Oct 16 – Update (#2)

Nice pop there. Pretty much bringing account back to normal now. Through the event I did have some vol related draw downs, nothing that stressed me out or anything but I didn’t love how I entered the event re trades/hedges and sizing which is prompting me to create a much more concise trading plan which I am really excited about. I feel really good about how things went and where they will go from here. I am basically shaking off some pests and revising some of the plan to be even more robust. Right now, I am developing a concise and mandatory trade plan that’ll be printed and bound and at my desk. As I mentioned before, I am taking my optimistic honey badger mentality and focusing it on entirely on risk management instead of out-sized returns and I am super relieved and kinda super excited about it. I am going at it hard. It’ll be epic to create any sort of trade plan that can handle large money that does 30-40% returns but doesn’t flinch in events. Ideally, it’s going to be a lotto as well. That’s an amazing feat. Thanks to the PMTT Group. Once developed, I’ll probably be looking forward to the next crash event 🙂

This plan, it’ll have all sorts of idiosyncratic rules and requirements that I am going to force myself to follow. It’ll also contain journals of my thoughts related to how I felt during crashes, what I did, tools etc. I’m accepting the returns that I calculated (more modest) and I am putting risk at the first priority. Take care of risk and the returns will come (compounded or otherwise). That’s the key I think.

Update on account and management:

ES:

By EOD, I have removed most of my PCS that I had on for the HS3s and am sitting at about even on an account level for the EDF/ES account from start of crash till now, all said. Not bad. I closed off all the Dec including the ATM PCS today (maybe a bit premature as I closed them around 2795 rather than the 2815 its trading at now).

Jan HS3s are locked and loaded in a really nice zone for quick profits in the next 14 days. Could add 40k in profit by end of Oct.

The Mar HS3 is down about 59k while the hedge is locked in at 30k profit so the combo is still down 29k total. Could recover quickly but EDf did force me to liquidate and lock in some loses last week. Not bad still. I also had initiated a 100 wide PDS at 2775 last week which hurts the UEL (upper expiration line) a bit.

The BSh factory is now profitable. I will use the next few days to start forming the BSHs and should be ready to rock soon as a hedge.

SPX

March CC campaign is at even now (wow!) and I have some bearish STT covering it which are down about 6k. So all in all about -6k to 10k on the whole thing.

Jan CC campaign is doing fantastic. It’s got so much theta that it could swiftly make a lot of cash in the next 14 days

Dec CC campaign. About even now (from pre-crash—but was at target anyways before) but has no real juice or risk. Will slowly turn into a hedge.

BSH Factory. Is profitable now. I was a bit too aggro on the short puts so I might use the opportunity to start forming on any signs of a down turn. Not really worried as it’s december shorts and they are deteriorating quickly.

X4: Removed for loss of 15k

Rhino: About even.

KH recovering some of the draw down.

All in all, I am about about 1.5-2% on the account and a week sets that even in theta and a month should be aces in profit.

If I get a few weeks to a month to rejig my plans, form factories and work on sizing then any further vol should be easily deflected if not profitable from here on in.

Oct 16 – Trade Plan

Yesterday, I put on about 37 Bearish STTs to hedge off the 282 March STTs. The goal is to roll up the debit spreads to eventually convert into a regular STT when my market bias supports it. I removed 7 ES hedges at 2669 (this AM) after spending about 2 hours reviewing technical sources last night. Confident that we’re locally bottomed and that we’ll bounce. I’ll continue to review technicals and market commentary but I don’t have all that much risk on, especially as time goes by.

What I am most upset about is that I didn’t have dry powder to enter during the mini-crash. Ah well. Next time.

My BSH factory is approaching even today after the bounce. The shorts I sold were in Dec so they’re getting pulled right down.

