Jul 30 2020 BWB+Fly Aug Trade Update

A nice pop in the p/l given the US is contemplating giving up on those pesky elections. Who needs them 🙂 Delta sitting comfortably at -800 and given the DTE, any moves towards -200 delta and I’ll just start peeling off the trade piece by piece removing risk as I go.

Sep BWBs are currently going for about 95c credit and Oct BWBs are going for about 2.25c. I’ve got loads of flies up in Sep so I can purchase BWBs against those but I didn’t get any in Oct yet so I’d have some exposure to downside if I get some of the Octs on. Not terrible given the deltas I’ve got built up in Sep so I’ll probably put some on today. Usually I like to start with the flies. It’s no different than just entering a rhino/bwb though which loads of people do without the fly hedge/combo.

It’d be a huge milestone to close the Aug at 500k P/L. It’ll call for some real nice champagne. But I won’t fixate on it, I’ll just manage that risk. Huge month so far and I think July is sitting at just over 7% P/L and Aug will likely be similar. Cannot complain and thankful the market keeps on giving.

Had a 30% year last year and I gather I’ll get towards 50-60% this year solely from the opportunities. The last few months, I’ve just been concentrating solely on building that long vol BSH up and trading these Rhino/BWB combos but it rarely takes much more than 30min a day, things are boring when they are producing. Many traders say you’ve made it and are barking up the right tree when you’re trading a system thus eliminating human factors and bias and subsequently the actual act of trading becomes boring. The latter part is true right now, the former isn’t based on a system per say but it will be once this environment ends.

Jul 27, 2020 – August BWB/FLY Trade Update

We ended Friday at a delta of -900 after adjustments and now sit around -1700. That shows you just how quickly negative delta you get with time even just the weekend. The position is hovering around 285k P/L so it’s seen an increase of 35k over the weekend. I’ll have to adjust the upside today and by Thursday this will be done with removals from the structure rather than additions to it. There is 25 days to expiration and I’ll aim to remove risks as we go from here until it’s a benign structure that can be expired.

Jul 24 2020 – The Big ATM trade update

Here’s an update on my big August trade that has about two weeks left in it. It’s starting to actually look like an old school ATM trade given the reduction in VIX and the lack of credits in 30 DTE or earlier trades. From March till June, credits were huge and upside risk NIL. Now as opposed to then, I actually have to use some upside adjustments aggressively.

I started adjusting for upside exposure during this little fall towards 3200. My overall deltas are sitting at -900 and I’ll close out the day at that.

Delta: -939

Theta: 21,956

Vega: -10,567

The position represents 5MM in planned capital and is sitting at 251k profit. I’ll dance this thing into Aug 7/8th and continuously remove risk and adjust. There’s a small chance for an extremely large payoff (the biggest I’ve ever seen) @ 1MM in 1 month. Reminds me of that show 2months 2million. Ridiculous but it is the environment and the opportunities. These types of trades won’t last. For now, I’ll happily let it beef up the account. I’ve got BS protection in case we have some sort of massive gap down.

Here’s the trade looking forward 7 days

Here it is where I expect to close it. It won’t look like this later as I’ll be constantly adjusting back and forth between now and then and the negative deltas will continue to build up as time passes

For a bit there, the VIX hit around 24 and it looked like the ebb and flow trade was about to get a lot harder but today we can now get a Sep BWB for $1.00 credit. So we’re still going for now 🙂 I got some on to offset the Sep position which I started with symmetric flies back at 3260-3270. I’ll be very happy if we can keep getting these conditions for the next 6 months.

In a large fall, and if we approach -400 delta, I’ll start to adjust for the downside and I’ll offset with some way OTM calendars in case of a bounce. I have two trading weeks left for Aug position which will get more and more negative delta and have more and more protection to the downside. If I am forced to adjust for downside next week, it means we went through 3150 area and to offset the nuance of continuously increasing negative deltas, I’ll use some way OTM calendars for upside protection while adjusting for the asymmetric risks on the downside.

I gotta say, I feel kinda lucky that I was also able to start the September position, I wasn’t sure I’d be getting the same opportunities with BWB pricing. Perhaps this continues on for the rest of the year re elections in Nov. Eventually I will move on to a 488 campaign, BSH factory, TAA and ATM at lower PC.

Post Covid Crash update – May 5

Been a while, I should have kept posting through the whole event. I am up about 20% on the year which is decent given the events and given several mistakes I made. I’ve since revised how and what I do in my process and can only be thankful I ended up positive through-out.

