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25.9%

Honest reporting on shorter-term trading activity and ideas
hiriskpaul
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Re: 25.9%

#26169

Postby hiriskpaul » January 25th, 2017, 7:20 pm

It is curious how steep smile is at the moment. So still plenty of demand for downside risk protection, just not being reflected in the price of the at the money strikes. When skew is this high, that is often a good time to be short OTM puts, since the downside risk is lessened and there is a good chance that the skew may drop. So good short term reasons to hang in there a little while longer.

As an example, VIX is at 10.7% (!!), but my 20% OTM June puts have implied vol of 23%.

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Re: 25.9%

#26281

Postby moorfield » January 26th, 2017, 10:07 am

hiriskpaul wrote: Looking on the brightside, your existing positions are now much lower risk and rather than betting the other way a simpler trade might be to close out some of your short puts.


My inner HYPster is yelling at me not to tinker with these - that's what the "normsdist" column on my table is there for. And my own scrooge mentality prefers to see the spread against me vanish at expiry. I may try legging in the long side first if this continues next week.

hiriskpaul
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Re: 25.9%

#26371

Postby hiriskpaul » January 26th, 2017, 3:54 pm

If my expiries were Feb/March as yours are I would probably stay put as well. Mine are for June, so I have 5 months to go before expiry instead of 1 and 2. Theta has come right down for my positions. A couple of metrics I look at are delta/theta and vega/theta, with theta expressed in pounds per day. These give the number of days to counteract a 1% shift in the underlying and 1% shift in vol. Your puts have lower ratios than mine and are more rapidly heading lower, so any adverse movements affecting premium are more quickly decayed away for your puts. For example, delta/theta for you Mar 2030 puts is currently 6.3 days. My Jun 1800 puts have delta/theta of 9.5 days.

Half the maximum profit I could have achieved over 6 months has arrived in less than one, provided I take that profit of course!

My choice is take the profit and kick myself if we don't get a more profitable market reversal opportunity in the next 5 months, or don't take the profit while I can and kick myself if we do get big reversal.

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Re: 25.9% - 2017 interim update

#44069

Postby moorfield » April 6th, 2017, 1:58 pm

Hello All

A rare day working from home affords me time to provide a brief update on progress with this project.

My account xirr at close yesterday is 54.0%, forward xirr is 53.2% at 16 Jun, and notional value is £172,316 - I am now well ahead of schedule however the S&P 500 has been quite kind to put sellers so far this year.




M

hiriskpaul
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Re: 25.9%

#44317

Postby hiriskpaul » April 7th, 2017, 11:24 am

Certainly a very good 1st quarter. I thought you must have been doing well.

We have the French election looming. Are you comfortable staying invested through that? The bookies are giving Le Pen about a 1 in 4 chance of winning. That outcome could be catastrophic in the short term for equity markets. At the very least I would expect implied vol to rise during the period.

I have a single short position in DAX June puts at 9950, which I intend to reduce or close completely over the next week.

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Re: 25.9%

#44369

Postby moorfield » April 7th, 2017, 1:50 pm

hiriskpaul wrote:We have the French election looming. Are you comfortable staying invested through that?


Completely. The first round falls after (a hopefully uneventful) April expiry by which time my margin requirement will have dropped by nearly 25%. If we start to see much volatility in that week I won't be in a rush to open a July position, and I have some leeway now to open a less efficient position (higher long strike) to keep things ticking along, or in fact do nothing.

M

hiriskpaul
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Re: 25.9%

#44443

Postby hiriskpaul » April 7th, 2017, 5:45 pm

moorfield wrote:
hiriskpaul wrote:We have the French election looming. Are you comfortable staying invested through that?


Completely. The first round falls after (a hopefully uneventful) April expiry by which time my margin requirement will have dropped by nearly 25%. If we start to see much volatility in that week I won't be in a rush to open a July position, and I have some leeway now to open a less efficient position (higher long strike) to keep things ticking along, or in fact do nothing.

M

Good point about the expiry. I plan to be out, or mostly out, and in a position to take advantage of any volatility. Best of luck!

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Re: 25.9%

#44464

Postby moorfield » April 7th, 2017, 8:01 pm

hiriskpaul wrote:Good point about the expiry. I plan to be out, or mostly out, and in a position to take advantage of any volatility. Best of luck!


I sense you are working to shorter timescales and closer to the money than myself hiriskpaul, good luck to you too.

I am already planning ahead to be flat during my July/August summer break - lesson learnt from 2015!

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Re: 25.9%

#47569

Postby hiriskpaul » April 21st, 2017, 12:42 pm

@moorfield, Have rolled over your APR expiries yet? Or are you going to wait and see what the Weekend brings?

I did not manage to close out my DAX puts as the market moved against me. Last Thursday though, before Easter, I sold DOW puts for June at 18500 (for some reason the implied vol just happened to be better than for the S&P equivalent) and the position finally looks good after yesterday's rally. My DAX puts are looking better as well, so from my point of view it is fingers crossed that the French don't vote for 2 nutjobs. The bookies seem to think Macon will get through, but I have pre-loaded my account with a lot of margin just in case they are wrong!

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Re: 25.9%

#47630

Postby moorfield » April 21st, 2017, 2:26 pm

hiriskpaul wrote:@moorfield, Have rolled over your APR expiries yet? Or are you going to wait and see what the Weekend brings?


No I'll do this next week, not in a rush. (Incidentally the forward xirr I mentioned earlier - 53.2% at 16 Jun - remains unchanged today, my margin requirement drops about 25%.)