My Mar STT CC campaign is down about 22-25k or so on 282 butterflies (71 units). Loads of theta. Healthy and hedged by a bearish STT
My Jan STT cc campaign made about 10k through the mini correction and has loads of theta (it’s in the most perfect position imaginable for the next two weeks)
My Dec STT cc campaign is break even through the mini correction
My KH hedges are all down now (~20k or so) but are mostly Dec PCS that are just ab it compromised. They will quickly deteriorate into a slightly below break-even result if things don’t crash. They did their job with margin control and slight hedges.
My X4 is down about 18k (I am waiting for a 2800/2810 to take it off)
My Rhino is break even (it went through a 15% crash, well handled)
My ES HS3 (Mar) is down about 80k but the hedges I had on are +32k so net down about 48k. Will come back quickly
My ES HS3 (Jan) is really flying and should make up for the Mar within 14 days (Perfect positioning)
I removed all my Dec HS3
My ES BSh factory is break even

Poker

I have to up my study game as the last week had my focuses elsewhere. New course came out that I am interested to audit (Nick Petrangelo). This week I’ll catch up. The tournaments start next week and I am off to MTL on the 21st. Should be fun!

Oct 15 2018 – Update on Trades

All in all, this was a perfect little mini-crash tester for my systems and risk parameters. My systems and parameters (trade plan) were drastically revised after the Feb event (which was an absolute earthquake shake up in how I handle risk). That event let me see how everything reacts both re BS protection and how the system reacts to the portfolio of trades. The really important part is the nuance of removing trades while staying within margin parameters. The hedges have to get taken off quickly but that means you have to take off some income trades. These income trades are sometimes riddled with so much juice that it is hard psychologically to remove them. The thing is, you’re now closer to your tent, any stabilization and you could be at 2-3x your profit target in the first place. So re human factors, what do you do if your hedge didn’t fully protect your income (under sized or it just didn’t trigger, or you waited too long to remove) and you’re down 5-10%. Do you just take the loss and close the hedge and income trade with no hope of getting back? Do you close it all down and open new ones? All these things have to be part of a trading plan. Accounting for how to deal with yourself and your portfolio during an event is crucial.

I am convinced the experience I gained having traded through the markets of Sep/Oct 2014, Aug 2015, Jan 2016, Feb 2018 and now Oct 2018, gave me an incredible wealth of insight into how to manage events and event risk. I feel that I am reaching a stage of trading where my focus is solely on risk management much before maximizing returns. That’s a big big step for me, I am naturally a risk taker, and I go big. To be so focused on the opposite part and it now being natural is a massive step for me. It’s served me very well in life re taking risks and making them work but with the nuance that I usually have 3 back ups and really understand the risks/odds I don’t sleep until I make sure it works! In trading, I found that I sometimes didn’t initially understand fully the risks and I couldn’t just make it work. So this slaps you in the face and requires you learn to be pro-active in risk management. And here we are. This was and is the hardest thing I’ve done in life. I think that road (the learning of how to manage risk) is now coming to an end, I think I’m arriving to the point where I should be re trading. Risk in trading is not easy especially if you’re doing amounts that make a difference to your life. Taking large losses during an event and/or waiting for the vol to come out can take months and these months can affect your life if you’re trading large. I can tell you that it sucks waking up at 3am to check futures. It’s just not worth it. Pre-plan and take care of your risks. As I said, I am a risk taker, always have been and I’ve done it successfully in all areas of my life. I mean I was a professional gambler at the start (7 years!), made tons, parlayed that into a business (all of my cash..which is absolutely insane if you think about it) I could have retired off what I made but instead, I bet it all on a business. Took that risk. But. When I choose to take a big risk, I do everything I possibly can to make it succeed. That’s the key (but it doesn’t work with trading unless you’re thinking long term development as a trader). What I mean, is if you have an event, and you’ve taken loss, you just can’t do anything there can you? But you can do all you can to work on your trading plan and yourself to make sure it doesn’t happen again. I don’t sleep at night if it requires attention. You just make it work. I’ve seen so many people start businesses, then just fuck off and give up on it. It’s like they end up with a resentment to it, a resentment to their failed expectations. That resentment seems to push them away from success and allows them to accept the failure. They’ve tricked themselves into hating their business or whatever it is which allows them to just close it up.

