I’m hitting (well above) negative delta limits on my current Aug ATM trade and am looking at ways to reduce it now that July expiration is over and that was providing me some positive deltas. It’ll get more and more negative delta as it progresses into the month so I’ll deal with it daily and continuously raise up that Upper expiration line. This trade represents a planned capital of 5,000,000.
I had the deltas in line a week ago but the reduction in vol and time passing has brought them quickly out of line. The BWBs in August are no longer giving a credit but would give some positive deltas and theta/risk. I think I’ll save those for a larger down day. We’re down about 0.75% today so I’ll have to start looking at PCS maybe even some call structures (call calendars or call BWB). I haven’t had to do that yet post crash as the bwb credits were sufficient in raising that UEL and eliminating upside risks.
I am looking at 3325 calendars, 3250 calendars (mixed) along with a 11 delta 75 wide PCS and I’ve already got some long ES to temp hedge.
So yeah, let’s go over the Aug position:
It is at -1450 or so delta and has pretty significant upside risk to the already existing profit of $125k. So we have to do something. We do benefit from vol release on up moves but it’s not enough. I’d like to get it down to about -700.
Here’s the trade looking forward 14 days
We’ve got massive theta, great risk reward if we get our deltas in-line and decent non-black swan downside risk profile. The previous expirations (from May till now) were a lot easier on the upside so this one will be a bit trickier.
The last two months have been quiet for me. The low vol run up meant that I had no STT trades on and I was left with just the LTI/Tactical asset portfolio along with a few ATM trades. Still at about 30% for the year and any big down move that causes a VIX 22/23 move along with some evidence of capitulation/forced selling/margin call will allow me to enter a nice STT that could catapult the return to 35-40% for year end. We’ll see if it happens.
Today’s down move got me perked up and I am keenly watching for entry opportunities. If it doesn’t come, it is what it is. We’ll keep waiting. In the meantime, I did enter some ATM trades today using the vol to get decent prices. It’ll give the portfolio some potential for a decent year end. I’d love 35% but with these opportunistic trades, profit will come in bunches. My backtest shows that 2018 would have been a 100% year if I was entering with the same parameters I have now. Today, we hit 18 vix and I was hoping for an EOD type sell off and a further weak open to eye up some opp. 484stt with elevated >22 VIX but alas we bounced into close.
The idea going forward is to do the TAA blends, some ATM blends and opportunistic STTs (I might only get 1-2 a year but they’ll boost the TAA+ATM for a solid 40% average return over time). I can post all the ATM stuff I do without regard to the IP restrictions of the group so maybe I’ll start just posting my daily updates of the ATM trades so there’s more content and commentary here. I’ve halved the PC for risk purposes but it boosts the LTI returns while we wait for STT opps. I much prefer to be patient and wait for great entries than to deal with extended down moves and vol increases with OTM type trades.
I had a busy few months traveling, which I guess was good timing with what was a “never go down” market until now. I hit up LA with my family to look at schools for my kids, then met my guy friends there and departed my family and had a guys trip that extended from LA to Denver and Miami. Good time but when combined with my last trips in September, my liver needs a good cleanse.
I am now back at my desk after an eventful 13 days in Montreal. The trip did not work out as planned. Ash and our toddler got super sick and I had to deal with the market for the first 4 business days of the trip. EDF was on me like white on rice and forced me to capitulate a large portion of my account at a pretty crappy time. I went from 290 or so units to 77 units and from the 77 I had to get down to 40. So almost a 85% reduction in risk. Insane. That cost profit and added a very unneeded layer of stress. EDF is a small portion of my overall account which is good. My main IB account is actually profitable through the event as of today but it did have some draw down during some of those crazy days. Wildly, I have the most theta combined that I’ve ever had. If we end up anywhere in the 2550-2850 range within 30 days I gain something like 400k which would end the year reasonably especially after EDF and the Feb event. Overall, I’m like break-even from Oct 3 onwards because of the EDF issues but have loads of premium. Just have to get through these mid-terms unscathed.
Rhino pricing has been insanely good around $1 to $1.30 area (means very low upside risks and much easier to manage). So I’ve been putting those on quite a bit. I also formed a few BSh factories today as pricing on the longs finally fell enough. I’ll probably be doing a lot of BSH factory (two versions) and Rhino type trades while the pricing is good.
I busted my last tournament in a gross way which almost had me want to retire. I had 66 on 6T2 flop. Got a guy with Aces all in. Ace hit on the river.. (2 outs) and I busted…horrific. Getting sick of these 5%’ers hitting on me when it counts.
There’s another really nice tournament in my backyard (Bahamas) Party Poker Millions Caribbean. It’s only a 1 hour flight and I get free biz class upgrades, so I can fly in style. I was kinda considering hopping over on Friday night until Monday but I dunno if I will. Disillusioned a bit 🙂