Aug 8 Trade and Travel Update

I am on my very last 2 day leg with my family in Milan. On Aug 10, I’ll drive up to Munich to meet some friends and do a beer tour around Germany and probably Pilsen (Czech) and maybe Krakow, Poland. On the 19th, I’ll be in Barcelona to play a big poker tournament and then I’ll be heading home to resume normal life. I think this will be the last EU tour for a little while. We’re building a house in Canada next year and I think we’ll use that as our summer base and slow down the EU tours as I think I’ve seen most of it now. It’s not as exciting as it first was and it’s been more of a drain than a rejuvenation. As my account grows, I need to fully concentrate on trading and take only brief breaks on weekends etc.

As for the trades, well, the market is in a historic area right now. The DOW has made 9 all time highs in a row and the VIX (and thus option premium) is at all time lows. It’s a bad time (the worst) to be an option premium seller. It’s the worst time for strategies I used and the plan I had 🙂

I saw this graph of VIX futures and it really sings a song.

Anyways, I know a lot of people are being challenged right now. It’s been a rough 20 months for trading these types of strategies. Slow. I started trading the Rhino (which really likes any market other than a 5% up market in a 45 day period) and as soon as I initiated that trade at full volume, the market had like 15 months where 9 of them (RUT) went up 5% or more 🙂 I have terrible timing. I think the RUT moved up 50%+ in the last 15-20 months. The SPX went from 1828 to 2475 in what 16 months? Incredible move. So I had low’ish returns for that trade over the course of 2016 (I was positive just meh, I think 20%-25% overall). Then 2017 came along, and I had started the STT full on but still had Rhinos on from previous. The rhinos got decimated in the environment and is still affecting my overall return for 2017. This environment for the STT can still be done well I just wasn’t able to kill it this summer. As to do well, you really had to be perfect in timing for paying off the BSHs and for initiating the STT. It took a certain plan and without knowing how the market would have gone, it would be hard to do well in that environment sans Combo trades (the combos would have crushed). The vol has been so so so low that I’ve been dragging heels on initiating new STTs. I mean, you’re a net seller of vol and vol is at historic lows, you haven’t gotten a worse price on this ever. So I wasn’t excited about initiating new trades. I know it can be done if you arrange a + UEL and if you are very prudent at paying off those BSHs but that’s not easy. On big up moves, I’d initiate BSH and RC (RC pays off about half of the BSH) and I’d wait for some vol to enter in STTs. That vol never came (ever!, it’s so damn crazy how low the vol is..we haven’t had 0.3% daily moves in record times) and I was stuck putting on STTs in low vol(Crappy prices) and when my BSH/RC combo was down. Still it profited but just nothing much at all. Typically, the plan was this: Put on RC/BSH as the market has a big up day, wait for down day and enter an STT. In ANY normal market, or any market that’s not this market, you’d have that opportunity. Down days are fairly common…just not this year. That all said, poor (slightly profitable) results because of the management/plan I chose for the year. That’s got me a bit bummed out but at the same time I haven’t been more excited for what is coming in my trading career.

The combos that we are working in the group and the testing that we’ve done suggest very very consistent results. I’m showing a result of 8.75% on margin in 45 DIT. Thats 5.833% per month on margin used. We use only about 65% of balance, so total balance return would be 3.8%. Not that exciting when looked at as a single component. However, If we combine this with a T5 (TTT555) trade the margin reduces significantly. My goal is to get it to 5% a month on whole account for the STT combo alone. The T5 trade has gone from 1200 to 20k in 2.5 years in backtesting. That thing returns 100% 70% of the time within 10 days and loses equivalent 30% of time. You obviously can’t do too much of these as you’d wipe yourself out psychologically (and 30% of your balance) if you had 3 losing months in a row but the boost and the margin reduction makes it very attractive. My goal is to have the combo, the BSH factory and the T5 trade working together to provide a total account return of 100%. That’s exciting but it’ll be a lot of work, a lot of organisation and diligence in process. Further to that, we’ve got a T5 timer that helps immensely with entries and exits. Unfortunately, I went about 40 units in for the T5 before the timer exists and I entered at a shitty time, it’s down at them moment but the risk profile looks great. Like I said, I have the worst timing for everything and I have to create a life and trading plan that negates my awful cursed timing 🙂

I was asked to do a presentation on the PC2 trade but I am on my last two days with the family and I just can’t sacrifice the time w/ them without having a very angry wife so I am hoping I can just do it early September instead.