Bizarrely, I was super in-tune with the whole virus thing back in late January as the first reports were coming out of China. By early Feb, I had got out of my entire standard equities portfolio (TAA –Tactical Asset Portfolio blend) and purchased 400 long puts ~ $1.00-$2.00 in anticipation of some volatility thinking I caught it earlier than the market. The market just kept going up and up and up until Feb 24. I had no real OTM trades on and had built up some long-vol portions but the nuances of en-cashing was where my regret lies.

On Feb 28th, I started cashing out of those 400 long puts which took a beating through the mid part of February. Had I kept them on till March 24th they’d have been worth millions. Just before that, on the 27th, with the VVIX spiking the highest since Feb 2018, I also started opportunistic OTM trades that got annihilated despite being hedged with Black swan hedges. A poorly timed entry, every indicator was flashing off so I should have waited for a bottom signal before entering but at the time I figured that the virus news would cause a more lengthy decline with several bounces in-between so I figured I could get in and out using vol relief on the bounces to capture profits. I was wrong. The mess lasted till Mid March and lost a bundle but was offset by my long-vol and BSHs. Though, I did take a pretty big temporary hit on mark-to-market throughout. Anyways, to go back a bit, on the bounce in early March, I picked up another 450 long puts at 1800 for $3.00 and I was going to convert into a BSH factory but the market collapsed almost immediately after I bought them (lucky). So I followed the trend down converting slowly into fully formed BSH and used them to hedge off the OTM trades. I was keeping that left tail popped up. By the end of it all, the combo was green and all was fine.

In Mid March, I started using OTM calendars on bounces as an income capture. As well, to offset the long vol hedge that was incredibly negative theta positive vega until I got a signal to encash, I started selling 5-7 DTE puts in ES after-hours at ridiculous prices whenever they came up and used that against my long-vol (calenderizing the long vol hedge that was 90 DTE). This all worked out really well and I was able to capture some really ridiculous pricing. I saw 1000 SPX puts going for like $10 I am pretty sure.

By April, I started doing BWB ATM trades on dips for large credit (usually they are $4 debit!) with 40 DTE. On bounces, I’d add symmetric flies. I’d rinse repeat this in a nice ratio to maintain decent profile and am still doing this now.

I’ve become a fan of using trend indicators for risk management and that’s where my interests lie right now. In this environment, I’m setting my portfolio to be mostly locally concave with respect to selling premium (ATM income trades) yet my overall portfolio will be global convexity (long vol). I won’t sell asymmetric risk rather I’ll own it by using some BSH type factories and some usage of OTM strangles and I’ll sell more defined risk upfront with ATM type strategies. It’s the environment we’re in and with the credits (removing upside risks) in the BWBs, it makes management much easier.

Since I am doing my own blend of things I can probably start posting more risk profiles and trades so I’ll start doing that.

Dec 3 2019 – Trade Updates

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.

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.

Nov 26 – Trade Update

Edit–I didn’t find I was clear enough on some specifics related to BSH activation and the KPBR and I was pretty emotive while presenting something in a very confusing manor. I am a big advocate for the original PMTT BSH and in fact my main base trade is a BSH factory for both income and hedging as well as a Jeep STT variant. My sole two OTM trades are centered around the original concepts. My frustration and emotive response was in relation to the exotic structures that I saw got some people in trouble.

So to get into it, my original post was not really clear re how OTM and BSH trades were affected in the Oct and (now even Dec) events. The VIX did not spike as much as it should have thus BSH trades acted accordingly BUT so did the STT trades. They compliment each other. The STTs were totally fine through Oct and Dec as anyone can find out re backtesting and who’ve traded it live and thus the BSH activation wasn’t needed. The same thing that affects the STT is the same thing that causes the BSH to activate. It activates in a black swan and this move was not a black swan. You manage these moves with the relevant downside adjustments and you wait out any small vol/skew draw down you might have. If the STT isn’t affected by an event, then you don’t need the BSH activation and so on. I was clear in my original post that I didn’t have problems and was doing great in my main IB account, and that’s because I had on original structures and not the alternative exotic ones.

