I've been busy with work and other things, and have not been able to post as I trade. I've got a couple of minutes before I grab some sleep to catch up on a few things for those of you that are interested. I also like to post to organize my thoughts a little, and later to be able to take a big picture view of the portfolio and the trades as a whole. This usually ends up as: "What the !@#$ was I thinking!". But every once in a while I make some money.
So, When the VIX was last at 20 just before Feb '15 expiration, I sold a 2 standard deviation strangle in SPY for $.65 net credit about 55 days to March 31q '15 expiration at 217c/167p.
I was kicking myself the next day, as the trade could be sold for $.80, but now after a couple of weeks I'm back to even at about $.67. As you can see by the above charts, I was able to get a pretty fair credit, and my short strikes literally don't even show on the chart. I am most in danger (As I always have been, and probably always will be) on the call side. The S&P 500 has had a propensity at times to grind inexorably higher regardless of market fundamentals sometimes for weeks, slowly but surely running over call strikes like lava from that volcano on the Big Island in Hawaii that overran that unfortunate town. On this trade, I'm still in the game.In my previous post on the S&P 500, I had purchased a butterfly below market hoping to capitalize on continuing volatility that never materialized. What a surprise. I was going to roll right in to March expiration with the same butterfly the next day, but I got cold feet and thought; One, the market is going higher from here, and I don't want my butterfly left out in the cold. Two, I thought that there might be a better way to manage my directional exposure based on my TLT butterfly. More on that later. I held off on my March butterfly until last night.
To maximize my Theta in the middle of the butterfly, I decided to leg in. I bought to open the SPX March 20 '15 2075/2025 put debit spread for $11.00. I did this because volatility is lower than it has been in the whole of 2015. Also, if I'm successful, and the SPX trades towards the 2025 level in the next week or so, I can get a lot more credit for the lower half of the put butterfly, and could possibly lock in a profit, and take risk completely off the table. If we bounce off the 50 day MA when/if there is a decline I may decide to close for whatever profit there is at the time, sans butterfly.
In my previous post on GLD, I had gone long with a Sep'15 call at 122, reducing my basis on the call by selling the 122/112 Sep '15 put spread.
As you can see, my entry was horribly mistimed. Though because duration is my friend on this one, and I am still above trend as GLD looks to be putting in a higher low, this is in the danger zone for the following reasons. I can be put 100 shares of GLD per short contract at 122 at any time. GLD can very likely continue lower. I am close to stopping myself out on this one, as I can still salvage 50% of my capital. On the positive side, 7 out of 10 of the days that GLD traded above 10 million shares after gapping up from 119 were on green days as GLD works to build a higher low after this pretty convincing rejection from 125.
In my previous post on TLT, I discussed how my would be victory spread was blown up by having been exercised on short calls that were In The Money when TLT peaked at 138. Though not a revenge trade, I went back into TLT as soon as I could short at 135 with a long put, because my thesis had not changed. If TLT is extremely overbought at 135, it was even more so at 138. Anyway, being in hind sight correct about the direction of TLT, and having a nice profit on my long 135 put, I turned my exposure to a butterfly to take advantage of the elevated volatility in TLT to sell some premium.
I'm sitting pretty with the TLT butterfly having locked in $1.69. I would love for TLT to rise in the next couple of days to the 130 level. I have a limit order to sell at 1.65 net credit, or double per contract over my locked in profit, of which I have no doubt will be filled if TLT can rise above 130 again.
In closing, I'm net short stocks, neutral to bullish Bonds and long gold.
Wow! That's quite a bit to catch up on, but there's where I stand going in to March. I'm working hard to recover from my OVX fiasco, which were two big complete 100% losers caused by trading in a product that had no liquidity in an underlying that I have very little knowledge of, going through it's most INSANE period in the better part of a decade. Lesson learned.
Good luck in your own trading, and please leave comments or questions here or on the Small Time Trader Facebook.
STT
TLT 135/131/127 March '15 put butterfly sold for $1.00 net credit above the 1.69 that was locked in by legging in. So, I originally bought just the 135 put for $3.00 debit, sold the rest of the butterfly for 4.69 credit, and closed the trade for $ 5.69 credit. That's a profit of $2.69.
ReplyDeleteAs for the SPX put debit spread, I closed that at $9.00 for a loss of $2.00. I got cold feet as the bottom fell out of volatility, and the market turned into 2014 again. To get my negative deltas I sold another victory spread in the NDX just like in my previous article.
March 31 '15q SPY strangle was closed on 4 March 2015 at my target of $.23 which is 50% gain including having the trade pay for it's own commission.
ReplyDeleteThe GLD trade however is going bad as can be with gold going down even further last night. I had taken out another trade to reduce basis that went in the money. Poo. I at least can roll that one into April. Since my original spread is past my long strike now, and out in September, as long as I don't get exercised, I'll be alright. No reason to switch direction to the short side now, as I believe that gold has moved so far, that once the USD rolls off I may get a rebound to allow me to pick up the pieces. Duration is my friend on this one.
ReplyDelete