The Week in Review
So, it was good to see this week that I'm not the only one that makes mistakes. There was a story in the Wall Street Journal this week about the Catalyst Hedged Futures Strategy fund and how they lost $600 million dollars holding onto a butterfly that they carried into expiration week. Interesting reading at: https://www.wsj.com/articles/funds-600-million-lost-week-captivates-traders-1487292045The market moved solidly up early this week and then settled down a bit on Thursday and Friday. The SPX (S&P 500) ended the week at 2351.16, up +1.51%, and the RUT (Russell 2000) ended the week at 1399.86, up +0.79%. The portfolio was up +0.76%.
The SPY Put Write and Delta Hedge strategy did nicely this week with the strong move up in the S&P 500. Both trades were closed out for gains this week. I put on another Put Write on Friday. For the Delta Hedge, I used short calls this week because the portfolio was leaning pretty positive delta. It added 11 bps to the overall portfolio.
The VIX Calendars also added a bit to the portfolio. I opened up a new VXX Calendar which did great the first couple of days but gave back most of its gains which volatility ticked up later in the week. This strategy added 6 bps to the portfolio.
The SPX Broken Wing Butterflies and Ratios strategy was a bit of a challenge. When the market moves up, I usually adjust by bringing in the long calls by buying a call spread. I've been doing that a lot lately and the strategy is sitting with a lot of positive delta which is not what I would like. Also, it limits my gains because the current index level is sitting outside of the tents of the trades. If the market moves back down again, I'll end up selling those call spreads back to balance out the deltas a bit. I've put details of the SPX BWB trades down below at the end of the Trade Activity section. For the week, the strategy subtracted 5 bps from the portfolio.
The RUT Iron Condors strategy did better compared to last week. The adjustments however have taken a toll on the expiration graph and I'll be lucky to get out of these trades with gains. We'll see how the next couple of weeks go. For this week though, the strategy added 38 bps to the portfolio.
Finally, the RUT Butterflies strategy also was able to bring in good gains. With the adjustments made last week, the trade was well situated to bring in some theta as the Russell 2000 moved modestly upwards. The index level is still situated under the tent. For the week, the strategy added 26 bps to the portfolio.
Contribution to Return
| STRATEGY | WTD | MTD | YTD |
|---|---|---|---|
| SPY Put Write and Delta Hedge | 0.11 | 0.34 | 0.52 |
| VIX Calendars | 0.06 | 0.10 | -0.11 |
| SPX Broken Wing Butterflies and Ratios | -0.05 | -0.20 | 2.30 |
| RUT Iron Condors | 0.38 | -0.09 | 0.73 |
| RUT Butterflies | 0.26 | 0.26 | 2.17 |
| TOTAL | 0.76 | 0.43 | 5.62 |
Trade Activity
- CLOSED SPY Put Write Feb 17 +2.36%
- CLOSED SPX BWB Feb 17 +3.71%
- CLOSED SPX Ratio Feb 17 +0.03%
- CLOSED SPY Delta Hedge Feb 24 +1.23%
- OPENED VXX Calendar Feb 24/Mar 10
- OPENED SPY Put Write Feb 24
- OPENED SPY Delta Hedge Mar 3
- OPENED SPX BWB May 5
SPX BWB Trade Details
- SPX BWB Apr 13 BOT +2 VERTICAL SPX 100 (Weeklys) 13 APR 17 2310/2320 CALL @6.80
- SPX BWB May 5 SOLD -2 IRON CONDOR SPX 100 (Weeklys) 5 MAY 17 2325/2375/2325/2250 CALL/PUT @46.40