The thing is with the alternative search for other cheaper BSHs, which people created to break even or even slightly profit (no cost BSH?…too good to be true eh?) there are always trade offs. In this round of creation, people were looking at types of ratios that many realized too late, had this sea of death issue that hadn’t triggered in previous backtests per say. If the move down is slow and controlled, you’re going to get in trouble. The attractiveness came from the fact that it was theoretically free most the time. The ideas is that the ratio style BSH paid for itself. The problem is that it was meant as a hedge and if there are situations where it trends with your income trade (ie doesn’t hedge it) then it could present unexpected problems. The thing is, now that we’ve had this move, we’d also have this data and had we backtested it thoroughly w/ this data previous to this event, we’d have seen that 🙂 So yeah, the VIX not spiking as high as it should have re the move that occurred did have slight very temporary affects on the income OTM trades but they were totally manageable and expected but the effect it had on exotic KPBR/KH type hedges was pretty horrible combination. Resulting in the income trade but also the exotic KPBR type BSH having double whammy draw downs. This can escalate account issues quickly. The trade off isn’t worth it. I was fortunate enough no to experience that because I stuck with more traditional approaches

(Original Content with some edits)

What an interesting month October was. The market fell pretty hard and not only that but the technical indicators on all sorts of metrics deteriorated to points not seen in a long long time. A lot of damage was done and the market won’t recover without a lot of reparation.

The KPBR hedges (not a PMTT trade) failed miserably and a few people that ventured away from the standard setups experienced a lot of pain. These types of exotic structures not only did not activate but also lost significant money and when combined with temporary P/L issues/vol draw downs in OTM trades, left some with balance issues that can cascade into margin issues etc. It didn’t affect me (I had standard BSH protection on) but it affected other people. What did affect me was margin expansion issues and broker (systemic) issues especially at EDF because of the HS3 (another alternative non-course related trade that’s probably going to be shelved by most people). My main account (@ IB) is crushing right now which is nice. My EDF account is down modestly through it all from its peak profit. Mostly because of broker panic issues and margin expansion of the HS3 (I won’t trade this again). In fact, as of Jan 2019, I am actually just trading a BSH factory (Income and Hedge) and a Jeep version of the STT (as per the PMTT course) and that’s going to be it.

To me, this last period provided us with the most interesting back-test data period that I’ve ever seen. It was a swift but controlled fall of just over 10% where the VIX did not spike nor did skew change all that much which showed which trades were swimming naked as the tide pulled out. The trades that were naked were more of the exotic new versions developed. This was interesting and helps us see and test ideas even further. It shows how OTM trades do in a 10% decline where BSH activation does not really occur. It’s given me all I need now to fully construct trades that take into account BSH protection including swift but controlled moves down, systemic/margin issues including expansion and loss due to temporary P/L issues and so on. I believe we’ve got all the pieces to the puzzle for some smart refinements to the existing trades.

I got approved for an IOM seat at CME which gives me much reduced rates for futures. I’ll be paying something like 77c total all in for each futures options contract. Sweet.

Poker: I played the online party poker millions yesterday with 20MM guaranteed. Busted 550th out of 1600 when my TT vs 66 had the opponent hit a damn 2 outer 6. If I won that I think I would have min cashed at least for 5x my buy in. Ah well. Such is my luck in poker. Getttttting siiickk of it.

Back in action after MTL (BSH, Rhino and Current status of trades)

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.

    Poker

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 🙂

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 16 – Trade Plan

Yesterday, I put on about 37 Bearish STTs to hedge off the 282 March STTs. The goal is to roll up the debit spreads to eventually convert into a regular STT when my market bias supports it. I removed 7 ES hedges at 2669 (this AM) after spending about 2 hours reviewing technical sources last night. Confident that we’re locally bottomed and that we’ll bounce. I’ll continue to review technicals and market commentary but I don’t have all that much risk on, especially as time goes by.

What I am most upset about is that I didn’t have dry powder to enter during the mini-crash. Ah well. Next time.

My BSH factory is approaching even today after the bounce. The shorts I sold were in Dec so they’re getting pulled right down.

My Mar STT CC campaign is down about 22-25k or so on 282 butterflies (71 units). Loads of theta. Healthy and hedged by a bearish STT
My Jan STT cc campaign made about 10k through the mini correction and has loads of theta (it’s in the most perfect position imaginable for the next two weeks)
My Dec STT cc campaign is break even through the mini correction
My KH hedges are all down now (~20k or so) but are mostly Dec PCS that are just ab it compromised. They will quickly deteriorate into a slightly below break-even result if things don’t crash. They did their job with margin control and slight hedges.
My X4 is down about 18k (I am waiting for a 2800/2810 to take it off)
My Rhino is break even (it went through a 15% crash, well handled)
My ES HS3 (Mar) is down about 80k but the hedges I had on are +32k so net down about 48k. Will come back quickly
My ES HS3 (Jan) is really flying and should make up for the Mar within 14 days (Perfect positioning)
I removed all my Dec HS3
My ES BSh factory is break even

Poker

I have to up my study game as the last week had my focuses elsewhere. New course came out that I am interested to audit (Nick Petrangelo). This week I’ll catch up. The tournaments start next week and I am off to MTL on the 21st. Should be fun!