Theta Positive - Option Trading

June 8th

A strange day - I was mentally getting ready for a little sell-off - but around noon time I saw the VIX changing in characteristics. The vix seemed to have topped out. This kept me from swinging to much to the down side.

The butterfly is still intact - although I made another upside adjustment later in the afternoon. This month you get to clearly see how versatile a butterfly trade is and how long you can stick with it.

If the market whipsaws back to the downside expect me to quickly buy up to three 490 puts to protect the build up value in the 450-490 spread.

As you might remember we already closed one butterfly for June - so currently we are trading the second fly. I am very careful not to have this fly overtake the result of the other one (in the negative sense). June is lining up as great month - Overall my main focus for the rest of June is preserving what I gained (and already closed).

June 7th

Not much wisdom to share - the trade is doing well enough. A break of Friday's high would force me to do another upside adjustment - otherwise I will stay as it is at least till other couple of days.

See the theta chart - in a 4 2-daily lines. You can see that my theta is coming down rapidly - this week @ this point my theta will go below zero.

So we have two adjustment setup - going up and stay here.
Going down is profitable - we will assess when we see the force of a potential down move.

June 3rd

No action on the butterfly -

Yesterday some hit on my risk free box for 39.96 - so I realized max profit on one debit spread 450/490.
Still waiting for the 3 now naked short put 450 to come under their "purchase" credit of 85ct (see the ratio spread). I have an order in to close those puts for 30ct. As I have another order in to close the remainder of the butterfly now a 3-6-3 at my 20% profit level - to get there today we will need to see RUT 500.

If we break out to the upside I will need to close a credit spread 490/530 since the deltas of the butterfly are running away from my comfort zone.

Jun 2nd

Again some little adjustments to the butterfly - I closed the extra 540 call and sold a vertical 560/570.

We are in good shape - for a minor retrace of this up move. If the retrace doesn't materialize and instead we get an upmove then I will peel off again a 490/530 spread (and regret having sold the 560/570).

Jun 1st

June 1st was a difficult day for non-directional traders - big part of the move happened overnight, no retracement to Friday's close. So if your position was hanging in the wrong direction damage was done @ 9.30AM.

This happened to me in the butterfly - luckily enough my portfolio deltas going into the weekend were very moderate short -100D and over 1200T, plus short vega's. So it was not a disaster.

The butterfly is currently underwater - I could not - as by my trade rules, get the trade off for 15% if it retraces that profit level after hitting 20%. I had to make a decision take it of for a very small loss or fight it. I choose the last for the reason that we still have three more weeks till expiry time enough to let theta do its work.

I entered three adjustments - a vertical spread 490-530 to moderate the fly's delta's and a ratio spread 450/490 to move part of the risk to a lower point on the graph. (see my May post on Ratio spreads). Finally I bought and extra 540 call to smooth the deltas a bit more.

This morning TOS doesn't show the right P/L - I spent quite some time figuring out my error - but it seems it is the software - we will need to see what shows after the open.

I closed my large Iron Condor for profit of 8% - in a general thought of reducing risk and take banking some decent profit. So far June is lining up to be a very good month.

May 29th

That was a great move the last 15' of Friday - and it seems that market has more in store for us.
GM in bankruptcy seems to be good news - who would have ever guessed.

MY Theta Positive position are largely getting to short delta's - something will have to give. If we break the overnight high in the futures that is definitely the line in the sand.
My JUN RUT IC is/was in great condition - will need to see how much damage this up move is doing to it. Otherwise I might just pull it off.

Friday I managed to pull 20% of my butterfly for 20% profit.

Be careful when you make you upside adjustment not to open the barn door to the down side. Make the upside adjustments in small steps that way you won't get hurt if this market turns around.