May 14 (Update 2) – STT, Long term base portfolio and travel plans

Yesterday at about 2803 I was able to sell puts for my factory and in one single day I am now able to form a BSH for profit (free + some). I got 30 units (90 short puts) on within 8 hours. Epic.

I also started the equities portion of my long term portfolio as my base (I did a combo from allocate smartly that has a historical of 10.4% annual with a max draw down of about 6.1%). Good base portfolio. Today I got the treasuries/bonds portion on 🙂 good timing. I will now let that run itself without messing about. I had it on at 2940 area but didn’t like the timing re the heavy portion in SPY so I closed it at the highs 2949 and now just re-opened. It was more like a mulligan, my plan isn’t to mess about with it and I won’t from here on in.

YTD is now 15% (3.35% a month) and that’s on actual total equity. Nice!

I am going away for my next portion of the summer/spring vacations. I’ll be starting in Montreal for the party millions event and I’ll make my way to Ottawa to meet with my programmers in development office and then take in the Iliza show (for my wife). After that it’s on to Toronto to check out the start of my new house build there and then make my way to Moab for a glamping style wedding and after that…. Vegas for the WSOP!

In preparation, I’ve closed off most of my older STTs, cleaned up the account and prepped ONE. I have on some Aug, Sep and Oct with margin available for another 100 or so units if we get another vol spike/decline. The Aug is acting as a hedge to Sep and Oct but also has the most theta of all three months. October is now profitable (+11k) as predicted it would be by end of week.

May 14, 2019 – Trade Plan (STT BWB + BSH)

I ended up closing out my Jul 18 and Jul 31 STT remnants at a pretty awesome profit. I am left with August, September and October. The Aug and Jul ended up acting as moderate hedges to the Oct/Sept expiration which actually put my balance higher through the modest volatility events last week and put it right positive in the past two days. I am on target for a 20-22% H1 2019 and will end June at around 17%-18%. Exactly as predicted and planned.

That’s the beauty of running these in expiration campaign style. The older ones protect the newer ones and everything just meshes together perfectly. The older ones will hedge the 3-8% drops as you fall right into their built up profit zones and anything greater than 8-10% will be likely covered by the BSH OR you’ll have time to roll (if it was a slow grind) either way you’re good and only dealing with modest drops in P/L. Feels like a beautiful well oiled machine now.

I am not straying or considering much else in terms of trade types for the main portfolio. I want a clean year of just STT+BSH and I want to be a master of just one main trade type. I doubt I’ll deviate much other than finding more efficient ways to adjust.

All in all a good year so far.

May 6 2019 – Trade review (STT+BSH)

Nice little vol pop there. When I saw the tweet yesterday I knew to expect a very rocky futures open and when it got to about -2% I almost thought we could have a repeat of Aug 24 with a -5% open only because of the swiftness of the fall and the potential reaction when Europe opened. Alas, we swiftly found footing and the market rebounded and sits currently at 2920.

Funny enough, I had a portfolio on for my base via AllocateSmartly but didn’t love my entries and sold all of it Friday along with all my other longs. Good timing 🙂 I also harvested all my older STT and BSH last week and removed a ton of risk. I mean I have 600 net long puts in May 31 expiration and my Aug/Sep STTs were harvested. I wasn’t breaking a sweat last night even if we did open 5% down. Even today, I am neutral delta without a single adjustment.

Today, I am using the bounce and increased volatility to add some bearish toned STT. The bounce gives me better delta and the increased vol allows me to have a longer upside runway. Pretty much all I’ll be doing today.

My newest Oct STTs are taking a bit of heat, down about 300 a shot x 40. They were quite positive upper expiration line and roughly +50 delta but I have -delta older ones and I am adding some bearish toned ones now. Within a week or two they’ll be positive if all things remain equal. As time goes on, the trades get more and more -ve delta.

I gather I’ll get the account up to about 20% for end of June for the year. Which is roughly the target. I am hoping for 25% but we’ll see how this plays out. If we have more downside, then I gather I can get even more as we enter the tents of matured trades but if we runaway upwards, it’ll just be the standard lower profit. My goal is to consistently hit a yearly 50% with STT+BSH on total account value w/ compounding and opportunistic over-leveraging on significant down moves up to 1.2x. I won’t be deviating strategies or diverting any funds away to other trades. This is a year long real money test of real market conditions and actual trade results for the STT+BSH combo.

I’ve been researching T5 a lot lately but it’ll be far separated from my main account. There’s a lot of opportunity with that trade and its juicy AF but it’s more fitting of my older previous life as a professional gambler. You have to look at it like a weighted coin flip in your favor but with regular total losses. I have to analyze Kelly criteria and risk of ruin as well as all the trade mechanics and market environment entry type stuff. Big project. Re what I mean : if you have a 55/45 edge in a coin flip, and you have 50k total, how much do you bet per hand to eliminate risk of total ruin so that you can infinitely take advantage of that significant edge? Is it 5k a flip? 2k? etc. You have to analyze this differently then something where you put all your equity in every trade and try to eliminate max draw down. Rather you accept the 100% win or loss and determine the edge and calculate the bet size. Should be interesting.

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 1 – BSH Factory, CC (BWB-STT) campaign and poker

On Wednesday I just finished up a mastermind presentation in the PMTT group that talked about how to deal with your trade portfolio in a crash, the BSH factory campaign and how to harvest the STT-BWB. It went well, lasted about 1.5 hours and had 155 slides. It’s hard to talk about all this stuff on the blog as the info is protected in the group. It’s kinda what probably makes this blog stagnate at times. I have to get creative while not divulging our IP. If it was up to me, I’d share a lot more but it’s unfair to the group.

