Monday, September 21, 2015
Thursday, September 17, 2015
No Rate Hike, What A Surprise ...
I'm not shocked, but I honestly thought it was a 50/50 shot this time around.
Long Live ZIRP!
This non-event should suck vol out of the indexes, however the VIX at this point in time (2:08pm) is not reacting much, just like the markets. I expect the VIX to continue to "take the stairs down" over the next month to within it's normal range.
Yesterday I rolled up the SPY 182/185 (0.50->0.23) to 190/193 (0.70). Looks like it was the right choice.
Those VIX 13p are still around the same value that I originally picked them up at. I might have gone too far out of the money, unfortunately, for this to be a winning trade. But, we will see!
The Fed has cited China as a concern and a big factor on why rates were not raised. What a shock.
At this point a December hike is also off the table. The Fed is in full volatility reduction mode. Can't let the markets go down! Must keep asset bubbles alive! It's all we have to show for out multi-trillion dollar money printing!
Long Live ZIRP!
This non-event should suck vol out of the indexes, however the VIX at this point in time (2:08pm) is not reacting much, just like the markets. I expect the VIX to continue to "take the stairs down" over the next month to within it's normal range.
Yesterday I rolled up the SPY 182/185 (0.50->0.23) to 190/193 (0.70). Looks like it was the right choice.
Those VIX 13p are still around the same value that I originally picked them up at. I might have gone too far out of the money, unfortunately, for this to be a winning trade. But, we will see!
The Fed has cited China as a concern and a big factor on why rates were not raised. What a shock.
At this point a December hike is also off the table. The Fed is in full volatility reduction mode. Can't let the markets go down! Must keep asset bubbles alive! It's all we have to show for out multi-trillion dollar money printing!
LONG LIVE ZIRP
Tuesday, September 15, 2015
One Down One to Go
I bought back the iron condor in BABA today for 0.38 from 0.75, making a profit of 50%, my usual take-off point. Awesome.
Now just the SPY (and VIX) remain. Well, volatility has taken the stairs down so to speak, but because it isn't falling faster than the price of SPY is rising, the position is still down.
I think after the Fed meeting, regardless of what they say, vol will come in. If the markets jump I'll be in for some heat but if not, I should be heading back to even on the position.
The decision is Thursday ... see ya then!
Now just the SPY (and VIX) remain. Well, volatility has taken the stairs down so to speak, but because it isn't falling faster than the price of SPY is rising, the position is still down.
I think after the Fed meeting, regardless of what they say, vol will come in. If the markets jump I'll be in for some heat but if not, I should be heading back to even on the position.
The decision is Thursday ... see ya then!
Thursday, September 3, 2015
Is the Current Volatility Scenario an Opportunity Missed?
Same positions on ... the 167/170 put side of the SPY condor was rolled and now its 182/185/203/206. Overall vol is beginning to come down, but I don't think it will really drop until after the Fed meeting on September 16-17.
I still think a September hike has about a 50/50 chance of occurring. Tomorrow's jobs report won't affect the Fed's decision ... well, at least I hope it doesn't; I hope the Fed isn't THAT short-term focused! My view on Fed hikes have been made very clear.
At this point I have no idea how the markets would react either way. If the Fed hikes, does vol get crushed since that has more or less been priced in? Do the markets mostly do nothing? If they don't hike, does that signal that the Fed is worried about global macro? Does that increase vol?
Who knows, we'll just have to wait and see.
Also short vol in BABA with a big wide iron condor. 55/57.5/75/77.5 @ 0.75
Right now I'm just gonna hang on to my current positions and try to ride it out. I know that a weathered professional would say, "this isn't the time to hold back, rather, bring more chips to the table!" Well, I'm not a weathered professional. The way I see it, if I can hold my own with these positions and produce a profit in these times of high vol, that will be a chip on my shoulder. What doesn't kill you makes you stronger, right?
Is it an opportunity missed? Definitely. But it's only a good opportunity if you know what you are doing. I don't really know how to manage vol spikes at present because not enough of them have occurred since Q4 2012, when I started trading. The more that occur, the better I will become at navigating through them and making the best of the opportunities that they present.
Basically right now I'm trying to make it through the Fed meeting, and September overall. The last time we had this kind of draw-down in the markets was October 2014, which I mostly sidelined. Not this time. While I won't really be stepping up to the plate, I will still be taking risk ... just the best set-ups possible.
I still think a September hike has about a 50/50 chance of occurring. Tomorrow's jobs report won't affect the Fed's decision ... well, at least I hope it doesn't; I hope the Fed isn't THAT short-term focused! My view on Fed hikes have been made very clear.
At this point I have no idea how the markets would react either way. If the Fed hikes, does vol get crushed since that has more or less been priced in? Do the markets mostly do nothing? If they don't hike, does that signal that the Fed is worried about global macro? Does that increase vol?
Who knows, we'll just have to wait and see.
Also short vol in BABA with a big wide iron condor. 55/57.5/75/77.5 @ 0.75
Right now I'm just gonna hang on to my current positions and try to ride it out. I know that a weathered professional would say, "this isn't the time to hold back, rather, bring more chips to the table!" Well, I'm not a weathered professional. The way I see it, if I can hold my own with these positions and produce a profit in these times of high vol, that will be a chip on my shoulder. What doesn't kill you makes you stronger, right?
