This afternoon we’re opening the following position for January expiration:
Day limit order
Buy to open 4 SPY Feb 129 puts
Sell to open 4 SPY Jan 129 puts
for a net debit of $1.17 or better.
Note that 4 contracts per leg is our base-position size for single calendars. Trading whole-number multiples of the base size ensures that adjustments will not result in unbalanced positions. Also note that matching our Model Portfolio risk profile requires a…
We’re reversing Adjustment #3 by rolling our contracts at the 99 strike up to 109, as follows:
Day limit order
Buy to close 1 SPY Jul 99 put
Sell to close 1 SPY Aug 99 put
Buy to open 1 SPY Aug 109 put
Sell to open 1 SPY Jul 109 put
for a net debit of $0.52 or better.
Note that the 1 contract specified above represents our entire position in the 99 put…
Selling has increased heading into the final half-hour of trading, and this position is approaching our 25% loss-level risk-management threshold. In keeping with our intraday adjustment rule, we’re rolling half of our remaining contracts at 112 down to 102, as follows:
Day limit order
Buy to close 1 SPY July 112 put
Sell to close 1 SPY August 112 put
Buy to open 1 SPY August 102 put
Sell to open 1 SPY July 102 put
Wal-Mart has taken a pounding this week, but August implied volatility is only about a point above our target range for new trades. It’s a bit of a stretch, in terms of volatility risk, but we’re going to add a new position this afternoon to offset our Supplemental Trades portfolio delta:
Day limit order
Buy to open 2 WMT Aug 50 calls
Sell to open 2 WMT Jul 50 calls
Buy to open 2 WMT Aug 47.5…
Anytime the market becomes volatile enough to trigger multiple adjustments, it’s a good idea to adjust our expectations as well, to reflect the increased risk. Our open May position is currently trading at a gain of about 17%, and there appears to be no practical option for an upside adjustment at this point. Therefore, we’re going to book our profit on this position and wait for the opportunity to start entering June trades.
Closing this position is going to take…
Positive vega and disciplined risk-management kept us out of any serious trouble during last week’s wild ride, and our new, tighter restrictions on adding vega when an adjustment is triggered during a volatile sell-off prevented today’s nearly 30% drop in IV from coming back to bite us. Here’s where we stood a few minutes before the close today:
The May/Jun 116 call calendar at the center of our adjusted position was trading for about $1.43; the 108/120 double-calendar that…
As promised in last night’s Update, we’re adjusting this position again this morning, with the following order:
Day limit order
Buy to close 1 SPY May 120 call
Sell to close 1 SPY Jun 120 call
Buy to open 1 SPY Jun 108 call
Sell to open 1 SPY May 108 call
for a net debit of $0.60 or better.
Note that the 1 contract specified above represents half of our remaining position at…
The status of our open positions, after today’s resumption of the February–March uptrend, so far appears to confirm the value of the strategy adjustments I talked about in last Thursday’s trade analysis. Since we opened our first April position, SPY is up about 3.5% and implied volatility for SPY options has dropped about 2 points (more than 13%)—but we’re still showing solid gains as of 3:45pm today:
SPY Apr/May Calendar Spread #1 (116 Puts): This trade was…
An hour and a half into the session this morning, there’s been no sign of a major reversal; therefore, in keeping with our strategy rules, we’re adjusting the March/April double-diagonal. This adjustment has two parts—one, we’re buying the complementary diagonal on the call side:
Day limit order
Buy to open 2 SPY Apr 113 calls
Sell to open 2 SPY Mar 118 calls
for a net debit of $2.72* or better.
And two, we’re rolling up the…
Friday was a perfect example of both why we have a whipsaw filter, and why we introduced a rule for bypassing it. At the time the second adjustment alert went out, we were at a level of unrealized loss that we’ve defined as the maximum we want to tolerate on the portfolio scale, and our portfolio base-position delta was more than 80. If the market had continued to plunge, we would’ve seen our paper losses mount quickly. On the other…
Monday, January 3, 2011
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