The Week in Review
So I basically went from an absolute dream month to an absolute nightmare week. The plan for this week was to reduce exposure gradually ahead of the election. What I failed to take into account was that the volatility would move up more quickly than I thought. I should have reduced exposure last week. I closed a lot of trades this week, most of them for above my target profit, but I still incurred a loss this week because my nice big fat unrealized gains last week turned into much leaner realized gains this week. The ETF for the S&P 500, SPY, was down -1.91% and the ETF for the Russell 2000, IWM, was down -1.97%. Two interesting headlines caught my eye on Friday. The first was that the S&P 500 logged its' ninth straight loss, the longest losing streak in 36 years. Also, the VIX was up nine days in a row for the first time ever. Those nine straight losses also correlate with the start of the world series where the Chicago Cubs (Chicago also being the hub of the options trading world) won the world series for the first time in 108 years. I'm pretty sure this is one of those exceptions where correlation and causation are the same thing. Thanks Cubs. For the week, the portfolio was down -1.82%.
The SPY Put Write and Delta Hedge strategy notched a small gain this week. With the portfolio leaning heavily delta positive last week, I put on some short calls to try and neutralize delta a bit. For the week, the strategy added 3 bps to the portfolio.
This would have been a perfect week to have a VIX calendar trade on but alas, I still have not spent the time to really figure out how I want to use this strategy in the portfolio. All is quiet on this trade.
The SPX Broken Wing Butterflies and Ratios strategy suffered the biggest losses this week. I had chosen to leave a lot of those trades open after they hit their target profit and let them drift until they hit some prescribed levels. That was a mistake. Going forward, I think I will mix it up a bit and leave half of the trades open and close the other half. This reduces my risk and but still gives me a couple of lottery tickets to play with. For the week, this strategy subtracted 107 bps from the portfolio.
The RUT Iron Condors strategy also had a tough week. I closed out the November Modified Weirdor for a small loss and took off the downside exposure on the November and December Modified Nested Iron Condors. Those two trades should do better if the market heads moderately higher and are they are insulated if the market heads lower. For the week, this strategy subtracted 67 bps from the portfolio.
Finally, the RUT Butterflies strategy was fairly quiet this week. There is one December trade on right now and it handled the down move and increase in volatility really nicely. I moved the meat of the trade down 50 points on Tuesday because the deltas were getting a little bit out of hand. For the week, this strategy subtracted 11 bps from the portfolio.
Contribution to Return
STRATEGY | WTD | MTD | YTD |
---|---|---|---|
SPY Put Write and Delta Hedge | 0.03 | 0.01 | 2.89 |
VIX Calendars | 0.00 | 0.00 | -0.72 |
SPX Broken Wing Butterflies and Ratios | -1.07 | -1.14 | 2.56 |
RUT Iron Condors | -0.67 | -0.76 | 4.21 |
RUT Butterflies | -0.11 | -0.30 | 1.15 |
TOTAL | -1.82 | -2.18 | 10.11 |
Trade Activity (return % based on maximum Reg-T margin)
- CLOSED - SPX Broken Wing Butterfly, exp Nov 25 +8.08%
- CLOSED - SPX Broken Wing Butterfly, exp Dec 2 +21.82%
- CLOSED - SPX Broken Wing Butterfly, exp Dec 9 +3.24%
- CLOSED - SPX Broken Wing Butterfly, exp Dec 16 +3.09%
- CLOSED - SPX Broken Wing Butterfly, exp Dec 30 -3.06%
- CLOSED - RUT Modified Weirdor, exp Nov 18 -0.23%
- CLOSED - SPY Put Write, exp Nov 4 -2.42%
- CLOSED - SPY Delta Hedge, exp Nov 11 +2.09%
- OPENED - SPY Put Write, exp Nov 11
- OPENED - SPY Delta Hedge, exp Nov 18