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Re: 25.9%

#49406

Postby hiriskpaul » April 28th, 2017, 10:36 am

53.2% is way ahead of me. I closed out my DAX puts on Monday, but still have the DOW position. Prices collapsed after a 4% jump in the DAX and slump in vol and there seemed little point holding out for the residual profit at expiry. If I hold to June expiry, and the DOW puts expire OTM, I will have made 12.6% on capital employed over 6 months. That excludes any interest I have made on cash and gains/losses on securities held for initial margin. I would be happy with 12.6% for the entire year so am currently very satisfied with progress.

I will be looking for an increase in implied vol ahead of the next vote in France to see if I can do anything else with June expiries, but at the moment it is looking like an easy win for Macron, bookies indicating about 90% chance, so this will probably not materialise.

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Re: 25.9%

#49540

Postby moorfield » April 28th, 2017, 7:19 pm

hiriskpaul wrote:53.2% is way ahead of me.


That xirr will recede as I will have no positions open over my summer break. Indeed if I did nothing after that for the rest of the year my account would still finish ahead of target at 34.6%. Ever watchful of course for The Big One coming round the corner ...

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Re: 25.9%

#51468

Postby hiriskpaul » May 5th, 2017, 5:39 pm

So much for increased implied vol ahead of the French election! A prudent trade would be to close out my DOW puts, with such low vol and 6 weeks to go before expiry, but I am going to hang on as after what appears to be an uneventful French election on Sunday there are no obvious potential upsets looming . My puts are currently over 11% OTM with implied vol of 19% and if all else stays the same I should be able to squeeze 75% out of the remaining premium over the next 2 weeks.

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Re: 25.9%

#75607

Postby moorfield » August 18th, 2017, 11:22 pm

It's been squeaky bum time this week - having left the account flat while away en France (lesson learnt from 2015) I returned and reopened Sep + Oct positions last week. Account xirr at close today is 25.4%, forward xirr is 62.0% at 20 Oct - that's an indication of how much those positions have immediately deteriorated since the Donald and Kim Show aired, but the put ratio is certainly showing how resiliant it can be during sharp and sustained VIX spikes. One of my risk controls is the oft quoted option seller's "200% rule" ie. really I should have partially closed the short legs today - but I'm keen to see how much further these positions can be tested while time decays and there's a distinct possibilty the Sep long leg may now expire itm for bonus income, so have funded the account instead.



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Re: 25.9%

#75651

Postby moorfield » August 19th, 2017, 11:03 am

moorfield wrote:Account xirr at close today is 31.5%, forward xirr is 62.0% at 20 Oct


Correction - from my xls.

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Re: 25.9%

#77141

Postby moorfield » August 25th, 2017, 8:40 pm

Last two weeks volatility has receded and with the underlying index hovering around 2445 I have been able to exit that Sep position today at P&L>Net Credit, the first time this year I have made money on the long side of a put ratio.

Account xirr today is 66.6%, forward xirr 62.7% at 20 Oct. Roll on November ...

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Re: 25.9%

#81121

Postby HillarySmith » September 14th, 2017, 5:16 pm

Your insights and data presented above are worthy of a big try. Who don't want to be a millionare in trading!

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Re: 25.9% - 2017 Update

#106817

Postby moorfield » December 30th, 2017, 2:29 pm

2017 Update

My final monthly statement arrived today, so I'm calling year end. Much better progress on the S&P 500 this year, which started on 2239 and finished on 2674, a benign trend for short puts. My monthly routine has settled down and account xirr has moved well ahead of target to 67.9%, with net equity currently able to absorb a stop loss of -44%.





Position (29 December)

A tidying up of notation. I have dropped the x10 naming convention used previously and state: short / long strikes, ratio (short x long sizes), with (*) indicating a backspread for net credit, which I have been testing from recent levels of low volatility (and still don't really like). The "normsdist" column is an approximate risk measure of the short leg expiring itm (index lower than strike), and does fluctuate with market volatility and time.



(I missed a February trade, so two separate March trades.)


Unless anything interesting, unexpected or catastrophic happens, the next update here will be in 12 months.

Happy New Year 2018 to All, and Thankyou to Mods for keeping LF running.

M

hiriskpaul
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Re: 25.9%

#106861

Postby hiriskpaul » December 30th, 2017, 8:02 pm

Well done for keeping at it. I have hardly traded US options at all recently due to the low vol.

You are well ahead of me, I have managed 19% over the year, but that includes a brief diversion of my margin into some Provident Financial bonds about to mature and unrealised P&L on January DAX puts at 11700, January SPX puts at 2300 and WTI puts at 4900 (expiry 17-Jan). I think WTI and SPX are in the bag, SPX very small position anyway, but I am not so sure about the DAX puts. They are 8.8% OTM, so should be ok, but I have an uneasy feeling about the DAX and may reduce my position ahead of expiry. Implied vol is unnervingly low (for the DAX) at 20.8% as well.

moorfield
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Re: 25.9%

#115353

Postby moorfield » February 2nd, 2018, 11:48 pm

Evasive Action

It had to happen eventually ...

I had a week off following an uneventful January expiry (see above) and opened an April position on Monday (2580/2720 2.9x), and have spent the rest of the week watching the sell-off unfold on VIX ... :o

Image

One of the most undesirable scenarios immediately after opening a put ratio, and unsurprisingly my margin level has been severely tested. Not bum-clenchingly so (yet), but enough that even the village idiot would recognize that events could get a lot nastier next week.

So with high VIX and the index at 2762 evasive action has been taken today. I have exited March 2450/2560 position at P&L>0 (just) - which protects cash (rule #1) and covers margin level more comfortably in the immediate short term. From here I'm looking for the long side of that April position to move itm and a profitable exit asap, or VIX to calm down and a re-entry tbc.

For now the project remains on track, with account xirr at 39.2% tonight. Monday should be interesting ...


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