Is it an opportunity missed? Definitely. But it's only a good opportunity if you know what you are doing. I don't really know how to manage vol spikes at present because not enough of them have occurred since Q4 2012, when I started trading. The more that occur, the better I will become at navigating through them and making the best of the opportunities that they present.
Basically right now I'm trying to make it through the Fed meeting, and September overall. The last time we had this kind of draw-down in the markets was October 2014, which I mostly sidelined. Not this time. While I won't really be stepping up to the plate, I will still be taking risk ... just the best set-ups possible.
Wednesday, August 26, 2015
A Great Set-Up!
So the markets have tanked. Can't say I called it, but I did say that the bull market is over. just a couple weeks ago. That means that vol has gotten jacked.
So I've sold an iron condor on the SPY ... with the short puts down at 170. Damn! 167/170/203/206 iron condor, 50% PoP, and 1.00 credit. Much more room to the downside than the upside, which is better in my opinion. Despite today's rally, I think the markets will slog it out to get back up above 2000, and not have a V-bottom like back in October. During which time, vol oughtta contract, which leads to the second trade.
If the SPY does in fact rocket back up and the all clear signal is given to BTD, I bought some far OTM puts on the VIX. I picked up some 13 NOV puts for 0.20. If the VIX declines back to where it has been all year, the reverse side of the SPY returning to where it has been all year, then those puts will skyrocket in price. That surge should cover losses due to Delta on the SPY position, and I say Delta because if the SPY goes back up to "normal" levels, vol will contract and suck premium out of the options. And, since the short SPY puts are so far away, I have plenty of room to roll them up should things get hairy.
If the markets continue to decline, vol should go even higher, which means rolling down the short calls would be more advantageous. The VIX puts may be a wash, but they only cost 0.20!
Overall I have 5% of my portfolio at risk in these trades ... 4.66% in SPY and 0.33% in VIX. With that, even a full loser on both positions wouldn't hurt too terribly bad (full losers are incredibly rare if you're paying attention ... you can get out!).
So I've sold an iron condor on the SPY ... with the short puts down at 170. Damn! 167/170/203/206 iron condor, 50% PoP, and 1.00 credit. Much more room to the downside than the upside, which is better in my opinion. Despite today's rally, I think the markets will slog it out to get back up above 2000, and not have a V-bottom like back in October. During which time, vol oughtta contract, which leads to the second trade.
If the SPY does in fact rocket back up and the all clear signal is given to BTD, I bought some far OTM puts on the VIX. I picked up some 13 NOV puts for 0.20. If the VIX declines back to where it has been all year, the reverse side of the SPY returning to where it has been all year, then those puts will skyrocket in price. That surge should cover losses due to Delta on the SPY position, and I say Delta because if the SPY goes back up to "normal" levels, vol will contract and suck premium out of the options. And, since the short SPY puts are so far away, I have plenty of room to roll them up should things get hairy.
If the markets continue to decline, vol should go even higher, which means rolling down the short calls would be more advantageous. The VIX puts may be a wash, but they only cost 0.20!
Overall I have 5% of my portfolio at risk in these trades ... 4.66% in SPY and 0.33% in VIX. With that, even a full loser on both positions wouldn't hurt too terribly bad (full losers are incredibly rare if you're paying attention ... you can get out!).
Friday, August 21, 2015
HD Missed Opportunity and The Verge of a Bear Market?
No, I found it. I profited from it. But execution-wise this was an opportunity missed.
Home Depot HD was following a classic Bollinger OB scenario, and the markets started to roll over. So, I got short, with a plan to leg-out of the put spread when it passed 119.
I didn't.
I still made a $360 profit on the position, but I could have made over $1000.
Legging-out is very hard to time, unfortunately. And since you expose yourself to "pure" delta, you have to be damn sure once you take off that short leg that momentum will continue in your favor. If it reverses, your gains could be washed and could turn into losses very, very quickly.
So although it could have been better, I'll take $360 profit any day.
In other news, stocks are really rolling over on China. S&P dipped (and is currently) below 2000, and while that's arbitrary, it's a clean break from the trading range we've been in for about 7 months. Not good. While I am not sure on whether or not to short the market, I stand at the ready to sell VIX calls and SPY/SPX puts or and Iron Condor, cause vol is getting juiced.
With the big leaders in the market selling off visciously over the past couple of weeks, it would not surprise me if a "correction" is on the way and potentially a mini bear market. I say "correction" because this market hasn't gone anywhere all year and looks quite toppy. But, with the Fed still around, I don't think a prolonged bear market is in the making. China will go down into a steep recession probably in the next year or 18 months, and a bear market in most assets will surely accompany that. But, that's not for awhile. I wouldn't step in and buy-the-dip here, though, because ... where has the market gone all year? There's no point in BTD when the market is not trending higher, y'know?
Home Depot HD was following a classic Bollinger OB scenario, and the markets started to roll over. So, I got short, with a plan to leg-out of the put spread when it passed 119.
I didn't.
I still made a $360 profit on the position, but I could have made over $1000.
