As you can imagine, struggling is the best verb to describe my trading.
Based on the /er2 futures yesterday low was 676, the 1AM high of this morning was 721. Currently we are retesting yesterday's lows. (and while I am writing yesterday's is gone)
This is a difficult market for market neutral traders. I hoist the RED BALL for anybody but the extreme experienced traders. If you want to make a small "Las Vegas" style bet up or down, be my guest. Don't enter the market right now and expect the standard deviation rules to be applicable.
Normally you would say selling any spread with a short strike of delta smaller than 20 should be safe.
I would argue you can't bank on it these presumptions right now;
- Our Uncle Hank or his cousin Uncle Ben speaks and we are up.
(We are lucky that cousin John is silent; "The economic fundamentals are solid". Thank you McBush!)
- The CFO of an insurance company you never heard of confesses that (s)he played with the cash reserve in the CDS market and we are down
- The biggest shoe to drop; a big pension fund has to admit that all their investments are gone. They used to have a well diversified investment strategy. They owned GE, LEH, BSC, GS, FXI, EWZ, RSX, COH, FNM, AIG, WM, WB, F and GM. With the spare cash they owned some bonds and CDS'es. They just recovered from Enron and Tyco. Now they have to ammit that they come short x,x00 Billion.
Enough politics and pessimism.
Without regret I rebalanced the butterfly - I will get creamed if we turn around and go up from here (especially if we imitated yesterday's speed). Cost of yesterday's decision $535 for each 5-10-5 unit.
In these situation I keep an eye on the following 'last adjustment' and check if I make the final directional decision what would my p/l be. Currently that is $2300 which is close to 50%. We don't aim to make 50% so we still have time to peace meal the last three steps into the trade.
Late night edit::
Check this video interview with George Soros.
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