Theta Positive - Option Trading

April 14th

It seems that the market has decided and doesn't need to hear from INTC, GOOG, JPM before deciding on the governing direction. At least it is clear - the upside is less treating for now and the downside of the theta positive trade should be save for quite more points.

In my large RUT trade - I will maintain negative deltas by selling the extra 500 calls and by peeling off the 440-490 (in small steps).

My GS trade work out well - but the way I traded it was not the most profitable one. I had two calendars a 115 and a 145 April/May. Early morning I could buy back the April calls for 5ct and later - when I expected the day low - I closed the 115 calendar. I was expecting a pop from the day low and 'hoped to close the 145 calls for $2 or higher. That never happend - so I closed the GS trade for a small profit $20 per 1 lot. At the top of the trade had shown a $75 profit per one lot. I have no real regrets - I gambled and lost/won. This earnings play are in small size.

Cu all AM !

Apri 13th

Still no sell off, a nice sideways day. Two worries however - the vix is moving higher (from Thursday close to today close) and in the last 10 minutes traders decide not to take the market home at the high. In addition volume is also holding back a bit.

I entered a GS trade to 'profit' from tomorrow's earnings announcement. I entered a double calendar 115 and 145 Apr/may. Small size because tomorrow announcement is kind of a gamble. I am expecting a good quarter, but can GS run much further after the last 4 weeks? That needs to be seen.

I am still long those /es futures - with a small sidestep (see Thursday blog) I am holding since approx 825.

The butterfly got its first adjustment by means of entering a second fly centered around the 490 - with the long @ 440 and 540.

April 9th

What a day - my late afternoon (April 8th) decision to follow my hunch to add some /es longs work out nicely. This morning I got a bout of fear and closed the /es when we move down the 842.00, lucky for me also had a new bout of greed and reentered on the way back at 844.50. This left 2.5 pnt on the table. I try to fight these bouts of fear and greed - but when it comes directional trades - I am a scalper and sometime find it difficult to maintain a long term trend.

So for now I still long the /es although I changed it in a ratio spread by selling some extra next week expiring  895 calls. This leaves me save till the 910 - plus this way I hope to weather a slow start on Monday.

My main RUT position now consists of 3 series of IC's and a butterfly. Below you'll find the butterfly graph. As last month within 24 hours the market jumped outside my expiration break evens. We'll see over the weekend how to address this situation. One thing I have changed in my RUT trading is the size of the butterfly - the last couple of months the butterfly was my largest trade. This month the IC is larger and the butterfly is a 5-10-5. This hoist the loss of the butterfly between 370 and 510 up - since between butterfly break-evens, 370 and 510 the IC is still making a profit. The last couple of months the butterfly was bigger so the IC profits fell away against the butt losses. Check the current price of the 500 call - see how much protection that little call is giving me.

April 8th

A quick post because I want to be on record - to call a big up swing for the upcoming week.

I come to this conclusion taking into account a couple of observations;

- this week the market came down on strongly lower volume
- the vix came down while the market came down
- gld is off its highs
- tlt has come down
- I think the bank will post a big profit for Q1 - since they can reduce some of their early mark off (thanks to the new regime of mark to fantasy)
- I think most of the stock will react like AA reacted on its earnings announcement - not good intrinsic news, but we are happy that its is not worse.

I don't "play" with futures to often overnight - but I allow myself to buy some /es futures to back the opinion above.

Today I closed a naked strangle on the SPY - nicely profitable - my main reason to be in naked strangle is to pick up downward move in the VIX. The VIX broke through recent lows - I called it a day and closed the trade. I don't anticipate the vix to drop much futher.

Today I added to my long term RUT calendar -May/Sept 390. Every time the vix reaches a low I add to this position.

And I entered a new butterfly - tomorrow I will pick up blogging about this trade again on a daily basis.

April 2nd

So far April is a good month - as you saw I took a hit on the butterfly - but making it up with straddle and strangles. After last week tiptoeing into long straddles and strangles I upped the ant and enlarged size and the number of underlyings.
My conclusion so  far is that the triple ETF make good moves - but the execution probably doesn't weight up against doing a triple size SPY straddle. Be careful with this conclusion it is not based on any research just a gut feeling - and after a day like today any vehicle with a long straddle would have paid out handsomely.

I am also more active with day trading then I have been in a long time. Using multi-lenght CCI's and stocatics as my entry on a /es 333 tick chart. On average picking up 1.5 point - really quick and dirty scalping the trend.

As for the general market I am still waiting for at least a 38% retracement of the move which started last week. That would get us back to 774. Which is also the low of last Monday.

For May I have already entered two Condor's last week 25% of my size and today another 25%. The April condors are hanging on a loose thread. The first two came of with a loss - Still fighting the last two - a little down draft would be very appreciate - thank you very much.

Long time reader might remember I entered covered write positions in Oct - this move up has put a lot of the short calls in the money - coming April expiration I will get assigned on most of the  covered writes (hopefully). Then the 'game' will start all over again - writing naked puts - on some really nice to have stocks. So far CNH, PCU, CHK, HAL, AAPL, GS have been good to me - although I have to admit - they all together have given me some sleepless nights in the mid of the storm.

Hope you're trading wisely - what ever that may be for you