Legging-out is very hard to time, unfortunately. And since you expose yourself to "pure" delta, you have to be damn sure once you take off that short leg that momentum will continue in your favor. If it reverses, your gains could be washed and could turn into losses very, very quickly.
So although it could have been better, I'll take $360 profit any day.
In other news, stocks are really rolling over on China. S&P dipped (and is currently) below 2000, and while that's arbitrary, it's a clean break from the trading range we've been in for about 7 months. Not good. While I am not sure on whether or not to short the market, I stand at the ready to sell VIX calls and SPY/SPX puts or and Iron Condor, cause vol is getting juiced.
With the big leaders in the market selling off visciously over the past couple of weeks, it would not surprise me if a "correction" is on the way and potentially a mini bear market. I say "correction" because this market hasn't gone anywhere all year and looks quite toppy. But, with the Fed still around, I don't think a prolonged bear market is in the making. China will go down into a steep recession probably in the next year or 18 months, and a bear market in most assets will surely accompany that. But, that's not for awhile. I wouldn't step in and buy-the-dip here, though, because ... where has the market gone all year? There's no point in BTD when the market is not trending higher, y'know?
Friday, August 14, 2015
Dude, Where's My Market (Going)?
Ok, so I don't like to make market commentary all that much. But I gotta comment here.
Where the hell is the stock market going?
For all of 2015, the S&P 500 has done nothin' but bounce around 2100. Sometimes a little, sometimes a lot. There are a lot of theories as to why:
- The markets are unsure about the future!
- The markets are awaiting a rate hike!
- China!
So, maybe all of those are true, to a degree. Without full on stimulus (beyond ZIRP) from the Fed, stocks don't march higher. Plain and simple, the stock market has been ushered into an artificial bull market by the Fed's asset purchase programs and their promise to back-stop whatever downturn may come in the markets. Analysts have only been searching the garbage (economic data) to attempt and rationalize/justify that the bull market since 2009 has been a result of economic growth and not Fed stimulus, at least not entirely.
There are a couple of problems with that notion. First, the bottom three quintiles of income earners in America have been in stagnation really since 2007, and you could argue for far longer. Second, what economic growth? Third, corporations are not reinvesting in their companies.
All corporations are doing now are buying back stock, buying other companies, or increasing dividends, all in order to appease the shareholders. Major corporations outside of media have done little in the way of broad based expansion that has been seen in almost all other expansionary times in recent economic history.
Back to the stock market in 2015. We've basically gone nowhere for 10 months, something that has not happened in many years. Bulls will say that it's a "breather," and that after two years and a 45% gain its only natural to take a break. Fair enough, I suppose, but the market doesn't make moves ... investors do. The dog wags the tail.
Investors are afraid of a tightening Fed. Now, everyone knows my thoughts on the Fed's supposed oncoming tightening cycle. Ain't gonna happen. But not everyone is as skeptical as me and believe the shit coming from Yellen's mouth.
If I am proved wrong, I would worry for investors. The stock market has not "survived" a tightening cycle hardly ever.
In 1994 the Fed raised the FFR from 3% to 6%, and the S&P 500 didn't budge the whole year. Hardly a collapse in stock prices, but the economy was also moving along speedily, and it was a result of "real" growth. In the summer of 1998 the S&P fell from 1180 to 980 and the Fed responded by cutting the rate from 5.5% to 4.5%. The market took off as a result ... this was when the "Greenspan put" was coined. From June 1999 to June 2000 the rate was raised from 4.75% to 6.5%, the NASDAQ collapsed and stocks entered the bear market of 2001-2003. The Fed responded by cutting rates from 6.5% to 1% from 2000 to 2003. Starting in 2003, not coincidentally, the market took off.
The Fed then engaged in raising rates from 1% to 5% from summer 2004 to summer 2006. Guess when the housing bubble popped. Yes, that's right, late summer 2006. Stocks lost half their value in the coming years despite the Fed renege of cutting rates to 0%.
In other words, a Fed tightening cycle would spell disaster for the market. If cutting rates from 5% to 0% - ZERO PERCENT - did nothing to save the imploding market, what the hell can? Surely not a cut from 2% back to 0%, because that's probably about how high the Fed's gonna be able to get. The Fed has no firepower left to stem a market sell-off. Even another round of QE won't do the trick, because that will probably scare the hell out of investors since the accepted narrative is "all clear for raising rates, the economy is doing pretty good now."
If China gets worse, which it more than likely will, I smell trouble for US stocks in 2016 and 2017. It took about a year and a half for stocks to catch on to the fact that the credit boom of 03-06 was collapsing, hence their delayed sell-off until 2008. China's crumbling is the catalyst this time, it looks like.
The bull market of 2009-2014 is over.
Wednesday, August 5, 2015
AAPL and DD
standard vol selling here.
AAPL 100/105/125/130 SEP15 @ 1.15 x 3 [61 PoP]
DD 47.5/50/57.5/60 SEP15 @ 0.50 x 5 [65 PoP]
Portfolio at risk, 7.1%
I'm pretty far away from the market on AAPL on both sides but I'm pretty close to DD on the call side, however, that's probably more balanced since DD is in a downtrend but is nearing support and could bottom out soon.
