The Week in Review
Wow. So Great Britain decides to leave the European Union and all hell breaks loose in the markets around the world. Near the end of the trading day on Thursday, I positioned myself bullishly, expecting like almost everyone else that the British people would vote to remain. They chose a different route. That being said, I escaped with mostly a flesh wound on Friday even though the S&P 500 was down over -3.5%. For the week, things were not nearly as bad with the ETF for the S&P 500, SPY, down -1.59% and the ETF for the Russell 2000, IWM, down -1.47%. The portfolio was down -0.85%.
The SPY Put Write and Delta Hedge strategy held its own this week. I had removed the hedge last week because the portfolio was sitting a little more neutral than usual. The Put Write expiring on Friday came in for a small gain but the one expiring next Friday took some heat. This strategy subtracted 5 bps from the portfolio this week.
The VIX Calendars strategy ran into some trouble this week. The short put expired last week and I decided to hold on to the long put with the expectation that volatility would head down below 16 over the next two months. That long put position took some losses this week with the heightened volatility. There is still a chance things may quiet down. This strategy subtracted 11 bps from the portfolio this week.
The SPX Broken Wing Butterflies and Ratios strategy held up nicely this week. I was able to take some of the positions of and with this higher volatility it will be a good opportunity to add to the position without taking too much risk. I may even consider some of the riskier ratios. For this week, the strategy subtracted 3 bps from the portfolio.
The RUT Iron Condors had a tougher time this week. They were doing fairly well up until Thursday but got pummeled on Friday. The neutral piece is still holding on and we may be able to get out in a week or two with a minimal loss. The other managed piece's calls came off this week and right now I am still holding on to the original call spreads. We're not yet at a place where they need to be rolled, but we will see. This strategy subtracted 42 bps from the portfolio this week.
The RUT Butterflies did reasonably well this week. I'm always amazed how well they hold up to these big market moves. The July expiration butterfly was the one that I had positioned bullishly on Thursday and it definitely took some heat on Friday. We're only two weeks away from when I would like to remove it but we are also getting close to my maximum loss on that trade. I'll have to try and keep a close eye on that one. The August expiration butterfly held up very nicely on Friday and actually made some money. We're sitting right about the middle of that butterfly right now and we'll see how much management it will require. The strategy as a whole subtracted 24 bps from the portfolio this week.
Contribution to Return
| STRATEGY | WTD | MTD | YTD |
|---|---|---|---|
| SPY Put Write and Delta Hedge | -0.05 | -0.06 | 1.88 |
| VIX Calendars | -0.11 | 0.22 | -0.34 |
| SPX Broken Wing Butterflies and Ratios | -0.03 | -0.06 | -2.48 |
| RUT Iron Condors | -0.42 | -0.89 | 0.60 |
| RUT Butterflies | -0.24 | -1.53 | 0.66 |
| TOTAL | -0.85 | -2.32 | 0.33 |