With just three trading days left until September expiration, and our portfolio showing about a 12% return on total capital at risk, we're going to avoid the risks of late-expiration-week trading by...
TLT triggered a risk-management alert for our April/May double-calendar as the share price fell below $91.75 in the final minutes of trading yesterday. Because this is a Bonus Trade, I’ll offer several adjustment ideas rather than a single trade alert.
Our main goal is to reduce delta risk by at least half, without incurring a big increase in gamma or theta in proportion to total capital at risk. While I can think of a half-dozen ways to accomplish this, these…
While we’re watching time-decay slowly lift our core SPY position, we’ll consider the following Bonus Trade:
Buy to open 2 TLT May 95 calls
Sell to open 2 TLT Apr 95 calls
Buy to open 2 TLT May 92 puts
Sell to open 2 TLT Apr 92 puts
for a net debit of $1.56 or better.
Note that 2 contracts is our base position for double calendars. Trading whole-number multiples of the base position size ensures…
Just like we did with last week’s Bonus Trade, we’re taking another look at using a butterfly to hedge our calendar-spread portfolio. This time we’re turning the thesis on its head and examining the pros and cons of buying a butterfly with negative delta.
The Thesis
The primary risk we face with any hedging strategy is being whipsawed and damaging our total return for the month with repeated losses on hedge trades. That’s the reason for our whipsaw-filter rule:…
With the final numbers now in for our comparison benchmarks, we can officially log superior performance for May in conditions under which, according to “conventional wisdom”, a market-neutral strategy supposedly can’t do well. By following the latest improvements to our trading rules, we stayed mostly in cash and, for the one position we did put on, made vega-neutral adjustments to compensate for huge moves in the S&P as volatility shot back up to historically high levels. These same rules have…
We’re about to enter expiration week, and with this position showing a 13% profit, we’ve already captured 85% of its likely potential. We’re closing the trade this afternoon with the following order:
Day limit order
Buy to close 2 SPY Dec 115 calls
Sell to close 2 SPY Jan 120* calls
Buy to close 2 SPY Dec 108 puts
Sell to close 2 SPY Jan 103* puts
for a net credit of $0.47 or better.…
Even though there’s little delta/gamma risk in holding this trade into next week, there isn’t much additional profit either—and we do have volatility risk. We’re closing our position for a 15.2% profit, with the following order:
Day limit order
Sell to close 2 SPY Mar 97 calls
Sell to close 2 SPY Mar 71 puts
Buy to close 2 SPY Feb 91 calls
Buy to close 2 SPY Feb 77 puts
for a net credit…
For anyone who has not already closed this position:
A drop in implied volatility has offset the time decay of our adjusted trade, so we still have only a small profit in what remains of our position. But with the long President’s Day weekend ahead, there’s plenty of opportunity for the Secretary of Defense or some member of Congress to drop a comment for or against cuts in defense spending, which is one of the things that have caused unusually…
We’re closing our December Bonus Trade, with two orders, as follows:
Day limit order
Sell to close 2 MCD Jan 60 puts
Buy to close 2 MCD Dec 60 puts
for a net credit of $1.60;
Day limit order
Sell to close 1 MCD Jan 65 call
Sell to close 1 MCD Jan 52.5 put
Buy to close 1 MCD Dec 65 call
Buy to close 1 MCD Dec 55 put
for…
We’re rolling half of the remaining contracts from our original MCD 52.50/55 diagonal Bonus Trade up to the call calendar spread at 65, as follows:
Day limit order
Buy to close 1 MCD Dec 55 put
Sell to close 1 MCD Jan 52.50 put
Buy to open 1 MCD Jan 65 call
Sell to open 1 MCD Dec 65 call
for a net debit of $0.89.
Remember, the 1 contract specified above represents half of…
The market has pulled back from this morning’s rally, but MCD is continuing to trade above $61. It has reached the point where we want to boost the profit potential of our Dec/Jan diagonal Bonus Trade and raise our upper break-even. We’re rolling half of our original diagonal position up to the put calendar spread at 60, as follows:
Day limit order
Buy to close 2 MCD Dec 55 puts
Sell to close 2 MCD Jan 52.50 puts
Tuesday, September 13, 2011
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