Vol overall is down across the market right now and nothing looks good directionally either. I thought TWTR might break down but I prefer to play reversals at support/resistance rather than breakdowns/breakouts and continuations. I feel they're less reliable, and I'm no good at trading momentum.
I think there will be more volatility towards mid month as people frantically pour over the data to see if a rate hike is coming. IMHO, if this Friday's jobs report is "bad," Granny Yellen will hold off on that 0.25% hike. Which obviously would not surprise me, but I think there's a 50/50 chance for a September hike and a 75% chance that FF rate will be 0.25% by year's end. But remember, I don't count that as a hike because 0.25% is just the top of the current target range!
AAPL 100/105/125/130 SEP15 @ 1.15 x 3 [61 PoP]
DD 47.5/50/57.5/60 SEP15 @ 0.50 x 5 [65 PoP]
Portfolio at risk, 7.1%
I'm pretty far away from the market on AAPL on both sides but I'm pretty close to DD on the call side, however, that's probably more balanced since DD is in a downtrend but is nearing support and could bottom out soon.
Vol overall is down across the market right now and nothing looks good directionally either. I thought TWTR might break down but I prefer to play reversals at support/resistance rather than breakdowns/breakouts and continuations. I feel they're less reliable, and I'm no good at trading momentum.
I think there will be more volatility towards mid month as people frantically pour over the data to see if a rate hike is coming. IMHO, if this Friday's jobs report is "bad," Granny Yellen will hold off on that 0.25% hike. Which obviously would not surprise me, but I think there's a 50/50 chance for a September hike and a 75% chance that FF rate will be 0.25% by year's end. But remember, I don't count that as a hike because 0.25% is just the top of the current target range!
Tuesday, August 4, 2015
AAPL Melting Down??!?!?!!?
AAPL is one of the darling stocks in the American market. This company can do no wrong. They're gonna sell a bazillion of those watch thingies and it will be awesome, right?
WRONG
Who seriously thought the AppleWatch was a good idea? Who? THAT'S Timmy C's big innovative new creation? The thing everyone and their mother speculated Apple was gonna make next, so he said, "Alright, what the hell, y'know?"
And who thought they would actually sell a lot of them? It's an overpriced gimmick! Google Glass, anyone? Fucking dumb!
So investors basically gave AAPL the ol' fuck you and it's selling off. Why? Oh, China is bad! Bitch, Chinese GDP per capita is like $5000. A new iPhone 6 is like a tenth of that. 10%. Fuck China, IT'S NOT A DEVELOPED MARKET. HOLY FUCK. Oh, they didn't sell that many watches! NO FUCKING KIDDING.
Rant over. But seriously, AAPL's sell off is really fucking dumb. However, it has goosed vol, which means I'm about ready to start selling premium. I hate that word too. Fuck premium.
Maybe tomorrow, I don't know. It's on the radar.
Thursday, July 30, 2015
A Successful July
July saw a near perfect record for short term trading. Some good high volatility opportunities and a couple of good directional opportunities. July was a good example of the bread and butter trades that I put on all the time. Nothin' really fancy, and one earnings trade. Actually, that's been a good thing, because this earnings season has been pretty wild. Many stocks had +/- %10 moves on earnings.
In August I plan on continuing the same strategy. So far in 2015, I am up ~18%. Stocks as measured by the S&P 500 are up 2.2%. While I'm not ecstatic about July's 2.5% return, it was a solid month that I hope to repeat.
The only bad things? Well, I can't say that it was impatience. The directional shorts I had on stalled out a little, so I took profits. While they were decent profits, a couple could have been super. Gold continues to sell off, and I'm convinced it's going to $1000 and ounce, I just don't know how long that will take. And Facebook ended up selling off right after I got out for a scratch. So, I got out a little early, but, you know, hindsight is 20/20.
In August I plan on continuing the same strategy. So far in 2015, I am up ~18%. Stocks as measured by the S&P 500 are up 2.2%. While I'm not ecstatic about July's 2.5% return, it was a solid month that I hope to repeat.
The only bad things? Well, I can't say that it was impatience. The directional shorts I had on stalled out a little, so I took profits. While they were decent profits, a couple could have been super. Gold continues to sell off, and I'm convinced it's going to $1000 and ounce, I just don't know how long that will take. And Facebook ended up selling off right after I got out for a scratch. So, I got out a little early, but, you know, hindsight is 20/20.
Saturday, July 25, 2015
A Semi-Solid Week of Trades
This past week saw the closing of all but one of my open positions. DIA, GLD, FB, and an earnings trade I didn't post on in SBUX. DIA and GLD went smoothly, and both were profitable. FB? It ran up and then right back down again, so I decided to get out of that one for a scratch. SBUX reported a great quarter and announced a stock buyback, so that launched it to the top of the expected range, only to be pulled down during the day on the backs of a biotech meltdown in the NASDAQ. So, I got out a little too early, and made about $45. Eh.
