With the S&P down 2% this morning, a risk-management adjustment has been triggered by our intraday adjustment rule. We’re putting in the following order: Day limit order Buy to close 1 SPY Feb 117 call Sell to close 1 SPY Mar 117 call Buy to open 1 SPY Mar 105 call Sell to open 1 SPY Feb 105 call for a net debit of $0.91 or better. Note that 1 contract per leg represents all…
Sunday, January 31, 2010
Risk, rules and discipline are important for long-term success with any trading strategy, but never more so than when our positions are under pressure. Focusing on near-term risk last week, we suspended our whipsaw-filter rule (i.e., “adjust only on next-day confirmation of a closing price outside the adjustment price theshold”) to make Wednesday’s adjustment trade—with good reason, certainly…but bending rules without quantifiable criteria neglects two of the above three principles. Many professional traders will argue that trading is as…
Wednesday, January 27, 2010
Negative home sales, round two, has SPY down a quarter point—and less than a quarter point from our portfolio-level risk-management threshold. Considering our current degree of downside risk ahead of the FOMC policy statement this afternoon, we’re rolling half of our contracts at 115 down to 107 with the following order: Day limit order Buy to close 1 SPY Feb 115 call Sell to close 1 SPY Mar 115 call Buy to open 1 SPY Mar 107…
Monday, January 25, 2010
Disappointing home-sales data put a damper on the positive opening, but SPY is still above our $109.40 threshold for a second adjustment to the 115 calendar-spread position. So, as planned in last night’s update, we’re initially adjusting only the 112/117 double-calendar, as follows: Day limit order Buy to close 1 SPY Feb 117 call Sell to close 1 SPY Mar 117 call Buy to open 1 SPY Mar 108 call Sell to open 1 SPY Feb…
Tuesday, January 19, 2010
We’re adding the following position to our February portfolio: Day limit order Buy to open 2 SPY Mar 117 calls Sell to open 2 SPY Feb 117 calls Buy to open 2 SPY Mar 112 calls Sell to open 2 SPY Feb 112 calls for a net debit of $1.93 or better. Note that 2 contracts per leg is our base position size for double-calendars. Trading whole-number multiples of the base size ensures that adjustments…
Wednesday, January 6, 2010
XLE closed right about at our new adjustment threshold (approx. $59.30) yesterday and continued to show strength this morning. A rise in crude inventories last week reported by the Energy Information Administration sparked a sharp sell-off in oil futures, but the energy bulls have since taken back control. Nevertheless, with XLE moving into overbought territory, we’re still reluctant to lock in a loss at the 57 strike with a rolling adjustment—so we’re adding a third January XLE position,…
Friday, October 2, 2009
As discussed in last night’s Update, we’re adjusting for the market downturn, by rolling half of our contracts at 108 down to 101, as follows: Day limit order Buy to close 2 SPY Oct 108 puts Sell to close 2 SPY Nov 108 puts Buy to open 2 SPY Nov 101 puts Sell to open 2 SPY Oct 101 puts for a net debit of $0.51 or better. Note that the 2 contracts specified…
Friday, September 25, 2009
After topping out just below our upper portfolio-level adjustment point, SPY has retraced nearly half of the September rally, giving a nice (for us calendar traders) lift to implied volatility. The ETF came close to the lower adjustment trigger for our Oct/Nov CS#3 this afternoon, but at this point we’re more focused on the portfolio-level (triple-calendar) downside threshold at SPY $103, which at this writing is still more than a one-day standard deviation away. We’re currently showing a nice profit…
Sunday, August 30, 2009
The S&P 500 remained pretty much unchanged, on a closing basis, this past week, allowing us to exit our SPY September/October CS#1 position at the high end of our target profit range. When a calendar spread reaches a 20%–25% gain in two weeks, the chances of being hurt by an underlying price move or a drop in implied volatility start to outweigh the odds of increasing profit. Sure, it’s possible to reach a much higher return on a calendar…
Monday, August 24, 2009
We’re rolling half of our position in the Sep/Oct 98 call spread up to 104, as follows: Day limit order Buy to close 2 SPY Sep 98 calls Sell to close 2 SPY Oct 98 calls Buy to open 2 SPY Oct 104 calls Sell to open 2 SPY Sep 104 calls for a net debit of $0.29 or better. Note, again, that 2 contracts per leg represents half…
Jared Woodard is a registered commodity trading advisor who specializes in trading volatility as an asset class. With over a decade of experience trading options, futures ... Read More
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Thursday, February 4, 2010
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