A shift in perceived risk toward the short-term has put a drag on our currently open positions:
- SPY November/December Double-Calendar #1 (114/119): Heading into the close Friday, this position was mid-priced at about $2.17, for an unrealized loss of approximately 8.8%. It carried a base-position delta of about –9.3, or 2% of total capital at risk, and vega of about 23, or 4.8% of dollars at risk.
- SPY November/December Double-Calendar #1 (117/121): This position ended the week trading around $1.94, for a paper loss of about 8.9%. Its base-position delta was approximately +7.5, or 1.8% of capital at risk; base-position vega was about 23, or 5.4%.
- Supplemental Trade – JNJ November/January Double-Calendar (62.5/65): Our one Supplemental Trade for November (so far) was up about 1.4% after just a couple of days, closing the week mid-priced around 1.41. Base-position delta and vega were about –7 and +23, respectively.
Assuming something close to our Model Portfolio allocation, our core newsletter (SPY) portfolio is down a little less than 4.5% for the November cycle. Here’s our risk profile as of Friday’s close:
A couple of members wrote in Friday to ask why our risk curve didn’t look all that healthy at this point. The answer is two-fold: implied volatility and volatility skew. I’ll post more about this later today, but the bottom line is that our profit potential is still at an acceptable level, our portfolio risk curve is very close to delta-neutral, and we still have half of our capital to make adjustments and add positions at a more favorable IV/volatility skew.