Only open position now is short the Q's QQQ. With the biotech selloff and the AMZN jump, albeit less so than at the open, QQQ sold off about 1% on Friday. It closed near the lows of the day but failed to break soft support on the close. There is definitely some negative momentum, so I plan to leg out if we clear that 111 soft support. I decided not to leg out in GLD because the broader market began to sell off, and the negative momentum was taking a break, So I just closed it for a $150 gain. I'm still thinking gold will head to $1000/oz but if everyone else thinks that, why hasn't it gotten there yet? Volume decreased as gold sunk lower, never a sign of continuing downside momentum.
All told July is looking to be a pretty profitable month, clocking in at around +2.XX% as of right now. If things go smoothly with QQQ than that could turn into 3-4% for the month.
Only open position now is short the Q's QQQ. With the biotech selloff and the AMZN jump, albeit less so than at the open, QQQ sold off about 1% on Friday. It closed near the lows of the day but failed to break soft support on the close. There is definitely some negative momentum, so I plan to leg out if we clear that 111 soft support. I decided not to leg out in GLD because the broader market began to sell off, and the negative momentum was taking a break, So I just closed it for a $150 gain. I'm still thinking gold will head to $1000/oz but if everyone else thinks that, why hasn't it gotten there yet? Volume decreased as gold sunk lower, never a sign of continuing downside momentum.
All told July is looking to be a pretty profitable month, clocking in at around +2.XX% as of right now. If things go smoothly with QQQ than that could turn into 3-4% for the month.
Monday, July 20, 2015
D'oh!
FB
Don't try to short earnings run ups, or breakouts from rangebound trading.
Don't make a trade just cause you think you might miss out on the morning move the next day
Don't get "double short" with a positively correlated name (QQQ)
Don't make a trade if the option strikes end 5 points away from the current price.
I will most likely dearly pay for these rookie mistakes with this FB position.
I put it on, and then shortly after the close decided ... eh ... I don't feel so great about that one. And wham! 2.5% up move the next day.
Will probably be experiencing some drawdowns from these trades
But the short gold trade is working nicely today
Don't try to short earnings run ups, or breakouts from rangebound trading.
Don't make a trade just cause you think you might miss out on the morning move the next day
Don't get "double short" with a positively correlated name (QQQ)
Don't make a trade if the option strikes end 5 points away from the current price.
I will most likely dearly pay for these rookie mistakes with this FB position.
I put it on, and then shortly after the close decided ... eh ... I don't feel so great about that one. And wham! 2.5% up move the next day.
Will probably be experiencing some drawdowns from these trades
But the short gold trade is working nicely today
Friday, July 17, 2015
New Directional Positions!
Had the chance to find some good directional opportunities today.
First, The Q's ... QQQ
Typical bollinger band short here. This week the markets got way overextended, look how gappy that run is! So everytime the Qs get to the 70ish area on RSI, there are some declines. However, the Qs also managed to break out to new highs on "increasing" volume, so QQQ may go higher!
+5 SEP 113/114p @ 0.45. Not risking a lot here because the momentum monkeys may chase this thing higher.
Next up, Facebook FB
Same deal as with QQQ. FB was up on no real news, just kind of following suit with GOOGL's earnings surge of 15%. FB earnings are in two weeks, so the IV is very high. I sold 5 98/100 call spreads (that's the highest available) for the 7/31 expiration, planning on closing this before earnings. Could run up some more into earnings, but it has to run fast to beat the time decay. 0.65, 70% PoP.
Last, the GLD. Gold.
Gold broke down below its strong support line and has quickly fallen out of favor as the dollar has risen in value and a rate hike is supposedly on the way in September. I think gold will finally trade down to $1000 an ounce over the period, because the "safe haven" value of gold has diminished in favor for the safe haven of the US dollar. Sorry, gold, it was a great run.
+5 SEP 108/109p @ 0.48.
For DIA, things lightened up a bit today. Although the Dow only declined by a few basis points, the position closed the day @ 0.67, 0.12 lower than Thursday. As it stands, it has a 64% PoP and expires in 35 days. Volatility was sucked out of the indices incredibly quickly!
Total Portfolio Capital at risk: 6.54%
First, The Q's ... QQQ
Typical bollinger band short here. This week the markets got way overextended, look how gappy that run is! So everytime the Qs get to the 70ish area on RSI, there are some declines. However, the Qs also managed to break out to new highs on "increasing" volume, so QQQ may go higher!
+5 SEP 113/114p @ 0.45. Not risking a lot here because the momentum monkeys may chase this thing higher.
Next up, Facebook FB
Same deal as with QQQ. FB was up on no real news, just kind of following suit with GOOGL's earnings surge of 15%. FB earnings are in two weeks, so the IV is very high. I sold 5 98/100 call spreads (that's the highest available) for the 7/31 expiration, planning on closing this before earnings. Could run up some more into earnings, but it has to run fast to beat the time decay. 0.65, 70% PoP.
Last, the GLD. Gold.
Gold broke down below its strong support line and has quickly fallen out of favor as the dollar has risen in value and a rate hike is supposedly on the way in September. I think gold will finally trade down to $1000 an ounce over the period, because the "safe haven" value of gold has diminished in favor for the safe haven of the US dollar. Sorry, gold, it was a great run.
+5 SEP 108/109p @ 0.48.
