We’re in a bit of an up-hill battle this month, with SPY implied volatility in the doldrums and tending to skew toward the March contracts. Nevertheless, the G20 (non-)decision to postpone any commitment to bail out the Eurozone, appears to have kept support under April IV for the time-being. Shortly after the close of trading this afternoon, our one open position was showing an unrealized loss of about 7.5%—which, because we’ve been conservative with our trade entries in…
The S&P has gone nowhere since Friday, and the VIX is flat as well—but the position we opened Friday morning is showing a moderate unrealized loss. The culprit, quite simply, is a half-point drop in the average implied volatility for SPY options. The premium in both the March and the April contracts, both on average and at the strikes used for our one open position, has fallen, with the drop in implied volatility reflected more in the price of our…
We’re entering the following position this morning for March expiration:
Day limit orderBuy to open 2 SPY April 139 callsSell to open 2 SPY March 139 callsBuy to open 2 SPY April 134 putsSell to open 2 SPY March 134 putsfor a net debit of $2.85 or better.
Note that 2 contracts is our base position for double-calendars. Trading whole-number multiples of the base-position size ensures that adjustments will not result in unbalanced positions. In…
Last week we booked a substantial profit on both of our core trades for the February cycle, with only a small loss on the hedge position. Here are the results for each trade:
SPY February/March Double-Calendar #1 – 8.54% gain on total capital risked;
SPY February/March Double-Calendar #2 – 19.75% gain;
SPY February/March Calendar Butterfly Hedge – 0.52% loss.
The average return per trade was about 9%, and the relatively small size of the hedge position meant that…
We’re reducing our upside risk to adjust for this afternoon’s rally by rolling our position in the Feb/Mar 125 put calendar up to a call calendar at the 135 strike, with the following order:
Day limit orderBuy to close 2 SPY Feb 125 putsSell to close 2 SPY Mar 125 putsBuy to open 2 SPY Mar 135 callsSell to open 2 SPY Feb 135 callsfor a net debit of $0.08 or better.
Note that the…
Last week SPY-options implied volatility dropped by almost 15%, which, along with the share price climbing above the center of our risk curve, was a drain on both unrealized return and projected profit at expiration. However, following the strategy rules for managing volatility risk with our entry trades is paying off: at Friday’s close, the unrealized return on our February trades was up from the week before. In post-session options-trading, we were showing about a 3.8% unrealized return on total…
Since we closed out our January positions this week, the lede for this Update normally would be a quick review of the month’s results. I stopped posting stand-alone monthly performance reviews a long time ago, in an effort to help members stay focused on what’s important: long-term risk-adjusted returns. But as I thought about how we handled this cycle, and how that compares to last month’s trading and results, I saw a number of valuable lessons about risk-management that are…
We’re adding to our February portfolio by opening a second double-calendar, as follows:
Day limit orderBuy to open 2 SPY Mar 135 callsSell to open 2 SPY Feb 135 callsBuy to open 2 SPY Mar 129 putsSell to open 2 SPY Feb 129 putsfor a net debit of $2.38 or better.
Note that 2 contracts is our base position for double-calendars. Trading whole-number multiples of the base-position size ensures that adjustments will not result in…
Leaving aside the newly opened February/March Double-Calendar, our portfolio of open positions is currently showing a return (realized and unrealized) of approximately 5.4% on total capital risked. That represents a Model Portfolio return of about 3.3% after accounting for the cash we kept in reserve for hedging our January portfolio and entering February trades.
As the trading week drew to a close Friday afternoon, our January positions had a slightly bearish net delta…
With the January put vertical spread closed, we have enough margin available to open the following position for February expiration:
Day limit order Buy to open 2 SPY Mar 131 calls Sell to open 2 SPY Feb 131 calls Buy to open 2 SPY Mar 125 puts ell to open 2 SPY Feb 125 puts for a net debit of $2.40 or better.
Note that 2 contracts is our base position for double-calendars. Trading whole-number…
Monday, February 27, 2012
0 Comments