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.

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 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

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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
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Trade 2 – P

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Trade 3 – D

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Risk taking and pulling the trigger

    Risk taking and Pulling the trigger

Let me preface this with a funny but true story:

In my twenties, I took a big risk, I invested all my net worth and even my future income into a software business idea. So essentially, more than I had. It was a huge risk. It took 16 months to get the software idea from scratch to launch-able. We of course blew past deadlines as is typical, and went over-budget. I had no money left though I had some on its way. I was at a pop machine with a friend and business partner (he’s probably reading this and laughing) but I had one single looney left and I told him, this is my last looney and I’m buying a diet coke with it. I went to put into a pop machine. Guess what? The pop machine stole my very last looney to my name. Sounds super cliche but it’s an actual true but hilarious story. The pop machine ate my last looney. The end of the story is positive, the business worked out fantastically and all is well. But I took a leap and risked it all except one looney which a pop machine stole.

I am part of a chat group (Index Trading Group) which I started back many months ago and has now well out grown me. It is now some 250 people. 250 very smart and ambitious people. It’s grown to a point I never believed possible, I rarely contribute on there though my intentions were good but life, busyness and trading gets in the way as it often does. It’s no excuse. I should contribute more. Anyways, this options community is, in my opinion, immensely changing and shaping the future of retail complex option trading with new brilliant research and ideas. It’s got to be at the forefront of market neutral options trading. I often am even somewhat intimidated and in awe of some of the members abilities to focus and create great back-tested ideas and videos (I think most of those reading this will know who they are). Perhaps, it’s why I rarely contribute, it would take a lot of resource to match the quality they put out. I trade huge accounts which takes up time, I have a business to run and I have a family to take care of. Again, no excuse, so do they. But those become excuses I use to put off doing or coming up with ways to contribute (human nature). Anyways…

Today a topic came up about risk taking and trading for a living. A member asked what it would take to quite your job and trade for a living (the dream eh?). I say that almost facetiously, I trade as if it was for a living probably, and it’s got its perks but it’s also very hard money. I think business can be much easier 🙂 The breakdown from one member was very succinct he had listed out exactly what was required to adequately trade for a living and it was in the ball-park of 5MM which assumed you’d only trade 20% of your net worth and that you had several years put away for reserve. I’d pretty much agree with that except there-in lies the rub. If you used that equation to assess risk taking, you’d probably never make it to 5MM. Whatever gets you to 5MM in net, is likely to have broken that equation. Sometimes, you have to break the usual conservative views on risk taking and make that leap. Now, I don’t know if you should do that with trading per say. If you do do that with trading, you better have done your damn homework and have had a long stretch of success!

In life, and if you want to become successful and rich, you just have to jump and pull that trigger. BUT. You have to give it your all and you have to make sure you have back-ups and fail safes built in. Take the risk but if your fucking taking that risk, if something happens, you don’t sleep if it requires attention, you work your ass off making sure the risk you take works or that you have back-ups and ways to mitigate failure. When I started my business, I put every single cent into it, very irresponsible and would have seemed crazy. It worked out well but I think it was more because of insane persistence, fail-safes and tenacity. Once I made the decision to pursue an idea re software, I did everything I could to make it succeed. It took 7 years before it was profitable, and I worked 14 hrs a day 7 days a week to make it work (in my twenties). I pulled the trigger and being smarter now, I doubt I could ever make the same jump again, it’s just so crazy! But back then, once I had pulled the trigger, it was game on, I had back-ups to make it work and I worked 14 hr days 7 days a week making it work. I gave it my all.

The thing is, trading is so psychological and it’s essentially built on irrationality and the medium/arena (market) is largely unpredictable (some TA’s are screaming right now). I don’t think I’d pull a trigger in trading for a living if I were back in my twenties and about to take a risk.

For instance, on the macro level, trading for a living can largely be successful with all of the points I mentioned above (tenacity, hard work, dedication and backups). So Sure, I agree with that, hard work, tenacity and dedication will eventually lead to success as a trader on a macro level. But it’s not the same as a business..it’s a different beast. It’s a psychological Beast. You make decisions that directly and quickly cost or make you money. Dealing with the repercussions of those decisions whilst in a challenging time (down turn in P/L, stressed about $, needing to make more) etc will wear on you. I’ve made borderline adjustments that have cost me a car. Those adjustments bother me and used to affect my life. If you start second guessing yourself…it will start to affect your well-being. I lost many days of my early trading career life dealing with these frustrations and stress. I wasn’t even trading for a living, it was more of a hobby and the amounts weren’t touching my net worth. I can’t even imagine what it’d be like to trade while requiring it for living. I don’t know if I would wish it on my worst enemy. It can’t be easy. I commend the pro full time retail traders. They are a strong breed. Unfortunately, all of these little unexpected psychological issues of trading are human nature and WILL occur. It’s like running bad in poker, some players never recover, it’s a high speed venture with instant requirements for decisions that can cost you dearly. That will wear you out. This is why the best traders have very strict plans that they adhere to religiously. You cannot have on the fly decisions affecting your well-being or your trading psychology. This leads me to the micro level..

If you get into trading for a living and you run bad, this negativity will seep into your trades and it’s not something you can hit the pavement and make work with tenacity since its so much more complex of a battle (I am mostly talking about the internal battle within yourself at challenging times in trading and with the whole basis of the market being irrational and unpredictable). If a trade doesn’t go your way, and it’s getting desperate, there’s not much you can do and it’ll lead to more risk taking. So the whole internal battle you have psychologically, will tend to burn out or cause failure within someone. You can’t just get motivated late at night as a trader, and make something work instantly. So many times, I’ve thought my way through a problem in business, often times that’s not really possible in trading. That in and of itself, will lead to feeling helpless if you experience a bad run. This helplessness will compound. Then comes along second guessing yourself, and generally putting yourself in a compromised mental position.