I did have some back of mind reservations presenting this campaign as I thought it was the “nuts” and I worried about having tons of people selling the same strikes on the same opportunistic days, but I dunno, I don’t ever want to be that guy, I don’t need to resort to that in life and my integrity is worth more than whatever perceived value there is. My belief is the group works because we all generally share our good ideas and in return we get tons of smart “eyes” looking at it and making it better. It works and this is what makes it tick and I’m going to continue on this path. Besides, the value back has been incredible and I am glad that we’re all exploring furthering the campaign in both its theory and its practical implementation. Returns in spades.

On Friday, I had 12 units of Rhino waiting to fill and it did right at the end of day at a good price @ 2.75 for the Dec 1710/1670/1620 BWB. Nice. I just closed off my other 10 units that I put on in July for 21k in profit. I still dabble in the ATM trades for diversification. Though, I hate taking this shit off sometimes. I had a host of Call calendars, Call BWBs and put BWBs and taking one part off leaves the other side exposed and sometimes fills just suck. It took me 2 hours to close it and I was cursing the entire time.

On the opposite spectrum, the STT CC campaign is much easier to manage and I usually just convert the structure to a hedge structure late in the trade. Saves commissions and adds some insurance. The STT CC is my bulk trade right now coupled with the BSH factory which will be for both income and hedging. Pretty much all I do now is some Rhinos (super low % of account), CC campaign, BSH factory and opportunistic HS3. I also dabble in some mechanical equity investing but its just for utilizing some of my balance (for further info check out the motley fool mechanical investing forum (search TMF mechanical investing) or check out imarketsignals.com. It’s cool stuff. The community in mechanical investing have been doing it for 20+ years.

Poker

I’ve been studying every day ramping up for the Oct WPT in Montreal. This is going to be practice run at the PSPC in January. I have about 40 hours of study left I suppose just to get me on par level in knowledge with the average competition. Not an easy game as I’ve been at this since 1999 ;). When I was in my twenties, I mean, I felt like my generation was easy competition, I’d put in reasonable efforts and excel in whatever it may have been..ie. Poker at the time was jokes, first person shooters on PC was jokes or whatever. Now, I put in probably 800 hours into PubG and still suck, back in the day my wife and I played Rainbow 6 lockdown/vegas and were top 100. Now, I doubt I break top 100k 🙂 I don’t know, it feels like everything is taken next level (or ten) by this new generation. The kids in poker now have just perfected everything. They literally eat, breathe, shit poker. It’s all they do and they do it right. They’ve broken down the game to levels that are so far beyond. If they put that effort into anything else (trading, business start ups etc) they’d probably have easier success though. I’d gather that to be earning reasonable money in tournament poker would take the same effort it takes to be be a professional trader but with less variance.

All that said, After Oct, I might hire the best tournament coach in the world to get me prepped. The prob is he’s like 375 EUR an hour 🙂 Steep, but thats what you get for the best. I might start with a more reasonable one and get ramped up towards him. BencB is the coachs name. Epic track record.

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.

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.

Oct 10 – Rhino M3 Trade plan

Not much to report. All the trades are sitting comfortably, we’re in a range that isn’t affecting much per say. I’ve got Dec and Nov expiries on and profits are rolling in. Great few months.

NOV:
For RUT I have 1150/1200/1240s

For SPX I have 2040/2120/2180s

DEC:
For RUT I have a mix of 1140/1190/1230, 1150/1200/1240 and 1160/1210/1250s

For SPX I have 2020/2100/2160s

I am approaching the need to RH the upper longs for both trades but I will wait till tomorrow since its reduced volume today re Columbus day.

I’ve been backtesting a longer variant of the SPX Rhino (80/60 wings) where I start 88 DTE and end before 31 DTE. I reduce the planned capital by half or in other words, accept a 5% return on the original planned capital of 25k for 3 units. The results were very good so far. The trade is easier to manage both on the upside and downside though quite boring 🙂

I’ve also been looking at uneven condors as adjustments (sell and buy volatility when skew is favourable for either). I like how Jim Riggio approaches this. When volatility is low, and skew steep, I might enter a symmetrical butterfly with a long call (buying cheap iv) and convert it to BWB when vol gets higher on a large down move.

As for the market, I have not the foggiest where things will go but bonds should be putting some pressure on the SPX especially if we clear 1.75. I still see a small correction to the 2040 area before making ATHs for end of year baring no surprises re Trump.

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.

Sep 26 – Trade Plan

My whole day was spent closing down October trades. The SPX monster one reached 10% profit on planned capital, my other SPX ones hit about 7-8% as I was a bit more conservative with upside and the RUT one hit 5% or thereabouts. We’ve got 25 DTE and I am more comfortable starting larger trades later and exiting earlier, plus the SPX one was already at profit target. The debate is on tonight and if Hillary falls dead, faints, coughs for 20 min or anything else, I worry the market will open down big and if she does well, it may open up up big. So yeah, I closed them down and I am happy. I have some 200+ units on Nov/Dec across all the accounts and I didn’t need any Oct exposure.

I got some champagne for the debates (it’s sort of entertainment isn’t it?) and to celebrate the big result for the month. I cleared about 180k in profit across the Oct trades. One more month with a good result would put the account at about 30-40% for the year, maybe 50% if we got 7-10% P/L. Two good months, and I’d be laughing. Sounds like a lot, but the amounts exposed during the last 6-8 months and some of the swings, well, it’s somewhat deserved and I’ll be more comfortable after a few of those good months to cover any bad month.

I entered some SPX Dec BWBs (2160/2100/2020) @ 2.80 today.

Trade 1 – M
screen-shot-2016-09-26-at-5-08-33-pm

Trade 2 – P

screen-shot-2016-09-26-at-5-09-03-pm

Trade 3 – D

screen-shot-2016-09-26-at-5-09-28-pm