This Feb event gave the tools and foresight to strengthen my trade plan in this search for what I hope ends up being an almost riskless very conservative way to obtain 30-40% returns per year. The Oct mini-event, allowed a partial test of the new systems and allowed me to refine a few things. The goal used to be to trade very intricate complex structures and trade it full time and aim for 75-100% returns on capital but as my size grows and as my risk appetite lessons, and as my focus to risk management changes, I’ve realized that I probably will max out in the 30-40% range for OTM structures. I do believe the best ATM traders (John Locke, Kevin Lee) can do the 70-100% returns but it all depends on what capital they’re using. If you’re allocating 100k out of 2MM to a trade, then sure, you can probably accept specific risk parameters that allow you to obtain those out-sized returns, but if you’re allocating the entire 2MM then you have to dial it down.

What’s changed this time around?

1. I am going to allocate 50% of what I normally allocate re trading capital. I am so PISSED that I didn’t have more dry powder on Thursday. The shit is like 4x more juicy to enter. I am convinced if you waited for a 90% MDD day to enter these types of trades, you’d make the same amount as if you entered every month. These 90% MDD days happen 3.5x a year on average for the last 50 years.

2. I am going to have a trifecta of hedges (that’s right, 3). I will use an LP campaign, a Hedge BSH, an income BSH and KH for margin control.

3. I will be utilizing some bearish ATM structures as a partial hedge and separate income trade that covers that first 5%-7% down move in the markets.

4. I will utilize bearish STT during bounces after a crash event as well as index dynamic hedging.

5. Maybe stay away from futures and futures brokers 🙂

6. I don’t think I’ll trade HS3 unless its opportunistic and on large MDD type days. I don’t love its unpredictable complexity. I feel an STT so intimately.

Whoa, what a day.

Huh, what a day.

Maybe we’ll now have 3 sets of backtesting dates we can use for correction analyzing lol 🙂 Spicy 3.5% down on the market day while Futures are sitting at 2778 (nearly 4% down) post market day.

The day started off well. I was able to close a load of HS3 out for close to profit target (I removed around 150 SPX equivalent units throughout the day). That was nice. Rare that on days like these I hit target..nice for a change. That was for December HS3 though. Nice and matured and liked the down move. However, I did end up at 2810 with too many previous ATM PCS adjustments relative to the size of what I had left of HS3 original structures and the market puked so quick I didn’t get them off. A bit annoying because it drew down a bit at end of day.

However, not all that rosey, the VIX spike to 23 and the skew changes have hurt my newest existing CC and HS3 trades as well as the start of my BSH factory. Not insane down but a bit spicy. As well, I wasn’t able to get all my Dec HS3 trades off and I have some with too many ATM PCS that I didn’t close. Probably 5-10 units left here but positive delta exposure (though limited because the ATM PCS are only 25 wide and are already half the value). No matter how you slice it we sell Vol and when we have a move like this (they say its top 3 point move in history) we’ll feel some pain in the volatility increase.

My current main exposure is this:

67 Jan HS3 (+30k)
75 Mar HS3 (-65k)
65 Mar CC (-52k)
Oct HS3 Hedge (+30k) (converted today early on)

BSH factory start (-35k to -40k or so) (this is probably temporary..the puts are around 2050 and 1975 so I am not overly worried, it’ll just take time). I nearly took them off when the force index hit 15 but it wasn’t really part of my plan so I didn’t. I obviously wish I did.

I kinda expect the market to slow down here and bounce, it’s hitting the trend line from the Feb lows and the RSI is very oversold. Probably a bit more pain (capitulation) as we visit and test the 200 SMA in the AM which sits at 2769 area (approaching now in afterhours) and a bounce/relief. That said, the RUT broke its 200 day today quite a bit…maybe SPX follows. I’d say that a bounce is better odds than another 90% MDD day but who knows. My gut wasn’t too worried @ 2pm today but this after hours action is kinda worrisome. Should be an interesting few days.

