Jul 16 – ATM Trade Update

I’m hitting (well above) negative delta limits on my current Aug ATM trade and am looking at ways to reduce it now that July expiration is over and that was providing me some positive deltas. It’ll get more and more negative delta as it progresses into the month so I’ll deal with it daily and continuously raise up that Upper expiration line. This trade represents a planned capital of 5,000,000.

I had the deltas in line a week ago but the reduction in vol and time passing has brought them quickly out of line. The BWBs in August are no longer giving a credit but would give some positive deltas and theta/risk. I think I’ll save those for a larger down day. We’re down about 0.75% today so I’ll have to start looking at PCS maybe even some call structures (call calendars or call BWB). I haven’t had to do that yet post crash as the bwb credits were sufficient in raising that UEL and eliminating upside risks.

I am looking at 3325 calendars, 3250 calendars (mixed) along with a 11 delta 75 wide PCS and I’ve already got some long ES to temp hedge.

So yeah, let’s go over the Aug position:

It is at -1450 or so delta and has pretty significant upside risk to the already existing profit of $125k. So we have to do something. We do benefit from vol release on up moves but it’s not enough. I’d like to get it down to about -700.

Here’s the trade looking forward 14 days

We’ve got massive theta, great risk reward if we get our deltas in-line and decent non-black swan downside risk profile. The previous expirations (from May till now) were a lot easier on the upside so this one will be a bit trickier.