For DIA, things lightened up a bit today. Although the Dow only declined by a few basis points, the position closed the day @ 0.67, 0.12 lower than Thursday. As it stands, it has a 64% PoP and expires in 35 days. Volatility was sucked out of the indices incredibly quickly!
Total Portfolio Capital at risk: 6.54%
Thursday, July 16, 2015
Why You Should Sell High Volatility
So I sold some US market volatility by the way of the VIX and the Dow ETF, DIA. The VIX plummeted immediately, as I figured it would. That means volatility across the indices also dropped precipitously.
When I sold the DIA iron condor, IV rank was in the 99th percentile on a 52 week basis, indicating that IV pretty much was the highest it had been in a year.
US stocks had a couple day decline, and then once the Chinese government came out and said they would imprison short sellers, it was off to the mother fucking races.
LOOK AT THAT GAP N FLY. Totally irrational in my opinion, but so was the sell off so, I guess net-net nothing really happened. This pretty much happens after every couple day downturn. The Buy the Dip algorithms come swooping in and bid up the market once the all clear signal is given.
Here's the crazy part. A 6 point move higher in DIA has only resulted in the price of the 166/168/183/185 condor moving from 0.75 to 0.79! Only 0.04 against me!
IV rank dropped from the 99th percentile to the 14th percentile. That's why selling high volatility is so important. Now though, IV is probably the lowest it will get, so if DIA continues higher, it's going to start hurting more. There's some soft resistance just under 182, we'll see what happens. I've got that VIX victory money to hold me over for awhile if things get hairy.
When I sold the DIA iron condor, IV rank was in the 99th percentile on a 52 week basis, indicating that IV pretty much was the highest it had been in a year.
US stocks had a couple day decline, and then once the Chinese government came out and said they would imprison short sellers, it was off to the mother fucking races.
LOOK AT THAT GAP N FLY. Totally irrational in my opinion, but so was the sell off so, I guess net-net nothing really happened. This pretty much happens after every couple day downturn. The Buy the Dip algorithms come swooping in and bid up the market once the all clear signal is given.
Here's the crazy part. A 6 point move higher in DIA has only resulted in the price of the 166/168/183/185 condor moving from 0.75 to 0.79! Only 0.04 against me!
IV rank dropped from the 99th percentile to the 14th percentile. That's why selling high volatility is so important. Now though, IV is probably the lowest it will get, so if DIA continues higher, it's going to start hurting more. There's some soft resistance just under 182, we'll see what happens. I've got that VIX victory money to hold me over for awhile if things get hairy.
Wednesday, July 8, 2015
Let's Sell some US MARKET Volatility ...
The Chinses Connection fell through ... big time. China's stock market is collapsing. Down, down, down! I lost a good chunka change on the ASHR iron condor.
I don't think that the same thing will happen in the US. Right now volatility has spiked because stocks have broken slightly out of their year to date trading ranges. Investors appear to be worried about Greece (I really don't know why) and the Chinese stock slump.
I won't give market commentary. I hate that. So instead I'm just gonna sell an iron condor on the Dow Jones average ETF DIA.
It looks wider than it really is. Only a 53% PoP on this one ... however, my short strikes are at significant support and resistance areas. I think therefore that it has a higher PoP, but not statistically if you assume random walk.
-6 DIA 8/21 166/168/183/185 @ 0.75
On the same note, the VIX is spiking for the same reasons. Ordinarily, I would sell a bear call spread in the lows 20's (its at 18-19) on the front month, but because those expire next week, the VIX might go fairly high before coming back down to earth. Instead I sold naked calls farther out and away from the market. They have a 93% PoP.
-2 VIX AUG 28c @ 0.80
Here's a new thing,
Summary:
Max Profit: $598
Capital at Risk: 5.8% (floating)
I don't think that the same thing will happen in the US. Right now volatility has spiked because stocks have broken slightly out of their year to date trading ranges. Investors appear to be worried about Greece (I really don't know why) and the Chinese stock slump.
I won't give market commentary. I hate that. So instead I'm just gonna sell an iron condor on the Dow Jones average ETF DIA.
It looks wider than it really is. Only a 53% PoP on this one ... however, my short strikes are at significant support and resistance areas. I think therefore that it has a higher PoP, but not statistically if you assume random walk.
-6 DIA 8/21 166/168/183/185 @ 0.75
On the same note, the VIX is spiking for the same reasons. Ordinarily, I would sell a bear call spread in the lows 20's (its at 18-19) on the front month, but because those expire next week, the VIX might go fairly high before coming back down to earth. Instead I sold naked calls farther out and away from the market. They have a 93% PoP.
-2 VIX AUG 28c @ 0.80
Here's a new thing,
Summary:
Max Profit: $598
Capital at Risk: 5.8% (floating)
Thursday, June 25, 2015
Summer Markets: Where's the Volatility?
Not just talking about stocks here. Everything that is usually moving is not and everything that usually doesn't move has been moving.
Bonds: have been volatile, but will decline through the Summer, most likely. Will be highly dependent on "big economic data" because this market is being pseudo-driven by the Fed.
Oil: Has been doing nothing for the past 2 months, staying steady around $60 a barrel. Expect that to continue.
Stocks: nothing has happened ALL YEAR. Only things moving are Biotech and Healthcare. Momo's are gone for now, techs are doing mostly nothing, industrials and consumer stocks also have been flat.