I am not overly exposed and the pain is relatively small. The HS3 March could experience a vomma surge to help its profit if we crash more but likely it’ll be drawn down until we have vol relief. It’s generally BSH protected but none of that activates unless its really swift and large in magnitude.. Yesterday it was about break-even and today its down 65k on a 110 point move. The CC’s were down about 30k yesterday (all expected) and today was hovering around 50k and with this afterhours movement I bet it is touching 60k. Anymore and I’ll have to do something.

I turned my Dec/Jan CC’s more neutral well before this move and they’re all relatively ok. Barely flinched from yesterday, though drawn down from the start of 8 days ago due to vega over the past week.

I rolled my rhino yesterday which was great. It’s just drawn down a bit but positioned well.

I have KH on that are now up a bit today…not quite activated yet.

Whirlwind month of Jul (Travels, HS3, STT, Rhino etc)

Finally settling down and getting back to normal work lifestyle rather than scurried catch-up.

Just finished a 24 day cruise, then traveled to Arona, Italy for some R&R with family friends then onwards to meet my biggest client (a well known Ferrari racer/entrepreneur socialite type guy who’s got the fastest lifestyle I’ve ever seen) in Budapest which consisted of me trying to balance 2 kids, a baby, an “at the end of her rope” wife while staying out to 3:30am for business (and some pleasure). I barely could keep up with anything. After that I made my way by rental van to Zadar, Croatia where I caught up. We just left and made it to Istria, Croatia and now I am in a villa in the countryside relaxing and catching up on everything.

During these little whirlwind periods, I have to balance everything which can be difficult but I think I have it down to a science. My communication usually suffers, emails that aren’t super important sometimes get forgotten but everything else is generally aces. One of the reasons I travel to Europe during the summer instead of elsewhere is because of the timezone, i.e. the market opens at 330pm here so I get the evenings to attend to trading.

My mind is always focused on the trades during every single day regardless of where I am, or what tours I might be on or if we’re on the road. I generally don’t miss a beat on the management of these trades and finding opportunities for entry and adjustment.

I usually wake up every day, model my trades, look at the market technicals, figure out what I need to do later, enter trades in IB/EDF and pause them for market open. I then get out for the day with the family and do whatever we may have planned. We have a small baby now so we have to usually be back for 12-1pm for nap time. I use that to further catch up and usually do some backtesting or whatever else I have to do for market open. Then at about 2:30-3pm my wife and I will typically head out for some alone time for about 3 hrs, usually touring cities and getting dinner and a drink. During this time, I got everything on my phone and sometimes I may have to interrupt the conversation to get things on but its never a prob. We are usually back by 7pm where I finish out the rest of the market hours and I’m done by 9:30pm to finish the night. Through all that, I am usually tapped out and non important things get left to the way side until I get to an area where I can relax more and catch-up. So yah, If I am out, and I usually am, I’ll be looking at phone and entering those BWBs (for new trades), PCS (for raising UELs in HS3s etc), and entering them in-between talking to my kids at dinner or wherever else I am. I am using downtime during the day (naps or AM) to model and get a plan in place.

The HS3 futures in EDF are crushing right now, I started them I think in May and it’s up almost 35% or so. I reached profit target on 111 units in Oct 31 expiration and 20 units in Sep expiration. I have another 83 (SPX equiv) units on in Dec monthly which are more than half way to target and 61 (SPX equiv) in Dec 31 expiration that I just started on those two down days we had last 8 days or so 🙂

My HS3s in SPX/IB are also near profit target. Wonderful. I think I have on about 100 units there. Solid gains. My CC campaign is also doing great.