With a business, usually, you can solve it with smarts, tenacity, dedication and time. You can, not always, but mostly, make it work! You can work hard enough to get lucky. You can do that on a large macro level with trading in general but not on a micro level which can be devastating to the psychology of the trader. I wouldn’t wish trading for a living on my worst enemy if not properly prepared, well bank-rolled and experienced.

Sep 16 – Trade Plan

    SPX OCT Rhino MONSTER

P/L: ~60,000-70,000

screen-shot-2016-09-16-at-12-24-04-pm

Getting close to profit target of $120,000. Any good 1.5-2% move down will get it at profit target and I’ll close it up. Good trade. If we get lucky and the move happens a bit later on, the profit can be a lot higher. I’ll be pretty quick to lock up profits as we get into next week since we’ll be approaching the 30 DTE level.

    RUT OCT Rhino

P/L: ~22,000

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Getting close to the 37,500 profit target. Same thing applies as with the SPX one. Will start locking in profits and removing.

    SPX NOV Rhino

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Majority of our shorts are at the 2120 strike and we’re up about 7,000. I have to consider rolling the structure down soon. If we go towards 2100 especially.

    RUT NOV Rhino

screen-shot-2016-09-16-at-1-15-01-pm

Majority of the shorts are at the 1200 area and any move towards 1190 will require me to roll the structure down @ a profit.

Sep 9 – End of Day

Ah what a great day 🙂 It’s nice to be cheering and enjoying a beautiful market fall and even praying for a 3-5% gap down on Monday rather than being stressed out and at adjustment limits with collapsing P/L like I used to be in the modified iron condors days. Obviously, No disrespect or gloating intended. I’ve endured two hard corrections in my life where I wasn’t properly prepared, so I am allowed to say that. So no disrespect or gloating intended re anyone reading this that is long the market. I’ve earned it!

Like I mentioned a few times, I have some Sept Lottos on (specifically 100s of 1050/1100/1140s and 1060/1110/1150s from the Sept campaign that were worthless a few days ago. I had hedged them off the last 2 weeks with call BWBs etc that were all removed. It was cheaper to leave them then to pay commissions closing them. Of course we’re pretty far from 1150 or 1140 but if we got another 7% down before Thursday expiry, they could stand to make a LOT of money. I’ll definitely close most if we get an equivalent -3.5% move on Monday as we had today (it’ll make the Sept profitable) so its probably not actually likely that I’d hit the real big profits as they could, unless we have a mega gap down on Monday. Either way, neat.

All my other trades are doing great. The down move helped a lot. I wish I was a bit quicker removing the remaining upside hedges but it is what it is. I figured we may get back up to 2200 with SPX and 1265 area with RUT before a fall and I didn’t want to expose myself to a runaway up move. Balance. The same day i believed we topped out, I had bought some call BWBs for October. Bad timing but proper risk management. I only use my technical analysis for small things and finer adjustments within my overall parameters.

Ironically, I might actually have to roll down and adjust my Nov trades if we gap down on Monday, which is kinda funny given how much room there was just yesterday. I don’t remember the last time I did downside adjustments, not even Brexit brought me to that. They’ll all be profitable, so it’s welcomed.

Here are my Nov RUT trades which I don’t think I posted. The short strike is at 1200. So as we approach it, I’ll need to roll it down. I may also condorize it or add some call BWBs to help with an upside bounce. I won’t mess about with adjustments if we do gap below 1200 and touch 1190, I’ll be fairly quick to roll down the entire structure. I’ll give it 10 or so points since we’re far away from expiration but not more. If it gapped down the next day and you were at 1190, it’d be on the very slippery left side slope.

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Sep 9 – Trade Plan

A pullback! Right on time. So I guess the 1260 area WAS the big resistance zone where we’d experience a pull back. Got that one right! It was the upper trend line and matched a few other technicals, plus the bollinger bands were historically compressed, made sense we’d experience a pull back here. I just try not to let it affect too many of my decisions as it could go anyway. I still put on my call BWBs for October yesterday since the position got uncomfortable on the upside.

I have a few Sept lotto’s left over and a 8% pull back would be epic.

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C’mon 5% fall by Thursday 🙂

This is the first big 1%+ red day in a long time and it’s so nice to see volatility return. I hope we have a follow up Monday. It’d get our account nice and profitable for the year. There has been no mean reversion or respite from this rally in RUT. It’s made the trades uber boring and almost got me to the point of demotivation. But, volatility always returns.

Here’s my October RUT trade:

screen-shot-2016-09-09-at-12-23-35-pm

Here’s my October (Monster)

screen-shot-2016-09-09-at-12-25-24-pm SPX trade:

Sep 8 – Rhino Trade Update

I added 5 x 1230/1280/1310 call BWBs to each of the Oct RUT RHINO trades @ 20.85

I have been toying with adding some 1170/1220/1260 BWBs in @ 4.6 if we have any move up to 1260/1265 area to beef up the sea of death area and for a play on an expected pull back.

Oil is rallying huge today! Nearly 5%. Bonds are taking a hit (TLT down 1.6%).

Oh and I added back 1 futures hedge per trade on the pull back to 1256 TF