...I'll get to the “and” later.
First, a respectable comeback from last month's loss gets us off to a good start for the second quarter. For April we booked a Model Portfolio return...
We have two more positions to close today (we’re going to let the iron-condor position adjusted from BF Hedge #2 expire worthless, and the commission cost of closing BF Hedge #3 is, for retail traders, more than the proceeds we’d get). Because the April/May double-diagonal and the April butterfly (now condor) have opposite delta, we’re going to work both at the same time. Here are the orders:
Order #1Day limit orderSell to close 2 SPY May 145 calls
We’re placing the following order to close our remaining position in this hedge trade:
Day limit orderBuy to close 2 SPY April 143 callsSell to close 2 SPY May 143 callsfor a net credit of $0.46 or better.
Note, again, that the 2 contracts specified above represent our entire position in this trade, leaving us with no May 143 call position and cutting our short position in the April 143 calls in half. Of course, anyone filled…
SPY is up about $0.70 in pre-market trading this morning, putting the share price closer to the sweet spot of our April portfolio. I’ll resume the process of closing out our positions once the opening volatility dissipates, with the first trade alert (most likely an update to yesterday’s partially filled calendar order) possibly coming as soon as 10:00am Eastern.
As we move to unwind our April positions, the first move is to flatten out the calendar-spread hedge we opened Tuesday for upside protection. We’re entering the following order:
Day limit orderBuy to close 2 SPY April 143 callsSell to close 2 SPY May 143 callsfor a net credit of $0.47 or better.
Note that the 2 contracts specified above represent our entire position in this trade, leaving us with no May 143 call position and cutting…
We’re opening the following position to hedge our upside exposure:
Day limit orderBuy to open 2 SPY May 143 callsSell to open 2 SPY Apr 143 callsfor a net debit of $0.83 or better.
Note that this is not a core p0sition, so the 2 contracts specified above represent a number of contracts equal to the number allocated to our initial, Apr/May double-diagonal position.
Analysis: Welcome to expiration week. If we were pursuing a run-of-the-mill calendar-spread strategy,…
With SPY at about $137.30, our risk-management trade signal is no longer valid. We have more than a two-point margin to the downside before we hit our expiration-Friday break-even, so we won’t be making any modification to our positions this afternoon.
As of 12:57pm Eastern, we have an active risk-management trade signal. During expiration week, we’re careful to focus on reducing risk (gamma, in particular)—especially in a news-driven, risk-on/risk-off environment. If SPY doesn’t rally back above $137 and hold that level through the afternoon, we’ll be making another adjustment to our hedge position in the last hour to hour-and-a-half of the session.
We’re adding the following downside hedge position ahead of expiration week:
Day limit orderBuy to open 3 SPY Apr 137 putsSell to open 6 SPY Apr 135 putsBut to open 3 SPY Apr 132 putsfor a net debit of $0.23 or better.
Note that the 3 contracts specified above for the “wings” (outer strikes) represent 3 times the number of contracts per leg in BF (now condor) #1 and 1-1/2 times the number allocated to our…
Throughout the past week of hedge trading, I’ve noted that, given the current “buy the dips” mood among investors, we wanted to hedge incrementally, to avoid being hurt irreparably in a snap-back. While hardly aggressive, Tuesday’s butterfly hedge #2 did take a hit today, though, losing about 30%. The adjustment this afternoon was our way of unwinding that delta hedge without locking…