Theta Positive - Option Trading

Morning Report July 10th

I reduced my portfolio delta again around 3pm - for the second time the market could not break Wednesday high.  Download 2009-07-10_0708

Morning Report July 9th

I am having computer problems - have to resort back to a written market update;

a couple of point of interest;

• The Standard Deviation moves have not changed much 1sd Rut 11, 1sd SPX 17 pnts.
• Yesterday volume action on the SPY - volume size reducing during 'sell off' and volume size picking up while market returned to open levels.
• Yesterday Intra day VIX while market retest low of morning VIX was off its mornings high - always a tell tail of what the big boys and girls are doing.

I had a AA earnings play to share;
a 9 July Straddle combined with a 9/10 dbl calendar. The main reason to enter the trade was a raised IV in July. JUL IV is priced 50 points above AUG IV. That will have to balance out during the hours of trading. Currently it seems that the straddle will be a loss and the DBL CAl seems to be doing just fine.

Now @ 8:50AM EST the markets are testing Yesterday high - Always an interesting point to watch carefully.

I am running to the limits of my current computer to do the vdx stuff - So Newegg can expect an order anytime soon.

Morning Report July 8th

Download 2009-07-08_0725


Trade @ your own risk - get educated before you start

Morning Report July 7th

Download 2009-07-07_0832


Video Report - with a Market overview for non-directional traders (educational only) - Trade at your own risk.

What worked in June / What did not

Just coming back from an enormous successful option seminar organized by Mentor Dan Sheridan. We had two days full of socializing with Option Geeks and very interesting presentations.

As promised I would post a what worked in June blog.  Here it is

What worked

Butterfly; RUT, WMT
Calendar; IBM, GOOG, XOM, SPX, DOW
Double Diagonal; DIA, EEM, IBM
Iron Condors; RUT
Cash Covered Puts; HAL, CHK, AAPL, CNH, PCU, KOL, MOO
Directional Verticals; CL, ETR, ICE, MBT, POT, SNDA, AMSC, BTU, FSLR,
Expiration Day Strangle; DRYS
Earnings: HNZ
Directional; TLT

What did not work

Calendar; DBA, RUT, MCD
Double Diagonal; COST, EWZ
Iron Condor; NDX
Directional; TNDM, FXP
Expiration day Strangle; AAPL
Directional Verticals; GRMN

With the expection of FXP and TNDM did I manage my losing trade very tight. TNDM and FXP did run away from me a bit.

The lose in NDX condor is approx equal to the average profit on this trade - so I whiped out one month on NDX condor profit.

With the exception of my RUT trades; all other trades are approx equal size.

June 22nd - close of July butterfly

The butterfly for July is off - Friday I closed half for 15% and this morning the second half came off for 20%

If you wonder how in a 5-10-5 trade  I managed to do halves? - The answer is I trade bigger - then I blog in public - this gave me the opportunity to be rather aggressive in my close.

Why did I choose to be aggressive a. an average of 17.5% ain't bad at all , b. The trade is on for only 10 days (did the market give me a present?), c. the market is flat for 2 months now (is a move imminent?)

I updated the result page - I still own you a what worked in June blog post - which will come later this week.

June 18th

Easy cruising for the butterfly up 15% in a week - ain't to bad, right. Especially since you don't need any chart reading skills - you don't have to be right to make this trade work.

Before I close off with the butterfly graph - I want to show you an pairs experimental trade I have entered - a tip of the cap towards Trader E. founder of NYOT.
I had heard of pairs trades before - but was never really appreciative. E is a smart trader and he showed some enthusiasm for pairs trading - that motivated me to delve in again.
I am currently working with the FDX/UPS pair. Before earnings I sold FDX and bought UPS - yesterday when FDX bottomed out - I turned around and currently I am long FDX and short UPS. It couldn't work out any nicer. I am looking at just under 15% profit in a couple of days - for hardly any real market risk. Real market risk here loosely defined as tanking of the broad market. One can expect UPS and FDX to make a similar leg down if things hit the fan. I tried to add the pairs trade chart to this blog but the TOS Flex chart doesn't have a 'Take Picture' option - Start with a hourly line chart and use as symbol FDX-UPS that will show you the move I was able to pick up. Moving down is sell FDX and buy UPS, moving up is buy FDX and sell UPS.

BTW BRK/B has options (since today) - check below for a possible calendar (tongue in cheek)

Below you find my daily butterfly chart.

June 17th

Mid afternoon the market started to signal that it was ready for a little up move but quickly after 3:30pm EST the vix turned around back up and left no doubt.

Hope you were able to following in my TLT afer the twit and the Mytrade message.

The butterfly is hanging in there - mid day it show 10% profit - not bad for 5 days of work.

June 16th

During the day I gave you a couple of tweets - the first one was an observation that the VIX moved strongly up while the market was giving an impression to be will to break out to the upside. One or the other needed to change before a move could materialize. It worked out to be the downside in the market. I truly invite you to keep an eye open to intraday VIX readings they will tell you a lot after a while.

The second tweet was on a BGZ trade. See below - as I saw the VIX and SPX making separate moves I was anticipating a larger move one way or the other. Hence a Straddle in a Triple ETF. With the experiation coming up the ATM contract have an enourmous gamma - making them really effective for a long straddle. See the graph below.

The butterfly is hanging out - no remarks.

For all the NYC readers of the blog - be aware that Option Planet (the educational arm of ThinkorSwim) will have a free seminar on Portfolio Management in the city (June 22nd). If the market allows I will attend.

June 15th

I find it difficult to say anything sensible on market direction at the moment - I am looking downward but would not be surprised if the SPX moves to 1040 first. This covers me for the next 3 months - I will be able to say I told you so Mid September :)
Seriously I think both moves could present themselves with quite some force.

The butterfly is enjoying its existence.