I added in some Rhino and X14V14s in for ATM trades. I changed how I manage upside in the Rhino but the main reason I added is I call it a middler which loves moderate down moves and helps hedge that little area where the market falls 2-5% and affects (short term) the HS3s and CC trades negatively re vol and skew effects. I love how it reacts together. I really liked the rhino in the old days as I remember being super upset about making 20% when the market moved up 50% over 2016 🙂 I will use it small as a booster and middler 😉

I am not sure where we will go next (we’re here in Croatia until the 11th but for sure I will be in Barcelona for the Pokerstars tournament on the 22nd where hopefully I can have some decent luck..

More to come as I have lots of time…

Jun 27 – Trade Plan (STT, HS3 and X4V14)

Today was a typical bounce day and I used the opportunity to get in some bearish STT and PDS hedges.

I’d like to backtest the krishnan hedge as a vol spike hedge and probably will do so on the cruise during the vast amounts of free time I’ll have 🙂 Generally, I get a lot of sitting around time and I’ll typically choose something to research or test.

I’ve got on a slew of protected STT, HS3 and X4V14 trades (ATM BWBs). All reacted fine during the little fall and all are pretty well hedged. Not a whole lot to report really. I added some delta and vega hedges on the bounce just to balance out everything.

This trade war rhetoric should keep skews pretty disadvantageous to already on trades. Reasonable to put on new trades etc.

Back at it – April

After what was a very rough period from Feb 2 to about last week, I am starting to recover and regain my ambition and motivation.

I had a rough go with IB margin rules during Volmageddon (Feb). They had implemented a 30x rule which basically summed up the total value of the options and if it exceeded 30x the value of your account, you had severe restrictions with adding new positions/contracts EVEN if they were risk reducing. During what was one of the biggest vol spikes and thee biggest change in volatility (VVIX) the option pricing sky rocketed across the board, and when summed up vastly exceeded 30x. It’s a ridiculous rule and it was an unknown rule. IF I had opposing positions where I sold a put at $5 and bought another put at 4.75 they would sum the position as 9.75 even though there was no substantial risk in that position. In the vol spike, options 10x or more so they’d be $50 and 97.50. This summation technique would put the account in violation of the rule. This gave me problems for when I had to roll or remove hedges. They also used some bizarre calculations that would restrict even further. This left me in a very precarious position where the complexity of removing hedges and positions was very difficult. I couldn’t get off my variety of hedges unless I literally liquidated the entire account which would have been impossible during those few days. I tried as best as I could to remove hedges and small parts of income positions but I just couldn’t get it done in time and the hedges collapsed in value and the STT remained compromised.

Anyways, I’ve been nursing these remaining positions since February and have recovered much of it but not all. I hope that maybe I can get to full recovery by May or June. That’s my year so far.

Suffice to say, I am working with new brokers and won’t be using IB for PM type trading (STTs, HS3s etc). I will also be moving my base trade towards HS3 type trades, STTs in higher vol down moves and John Locke style trades (M3, X4v17 and some BB) as a booster and to bring back some diversification in my trade plan. I still like ATM type trades. I remember when I had the Aug 24 crash with my MICs (this happened right when I was learning the Locke trades and was just initiating). Soon after I had recovered the entire loss from Aug within 4-5 months using M3s and BBs. Anyone that traded MICs, would know just how bad those did during Aug 24 2015. I liked trading those things (M3). I eventually switched to Rhinos and did modestly with them but I hate the upside exposure on runaway markets. Though, I mean, I did Rhinos during one of the biggest up moves in history in the RUT. No wonder I was frustrated with those.

Anyways, that’s my current situation and plan re trading.

I am in Canada now visiting the office and some family and friends. I will be back again for the Montreal Party Poker tournament and probably touring Europe again this summer. I’ll post more about those travels and the trading complications there-in.

Dec 16 – March Rhino M3 Trade Entry

Not much going on. Trades gained some value today. Nice little down day in the SPX and flat for the RUT.

