Disclaimer: I am not an investment advisor. When I describe my own trading activities, it is not intended as advice or solicitation of any kind.

09 December 2010

Such a Slacker

I've been distracted most evenings lately from the four Xbox games I picked up during Black Friday madness, and so it has taken me even longer than usual to record thoughts, trades, and rambling nonsense.  As if that weren't enough to eat up my attention, the Bintgoddess and I just received our HTC Incredibles we ordered through Amazon Wireless, and I at least have been spending more time than I should customizing and moving into my new phone.  I had intended to switch from AT&T+iPhone to Verizon+Android when my contract ran out in August, but the Bintgoddess' pre-pay plan ran out of minutes, and we could save more money to switch us both to a family plan now, despite the early termination fee from AT&T.  With nearly free phones (1 cent each from Amazon Wireless) and free 2-day shipping, the choice was pretty clear.  And yes, Amazon did charge my credit card $0.02.  Silliness.

Iron Condor
The January 2011 Iron Condor position has required some adjustment to keep it close to delta-neutral recently.  Recall that I opened a 650/660/810/820 iron condor on Nov 8, and then adjusted it Nov 16 by buying a 630/640 put spread.  Since we're into December, I'm now erring on the side of closing positions rather than opening them - but I'll still increase a position if it's the right thing to do for the risk or the greeks.

The stock market had been rallying pretty hard the last week or two - in fact, it has been rallying pretty hard ever since the day after I put on that downside protection.  This is not a surprise - it's just how I roll: don't believe me? watch me play poker on Full Tilt sometime.  But I digress.  With the stock market rallying and delta going pretty negative, it was time for some upside protection.

First, I bought back about half of the 810/820 call spreads for 1.40: a very reasonable 10c loss.  This moved the delta up about halfway to where it needed to be, but gamma was still pretty negative.  Another up-move and the position would be in trouble again, so I beat the rush and put on a Wolfinger Kite Spread.  Specifically, I bought back an extra 810 call for 3.70, and financed that by selling four 830/840 call spreads for 50c each.  Not only did this bring delta to a nice manageable level and give me some much-needed upside protection, it also significantly improved my max-loss on the upside.  Of course if MDW is reading this blog, he's probably seething that it isn't a perfect Kite Spread - I should have sold the 840/850s, or reduced the sales by 1 contract.  Tough.  I am convinced this was the right trade to make, whether it can rightfully be called a Kite or not.

The next day, I took advantage of another rally to buy back a few of the 660/650 put spreads for 45c.  This lowered delta a bit again, but like the previous day's adjustment, it really helped out in the max-loss department.  The total position now has a nice flat S-curve to it, and theta miraculously is still 13.  So a sideways market for the next 30 days should net me about .25 per contract - that may not sound like much, but that's 2.5% margin-return on a monthly trade.

It's also about time to be looking for a February trade, but I'll learn my lesson from January and wait for volatility to come up a bit.  Using paperMoney is nice, because I have so much fake margin in there that I can make trading decisions without having to be concerned about margin.  If I want to put on February before taking off January, so be it.  Doing that with real funds would take some very careful money management... or more money than I have.

CS|MACO
Still very bearish signals (53% are bullish as of last night, way too many for my taste) from investors, who happen to be right this time about the market as it sustains an uptrend, and bullish signals from the trend following MACO component.  As a result, it still waits in (fake) cash.

CiG
Eurodollar futures (GEH1) gave a bullish entry signal on Tuesday, so I bought them at the stock market close for 99.56.  Trading Eurodollar futures is similar to watching a bad horror movie: long periods of mind-numbing boredom punctuated by moments of pure terror.  So far I'm in the boredom phase - two days after buying them, I'm up 3 ticks.  W00t!  No exit signal yet, so I wait.

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