As stocks resume their march higher today and implied volatility threatens another visit to 12-month lows, our portfolio P/L has slipped a bit since last week. This is the status of our open positions as of 1:35pm est:
- SPY January/February Calendar Spread #1 (124 calls) – This position was mid-priced around $1.11, giving it about a 13% unrealized return on capital at risk. Base-position delta bias was –45, or –11.5% of capital at risk.
- SPY January/February Calendar Spread #2 (127 calls) – Mid-priced at about $1.30, this position is showing an unrealized gain of approximately 21.5%. Its base-position delta is about –9, or –2.1% of capital at risk.
- SPY January/February Calendar Spread #3 (129 puts) – The position we added on Monday is trading around breakeven. It’s contributing a base-position delta of about +32, or 6.9% of capital at risk, offsetting the majority of the negative bias from our other trades.
Our total unrealized return on capital at risk is currently about 12%, which is equivalent to a Model Portfolio return of about 9%. Portfolio delta, as a percentage of total capital at risk, crossed our adjustment threshold around mid-day, but it’s not yet clear whether a trade will be triggered as the session nears the close.
Here’s our current portfolio risk profile:
Regardless of whether we make an adjustment (or open a hedge position) this afternoon, we expect to enter our first February position on Friday, assuming there isn’t a large spike in implied volatility. Members following our Model Portfolio allocation should take note of the overlap in the timing of our January and February positions, and anyone who wishes to participate in the February trade should make sure they have adequate margin available.
On a side note, volatility skew over the holiday period made conditions unfavorable for entering any Supplemental Trades, and it’s now past our time window for beginning a January portfolio. We’ll start scanning for February Supplemental Trades next week.