Currencies:
Bonds: have been volatile, but will decline through the Summer, most likely. Will be highly dependent on "big economic data" because this market is being pseudo-driven by the Fed.
Oil: Has been doing nothing for the past 2 months, staying steady around $60 a barrel. Expect that to continue.
Stocks: nothing has happened ALL YEAR. Only things moving are Biotech and Healthcare. Momo's are gone for now, techs are doing mostly nothing, industrials and consumer stocks also have been flat.
Currencies:
- USD ... has been movement and volatility but it's leaving, just like in US bonds.
- EUR ... won't be any volatility after the Greek 11th hour bailout. We're in a world of bailouts.
- JPY ... recent movement appears like a blip
- GBP ... nothing. of course, why would there be? Why is GBP a "big 4" currency?
Chinese stocks are currently experiencing volatility but they're in the middle of a massive run up so some sharp pull backs are definitely warranted. The PBOC is full-steam-ahead on that front. Cut rates and keep Shangahi airborne.
Earnings season is coming in July, so obviously some individual names will have vol there
Probably won't be much movement anywhere through the summer until September when we wait for another "Fed rate hike." Only potential volatility will come from a Grexit / Chinses crash ... both I think are pretty unlikely. BAILOUT NATION(S) REMAINS SUPREME.
update 7/8/2015
well how about all that. China is trying to pull out all the stops on the declining Shanghai shares and it is not working. Greece had a surprise "oxi" on the bailout referendum, and an 11th our deal seems unlikely. I guess when Bflakaz comes out saying "where's the vol?" it's right around the corner, LOL
update 7/8/2015
well how about all that. China is trying to pull out all the stops on the declining Shanghai shares and it is not working. Greece had a surprise "oxi" on the bailout referendum, and an 11th our deal seems unlikely. I guess when Bflakaz comes out saying "where's the vol?" it's right around the corner, LOL
Wednesday, June 24, 2015
Greece and the Fed provide nice profits
The Greece "deal" and the Fed "decision" managed to suck a lot of volatility out of the Euro, causing my FXE iron condor to profit immensely, in addition to time running out. Managed to close an initial credit 0.90 with a 0.52 debit today! Clutch!
Made a trade Monday in a Chinese stock ETF, the Deutcshe Bank db-X (currency hedged) Chinese ETF. Because of the recent 13% drop on the Shanghai composite, IV has skyrocketed. I think the PBOC won't let that fall continue much longer but I don't think Chinese stocks will quickly resume their huge run-up. I'm expecting a consolidation before a move higher, which would slurp all that volatility out of Chinese stocks. At the time of placing the trade, both strikes of the iron condor were ~10% away from the market, and I still got a hefty 0.66 credit on a 2-wide strike, because IV rank was in the 99th percentile. Should be interesting because the liquidity of the options in ASHR is ... awful at best. Sometimes 0.40 wide bid-ask spreads!
Rolled that ORCL earnings trade to July opex. Has literally no chance of making money but hey, my total risk didn't increase from rolling it, so it was worth it to take a lotto chance of this becoming a scratch or a winner.
Really starting to like being delta neutral in this go-nowhere stock market. It's strange how there is more volatility in bonds and currencies than in stocks! Well, where the vol is, that's where the opportunities are right now. The support/resistance overbought/oversold directional swing trading just doesn't work in a non-trending market. I'll stick to delta neutral positions for awhile since they're working pretty well!
Made a trade Monday in a Chinese stock ETF, the Deutcshe Bank db-X (currency hedged) Chinese ETF. Because of the recent 13% drop on the Shanghai composite, IV has skyrocketed. I think the PBOC won't let that fall continue much longer but I don't think Chinese stocks will quickly resume their huge run-up. I'm expecting a consolidation before a move higher, which would slurp all that volatility out of Chinese stocks. At the time of placing the trade, both strikes of the iron condor were ~10% away from the market, and I still got a hefty 0.66 credit on a 2-wide strike, because IV rank was in the 99th percentile. Should be interesting because the liquidity of the options in ASHR is ... awful at best. Sometimes 0.40 wide bid-ask spreads!
Rolled that ORCL earnings trade to July opex. Has literally no chance of making money but hey, my total risk didn't increase from rolling it, so it was worth it to take a lotto chance of this becoming a scratch or a winner.
Really starting to like being delta neutral in this go-nowhere stock market. It's strange how there is more volatility in bonds and currencies than in stocks! Well, where the vol is, that's where the opportunities are right now. The support/resistance overbought/oversold directional swing trading just doesn't work in a non-trending market. I'll stick to delta neutral positions for awhile since they're working pretty well!
Wednesday, June 17, 2015
Earnings Trades
Not going with the standard 2SD strangle. Instead putting wings on a strangle making it a iron condor
Sell ATM call / put, buy OTM call / put. Credit is higher looking to engage in pure vol arbitrage.
Most I can lose is 1% of account. Should be interesting.
KR 67.5/72.5/77.5 @ 2.65
ORCL 43/45/47 @ 1.40
both have ~28% POP. This is mostly a learning experience.
