjustments if NYMO is in extreme extremes like this and I wait for a pull-back to adjust. I did get burned in 2014 but that was with strictly MIC trades.

RUT has moved about 110 points and that’s at the extremes of what it normally does on a bounce.

To qoute Vbrandy from a recent skype group chat:

RUT moved -17.44% from Dec 29 in 14 trading days
Had an 8.22% bounce in 8 trading day most of which was first 3 days
Fell -9.08% in 8 trading days
+11.81% in 12 trading days

Because of all those reasons (massive overbought, high volatility environment etc), and the fact that it only hit my adjustment points after 3pm, I did not do any upside adjustments today. This is overheated. I still have some March trades on but I’ll wait till Friday or Monday to close on any modest pull-back. I don’t have too much upside risk in March still this took away some sig. profits. I was going to close most of it around the open of the day but held back and was going to wait till end of day as planned…doh.

My April trades are suffering big with this up move. I will have to adjust to the upside within the next day or two if it continues with strength. I’d like to give it till Thursday/Friday. I’ve got 1060 CC’s, 1050 CCs and 1000/1050/1080 call BWBs hedging now and those soon won’t be effective. THis will alleviate some of the upside issues as well as they start to lose as it continues up past the strikes. So yeah, these will all need to be removed soon and replaced if it shoots much past 1055. The odds are good that I’ll get a better adjustment point but still, this is stress. I can’t handle too much more up, maybe a touch of 1058 or thereabouts before I really have to adjust. I fear that this may go to the next RUT upside target of 1070 and I just can’t handle that move without an adjustment. Tomorrow I will be monitoring closely. This environment is pretty hellish.

As a completely unrelated trade, I did initiate some bearish butterflies at RUT 1052. I know this adds negative delta, but this is a completely unrelated trade. I bought several May and April 1020 BBs.

Feb 26 – Updates

This move up from 950 to 1040 (~11%) in the space of ten trading days has put a damper on both the March and April trades. Especially the 4.5% move in the space of the last 2 days. I am back where I started about 10 days ago, break-even for the year. I guess it’s not a bad result considering the moves and volatility. Just 3 days ago right when I was taking off my call spreads, I was up significantly (5%-6% of equity) and now I’m hovering around $0. Is what it is and the market sometimes does not makes it easy. Any pull back in the next 2-3 weeks will benefit the April trades and we’ll be right back up. I haven’t checked yet, but most of the pain is definitely in the April trades and March theta has offset some of the negative deltas as of late.

April Trades

    So for the April trades, I am just about at my delta limits and am looking to buy a modest amount of call BWBs or call calendars to bring the deltas down just a bit. NYMO is extremely over bought, the RUT is sitting at heavy resistance near its Oct and Sep lows, it’s moved nearly 100 points and the volatility in the market is high = I will be a bit more patient with adjustments to the upside. Though it’ll hurt a bit if this turns out to be an Aug 2014 style run to the upside. Any move down to RUT 1035 today, and I’ll be putting more of them on, if it runs from here (1038), I’ll be slower to add as I await some exhaustion and for Monday/Tuesday to see where we stand.

    March Trades

This has been some terrible timing for our 21 DTE removal of trades week. Sitting quite health last week to have a 4.5% move right into our most unpreferred area of both the Bearish butterflies and the Rhinos that remained. I had kept removing trades through the last 7-10 trading days but not enough to prevent some pain. I’ve got these deltas under control for now and it looks like I will wait till Monday/Tuesday to get the rest off. Taking off those damn call calendars at RUT 1008 after it touched into the 990s was a huge regret, especially now, that RUT is at 1039! That hurt a bit.

Frustrating week.

The March Unwind Update

I didn’t take many trades off yesterday, though I think I might end up regretting that. I am waiting for Thursday and Friday to unwind the March Rhino and BB trades and to also enter the May trades.

I’ve got a ton of accelerating theta in the March trades and my thought was to wait for the typical theta unwind that occurs from Wednesday to Friday and start closing down everything starting late Wed, Thurs and Fri Morning. We have GDP on Friday, the G20 on the weekend and some other big news from Shanghai re central bank policy. I’d like to be out of all March before the weekend.

I feel like I over-adjusted to the upside yesterday. I don’t know. The March trades were holding a lot of negative deltas and my Aprils were as well. I figured I’d get the March ones down a bit while Aprils would be somewhat maintained. Today, on just a drop of 10, (gamma in the trades is picking up), I am already at about 0 delta. I gather I could have done without a few call calendars on the march trades because on such a small drop, I’d still want to maintain negative deltas. Gamma sure does pick up toward the end of the trade. Though, if it had continued up hard, I’d be probably saying the opposite. I’d hate to have a big big down move tomorrow or Thursday but that’s risk management eh.