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 29 – Trade update

Super unexpectedly, I got a slew of emails from my new futures broker wanting me to send more $ to cover their risk models. They suddenly realised my risk at -10% slice was high (on their models). I gather that the vol expansion the last few days had all the risk guys looking into accounts and they tumbled on to mine. The Eroom guys are introducers and they were the ones that seemed panicked about the risk profile. On a true crash, the HS3 would likely do very well but most models don’t correctly show that. I was on a sea day (on the way from Copenhagen to Estonia) and obviously couldn’t easily arrange for said wire.

After what was about 25 emails between several people, I was able to transfer from my SPX account at APEX to my futures account at EDF. IF this is how they act on a normal day how will they act on a true crash? I can’t deal with the emotions and demands of several people during a day like that so I am not sure I can expand much with the futures account.

That’s all good though, we’ve developed a few new trade types that have exact risk profiles and backtests (automated 1000s of them thanks to a genius quant in our group) that can be done with ease in SPX and IB. I’ve already moved most of the newest stuff to that methodology anyways.

I’m glad its Friday and the market is up pre. I can go enjoy Estonia and have the weekend in Russia. Yesterday would have been a terrible day to be at port re dealing with brokers.

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.

Jun 26 – Yesterdays Vol Shock and the trades

Yesterday was interesting day, VIX spiked up 40-45% and we had some relative fear in the market.

My fresh HS3 trades all drew down as expected on any initial vol spike of that magnitude. Nothing at all to be concerned about and not all that big. My older HS3s were just fine. After an initial spike (VIX spiked to 19) there’s not all that much relative exposure to Vega left before the BS portions of the trade kick in. I mean there is a bit but relatively small and any more down move would trigger the OTM longs and the trade goes profitable. The trade is almost as perfect as it can get but what it needs is some initial vol spike hedging to keep Drawdowns and psychology clean. We have initial ideas.

The draw down is due to Vega and Vanna as the initial vol spike doesn’t quite affect the far away longs as much as the more upfront part of the trade. The far away longs would trigger in a bigger move down or a continued move down. Works well. The draw downs from an initial shock are moderate but I don’t lose sleep on it, standard (pre-market now, we’re already recovered most of the draw down). Basically, just stating that a 40% initial vol spike will generally cause your HS3s to draw down $500 or more.

Another 3% drop would activate those longs and BS protection kicks in and the trades would crush. This is the nature of the trade and the trade-off of the structure and well, it’s expected with ANY positive theta trade, at least initially. Rui mentions that he noticed in his backtest that the lower long put Vomma, Vanna, and Gamma power kicks in when the SPX gets close to the upper longs and the lower get into the 10 delta range.

Essentially, an initial shock and the time before panic is the temporary dead zone of these trades. Once those lowers have the greeks activated, then the trade profits.

Let’s call it VolFEAR and VolPANIC to distinguish the two types. An STT combo and an HS3 combo will initially draw down when we are in-between VOlFEAR stage and the VolPANIC stage and this is usually a relatively temporary period before either the market moves towards VolPanic or VolNORMAL stages.

Adding in a Krishnan PBR might be the answer to this and I am going to explore adding it in for low vol times for that initial shock (that you’d typically get in a 1.5-2.5% down day). This would cover the initial DD and maybe even profit and taken off while the initial structure would activate on a move further and is safe anyways.

The market is bouncing now and my pre-market balance is relative recovered. In backtesting, this was always the case and often after a larger fall and a few days of rest, the trades hit the profit tent and reach targets. Let’s see if this is the case for my older trades.

I managed to get on about 40 more units yesterday and I got 25 PDS @ 45 DTE to help with hedging on the bounce to 2721 at EOD.

I Like where we are right now.

Big accounts and prepping for travels (HS3 and STT trades)

I am about to board a 24 day cruise and am preparing all of my trades.

I have this on right now:

250 units of HS3 (spread between ES @ EDF and SPX @ IB) (2.5MM planned capital)
20 units of Campaign style STT (1.5MM planned capital)
34 units of X4V14 (Locke style ATM BWB) – (765k Planned capital)
50 units of KH hedge (Black swan lottos)

So that’s quite a bit!

To prepare I have 2 sim cards (local EU with roaming and a CAD world wide roaming) as a reserve. I have unlimited internet on the cruise and I brought a portable monitor and laptop. I’ve entered GTC orders for every HS3 and STT so that they’re there for me. I’ve got all my models ready and none of these are particularly exposed to a BSH as they’ve all got BSH built in. Most of the work is entering, and I am fully entered. I’ve got the GTCs so I can close in crisis (hopefully at profit). The market opens here at 3:30pm-4:30pm depending where you are, so I am usually done my tours etc by then so I can attend to trades in the evening or early afternoon.