I entered some March Rhinos

50 x RUT:1290/1340/380 @ 2.19
75 x SPX 2120/2200/2260 @ 4.00

A bit far out but I do like to enter around 88DTE anyways.

I’ve converted most of my Jan trades into more M3 like structures today with the drop. I worry about a slow grind up for the rest of the holidays so figured I’d jump in front of that with some calls and futures hedge. Low volume rarely gets sold into. I do expect some January weakness though.

Oct 18 – Rhino M3 Trade Plan

Been a while since I posted. I haven’t needed any catharsis so that’s probably why 🙂 What a great/fantastic two month period we’ve had…I mean the market (RUT) didn’t move up 7% in a cycle! Can things get any better? The last two months have made the entire year, I might even achieve the 7 figure profit in a 12 month period IF the next two-three months behave. Major Major milestone. When I say behave, I mean it goes down, stays neutral or goes up 3-4% max. That’s all that’s needed. What a journey. I started trading by investing in AAPL and BRK.B, frustrated with the lack of hands-on, I got into earnings volatility options plays via www.steadyoptions.com and eventually on to Modified Iron Condors only to experience the most dreadful trading experiences in Oct 2014 and Aug 2015. Learning experiences! I finally stumbled onto the M3 and BB courses via John Locke and here I am trading BWBs in my own way profitably and into 2017.

As my portfolio and trading size gets larger, I’ve been putting on more and more Space Trip Trades in an effort to hedge my portfolio by way of cultivating the STTs to the point where only debit spreads remain on the first set while cultivating the other expirations to the same point. My main concern is an 9%+ gap down overnight. I want to be protected in any flash crash and a gap down of any size. It’ll take some time to cultivate the STTs to the point where they are providing protection for both the ATM trades and the uncultivated ones still in process (in the case of a 12%+ move). Once, I have adequate hedging I’ll start to increase my size past what it currently is. I’ll probably be sticking to SPX with versions similar to the White Rhino and Jim Riggios 100 point butterfly. I really like the approach Jim Riggio takes. Sell volatility when vol is high and buy volatility when vol is low. Simple. I’ve changed my style a bit and I don’t use calendars and I will probably be doing versions of reverse-harveys for the upside rather than using call BWBs. It’ll be sometimes selling or buying iron condors as adjustments to the butterfly structure (depending on skew and volatility). I might have to call my trade something else, probably will end up calling it PEAK.

My November trades are all 10%+ and I have already started closing them all out by removing risk and unwinding the structures.
I’ve got Dec expiry on and I’ll look to put on some January as we get closer to the election (option premium will be elevated and the BWBs cheaper to buy). I might hold Dec but if I am anywhere close to a 6% profit, I’ll probably close them ahead of the election. They’re doing very well right now so it’s possible.

Sep 29 -Rhino M3 Trade Plan

Nothing too exciting related to the trades this week. I usually have some sort of market opinion but I really don’t right now. My guess if I had to state one is that we’d see some more weakness into October and probably touch 2040 and rebound up to 2300/2400 into the end of the year.

I put on some more SPX Rhino trades today. The pricing got way better in the afternoon and I bought several 2160/2100/2020s @ 2.75 and 2.80. Across all of my accounts I have 370/740/370 on. Big. Lots of downside room and lots of upside room at those prices. I’ll probably try to close them all by Nov 8 (start later and end earlier).

Here’s what one of the Dec SPX Rhinos look like

screen-shot-2016-09-29-at-2-13-36-pm

I’ve got a bit of RUT Rhinos on but not as much. I had great pricing early on but been struggling to get pricing I liked the past few days.

I’ll manage the SPX upside if we should break 2200 by selling condors or RHing. I probably won’t use calendars this time around. I do like how Jim Riggio (Kevlar) handles his trades. Not much else to say right now.

I’ve had to do nothing with any of these trades lately, boring, which is good. I am erring to start more like 86-88 DTE and end by 30 DTE. I am working on a full backtest with some updated rules and adjustment types.