Got out of TLT today @ 0.18
FXE looking ok despite total break down of Greek talks. No rate hike probably took some vol out.
Sell ATM call / put, buy OTM call / put. Credit is higher looking to engage in pure vol arbitrage.
Most I can lose is 1% of account. Should be interesting.
KR 67.5/72.5/77.5 @ 2.65
ORCL 43/45/47 @ 1.40
both have ~28% POP. This is mostly a learning experience.
Got out of TLT today @ 0.18
FXE looking ok despite total break down of Greek talks. No rate hike probably took some vol out.
Tuesday, June 16, 2015
June Holds No Rate Hike
No surprise.
The TLT bull put (111/113p) is lookin' good. Vol should really come down tomorrow and I'll probably take that trade off. It's @ 0.20 now, originally sold for 0.40. Closed at the highs of the day, usually signalling continuation to the upside tomorrow.
Greece continues to be an unknown. It looks more and more like no bailout deal will be reached, but a Grexit is still up in the air. Although vol has remained elevated, obviously, the time decay effect has helped the FXE position. now trading at 0.80, originally sold for 0.90.
Markets generally don't break out in the Summer, so I'd expect more of the same choppiness until September, when the rate hike decision will again be a no. I expect bonds to stabilize through the Summer as well now that a surprise June hike is off the table.
GL HF DD
The TLT bull put (111/113p) is lookin' good. Vol should really come down tomorrow and I'll probably take that trade off. It's @ 0.20 now, originally sold for 0.40. Closed at the highs of the day, usually signalling continuation to the upside tomorrow.
Greece continues to be an unknown. It looks more and more like no bailout deal will be reached, but a Grexit is still up in the air. Although vol has remained elevated, obviously, the time decay effect has helped the FXE position. now trading at 0.80, originally sold for 0.90.
Markets generally don't break out in the Summer, so I'd expect more of the same choppiness until September, when the rate hike decision will again be a no. I expect bonds to stabilize through the Summer as well now that a surprise June hike is off the table.
GL HF DD
Thursday, June 4, 2015
Greece Provides a Rare Opportunity
The turbulence in Greece is now coming to a heed; Greece has to make a payment to its creditors very soon and it looks unlikely that they will do so. I'll spare the details, but it means that anything exposed to the Euro has high implied volatility (IV).
FXE, an ETF that attempts to mirror EUR/USD movements, has an IV rank of 93. That means that IV is pretty much at the highest levels it has been in the past 52 weeks, which is to be expected given the situation.
When IV rank gets that high, its is likely that IV will contract back to the mean at some point in the near future because the IV is pricing in an event ... most of the time. Greece making or not making that payment can determine their future in the Euro area, and that's weighing heavily on the Euro.
One of the biggest influences on my trading is a YouTube channel called tastytrade. In this video, the old pros go over why when IV rank us super high you should bring more chips to the table:
So instead of taking in 1/3 the width of the strikes in an iron condor, I'm going to try and take in 45% of the width. This reduces the PoP, but it also means I take in a much higher credit. The goal is to take advantage of not only Theta decay but also IV reverting to its mean, theoretically.
Here's the trade: -8 FXE JUL 106/108/113/115 iron condor @ 0.90. That's a max profit of $720 and a max loss of $880 with a 48% PoP. Here it is visually:
It's going to be hard to watch this one because of how tight that range is! But, I trust the tastytrade guys ... and even if the Greece announcement really moves FXE, IV should drop, meaning that drawdowns will be more limited. Plus, a higher credit helps defend against drawdowns.
The TLT trade worked perfectly, and now I wish that I was more aggressive on that one. But, always remember:
FXE, an ETF that attempts to mirror EUR/USD movements, has an IV rank of 93. That means that IV is pretty much at the highest levels it has been in the past 52 weeks, which is to be expected given the situation.
When IV rank gets that high, its is likely that IV will contract back to the mean at some point in the near future because the IV is pricing in an event ... most of the time. Greece making or not making that payment can determine their future in the Euro area, and that's weighing heavily on the Euro.
One of the biggest influences on my trading is a YouTube channel called tastytrade. In this video, the old pros go over why when IV rank us super high you should bring more chips to the table:
So instead of taking in 1/3 the width of the strikes in an iron condor, I'm going to try and take in 45% of the width. This reduces the PoP, but it also means I take in a much higher credit. The goal is to take advantage of not only Theta decay but also IV reverting to its mean, theoretically.
Here's the trade: -8 FXE JUL 106/108/113/115 iron condor @ 0.90. That's a max profit of $720 and a max loss of $880 with a 48% PoP. Here it is visually:
It's going to be hard to watch this one because of how tight that range is! But, I trust the tastytrade guys ... and even if the Greece announcement really moves FXE, IV should drop, meaning that drawdowns will be more limited. Plus, a higher credit helps defend against drawdowns.
The TLT trade worked perfectly, and now I wish that I was more aggressive on that one. But, always remember:
Bulls make money, Bears make money, Pigs get slaughtered
If anything, regardless of results, this will be a good learning opportunity. Hopefully a profitable one!
In other news, the NFLX position is still sitting around. NFLX refuses to go up much past 625 and below 615 ... so it's a wait and see kind of thing.
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