I’ve done this before and guess what, it was during Aug 24 2015 crash 🙂 Suffice to say I was tied to the computer for the last 4 days of that cruise. The internet handles IB with ease. Haven’t had an issue. It was different them, I was trading rhinos and Modified Condors. I needed to adjust.

Lately, skew and vol has increased due to trade war rhetoric and i’ve noticed my Decembers take a vol hit. Not a big deal but could have had better entries.

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.

My plan going forward.. (HS3, BSH Factory, TTTBSH)

Finally finished up a deep backtest run of the newest trade setups and am finalizing my plan for 2018 which I am confident will be a break out year re profits. The trade plans setup are so robust.

Since Jun I’ve just been testing and testing and testing all the various concepts trying to cohesively setup a plan for end of 2017 and 2018. Majority of my free time has gone into this testing and I think I am finally in the homestretch. I have a plan and I have extensive testing completed for the majority of that plan. Testing was completed for the HS3 from Jan 2014 to present and here are the compounded results:

I’ve been waiting for a high vol red day since Sep 5th, and one has just not really come. I need vol to enter this trade. I’ve tested that there are about 20-24 entries per year but some years can be as low as 12-15. Good enough as the trade will return 10-15% on margin. So not only has the trading from Jan to Aug sucked, but I can’t get a damn entry for these new trades 🙂 Frustrating. I guess a year end is just a date, so patience is what I’ll exercise.

As for live trading, basically up to August, trading has been not going my way. I was live trading the STT and BSH w/ financing and just had a terrible time paying off the BSH structures (as I mentioned several times). I underperformed relative to my goals. Couple that with the legacy Rhinos from the beginning of the year that did AWFUL, it’s just been such a “meh” crappy year. I mean, this year has broke records in all metrics for volatility and down day magnitudes and frequency, it went as badly as it could for these types of trades. Coupled that with the fact that I am waiting to enter large trades, and time is ticking, I doubt I’ll have much chance for even a modest year.

When we do get that down day, I am using the trade desk to put on a 100 unit trade and I am not messing about with filling it myself. If we get another few down days after that, I’ll put on another couple of 100 unit sets on. Fun.

Yeah, so when I look back at the year, it sucked for trading live and results therein but it was the biggest learning and trading maturity step I’ve taken. It feels good. The entire year was probably 500+ hours of testing and analysis. Lots of dead ends, but lots of discoveries Jeez, the latter half of the year was so much back testing that I was dreaming about it. When I was on my trip, I’d use the 3 hour nap (my newborn baby) period during the day to backtest and test concepts and lately, it’s been testing in day and at night when the wife and kids go to bed. Since June, I think there have been 15 or so concepts introduced and I think we’re nearing the end of the runway of what’s possible re overall conceptual structures in the equities options market. Anything from here on in will likely be plays off what we’ve already tested. You can see this manifest as the group naturally is moving towards the next level of complexity—>VIX trading.

I’ve been liking the idea of a TTTBSH protecting the initial setup of a BSH factory and have done some extensive testing on that. Even if you do it in low vol, it seems to work out just fine as the TTT will protect until its adequately setup (the factory).

155 Unit STT

Been a while again…regretfully

I was traveling over the holidays. Ended up buying a piece of land for a cottage and a new Model X Tesla P100D. Then to top it off, I then flew to Bahamas to compete in a few poker tournaments including the Stars main event championship.

Poker went pretty awesome. I got a 1st place finish and a 62nd in the main event only to be busted out when I had AA vs Ryan Riess’s AK. I was a 93% favorite after I 4bet shoved but he caught 2 kings on the flop and I was eliminated. Bad beat. But I walked away with about 15k for my efforts.

I can tell you despite the good results, it didn’t feel that great. My chip stack was healthy as was the villain (Ryan Riess). I was a huge favorite and I am confident that with my style of play, I’d have made the final table with that win. As well, when he called my 4bet shove with AK, we had to wait several minutes as the photographers, tv crews and some writers came over to analyse the hand. So I was sitting there, super excited, knowing I was a 93% favorite ..basically already counting my chips and smelling the final table only to have KK flop. Brutal.

I might have to add in a section on this blog for poker as I am now back at it and will be playing the circuit. Next stop WPT on Feb 9th in Montreal.

Here were some of the highlights:

In the trading world, I have moved over to doing a good % of my trading portfolio in the STT(Space Trip Trade) and BSH (Black Swan Hedge) trade combo. I got a big one on for May right now—>155 Units!

I am excited about the trade and it should be fun and interesting. I was satisfied with the back-testing and I think the trade will be my main staple trade along with a 30% combination of the ATM trades (Rhinos). I closed off most of the Feb Rhinos and have only some March and April. I’ll enter the Rhino trades opportunistically when pricing is good and use them as a hedge to to the mid 5-10% downside moves.

I’ll get a post up analyzing my current STT trade shortly. I have a few more debit spreads to add and it’ll be complete.