The Week in Review
This was a difficult week for Europe but the markets over on this side of the Atlantic did not appear to react too much to the horrible events. There was a bit of a divergence with the large caps moving down a tad and the small caps moving down much more. The portfolio was leaning bearish last week and was able to capture some gains while the market moved down; the portfolio was up +2.37% for the week. Also with the move down, the portfolio moved from leaning bearish to now leaning bullish. The ETF for the S&P 500, SPY, was down -0.62% and the ETF for the Russell 2000, IWM, was down -2.20%.
A move down in the markets is generally bad for a Put Write strategy with a bullish Delta Hedge and that's exactly what we saw this week. The hedge is close to hitting my maximum loss threshold and may flip over to a bearish hedge if the market continues downwards next week. For this past week, this strategy subtracted 4 bps from the portfolio.
Volatility remained under control this week and I ended up selling another one of the VIX May calls. The VIX Calendar strategy added 2 bps to the portfolio this week.
The Broken Wing Butterflies didn't do too much this week. They handled a small move down well and are currently short delta. They could handle a small move down but may get into trouble with a bigger move. They added 15 bps to the portfolio this week.
The Iron Condors racked up some nice gains this week. They were bearish as of the end of last week and as of right now are sitting fairly delta neutral. The move down in the RUT allowed me to take off some of the call spreads and take in some gains and reduce upside exposure. This strategy added 81 bps to the portfolio this week.
And finally, the Butterflies were the big winner this week. The two bearish positions both moved into the black big time. Last week I was close to having to close one of them at my maximum loss but this week things really turned around. The neutral April position is taking some heat after the move down in the RUT but the neutral May position is holding up well. I really don't want to adjust the April position with about two and a half weeks to expiration but I'll have to do something if we move down past 1070. This week the strategy added 142 bps to the portfolio.
Contribution to Return
| STRATEGY | WTD | MTD | YTD |
|---|---|---|---|
| SPY Put Write and Delta Hedge | -0.04 | 1.20 | 0.95 |
| VIX Calendars | 0.02 | 0.03 | -0.13 |
| SPX Broken Wing Butterflies and Ratios | 0.15 | 1.46 | -4.67 |
| RUT Iron Condors | 0.81 | 0.78 | -0.87 |
| RUT Butterflies | 1.42 | -0.86 | -1.16 |
| TOTAL | 2.37 | 2.59 | -5.87 |