At Friday’s close, our unrealized return on total capital at risk for April was about 4%, or in terms of our Model Portfolio, which is still 50% in cash, about 2%. I suspect these figures are distorted by expiration-day skew (now that there are weekly options, every Friday is expiration day…I’m planning to write more about this in coming weeks). In any case, technical sell signals on the intraday charts suggest that our bearish bias is appropriate heading into next week.
In quantitative terms, we ended the week with a slightly bearish delta per dollar at risk of about –1.5%. Our double-diagonal position continues to buffer volatility risk, giving us a moderate net vega of approximately 3.7% of capital at risk. As gamma increases moving towards expiration week, our projected risk-management price thresholds have nudged in to about SPY $127.45 and $132.35. At Friday’s closing price for SPY, that leaves us within 1% of an upside adjustment; the good news is that if the market continues higher, we expect implied volatility to remain within our comfort zone for entering another calendar position to the upside.
This was what our portfolio risk profile looked like at the bell on Friday:
Once again, if the bulls retain control next week, we’re prepared to open a third April position above the market. Opportunities for Supplemental Trades, on the other hand, are nowhere to be found. We ran scans two or three time a day last week, and no trade meeting all of our entry criteria emerged. The time window for starting an April Supplemental Trades portfolio has close, but we’re considering getting an early start on May. As always, we’ll send out a notice as far as possible in advance of any anticipated trade.