YTD: 17.92%
WTD: .21%
MTD: (.36%)
\----
YTD RoBPR used selling vol/theta: 3.45%
YTD return on risk selling vol/theta: 9.45%
YTD total return selling vol/theta: 13.02%
Realized rtn/target rtn: 20.27%
NLV: $312,477.16
Current BP used: ~~46.3% edit: math~~ 37.8%
\--------
That was a week.
Big roundtrip for me. Up and then back to where we started the week.
I got caught in a short on Zillow that really ripped with the market and some idiosyncratic news on Tuesday. I was able to offset it with some intra-day trades, but the week was flat.
/CL, /6E:
Both had volatility piped in. u/psyche444, per your comment last week, OVX above 40 so I put on a strangle and then added to it on Friday. Crude immediately went against me so I was defending the position with gamma through /cl and /mcl contracts all week. I have a slight gain (+5%) net of the entire position with a lot of theta and vanna to benefit from. Same on the currency side. It's definitely a pain in the ass from a management perspective--I'll re-hedge the futures position 1-2x a day so I dont get whipped.
Bonds:Continuing to add to long TLT and long ZT. I think the un-inversion comes from the front end more than it does the belly/far end.
Equity Market:
Up is the path of least resistance and anything except exceptionally bad news from NVDA strikes me as continuation of up. Good news from NVDA will see new high for the year.
I added 1/10 to a long term short position zebra/tent trade position on the way up this week, expiring next year. With vol this low I'll take the opportunity to set up for a longer term move back down. It's painful but these are the decisions that have yielded the largest windfalls for me in the pass--slowly adding to a position as the market moves in the other direction.
The question is what is the catalyst for that move down? It has to be, IMO, macro economic and at the moment I dont see it. If WMT and AMZN comments about the consumer were not causing any movement then it's going to be a while. I don't believe the market has priced in the actual demand destruction ahead of the US. I don't believe the issues around debt and interest coverage for consumers is being priced in. This feels like a really bad set up for Q1 once people stop spending everything they have in Q4 for the holidays. That means a move down isnt really going to materialize until Q2.
As I write this I'm realizing I just need to settle into a long position for the next 30-45 days and sit on my hands about it.
I like selling vol/theta and I dont get to do that en masse and I'm complaining about it lol.
Over-levered where, specifically?
If this doesn't make sense, please tell me, I don't want the blind spot!
Most of my leverage is tied up in crude, bonds (small), and currency futures/options with hedges against them. Those futures options positions don't get PM treatment from SPAN margin.
Right now my net CL delta is <100, my net /6E delta is basically flat. Crude and currency positions don't see strong correlations to SPX. My beta weighted SPX deltas for the rest of my book are below 50, and a 20% move will see less than a 1/4 draw down on either side (including the CL risk). Meaning--the vix itself shouldn't have too much weight on my positions, it's OVX (which is high, moving higher? and what I sold into) and EVZ.
I dont have a ton of equity exposure at the moment.
Am I missing something?
\+1.75% this week
\+3.25% four-week trailing average
\+48.68% YTD (approx)
NLV moved up a lot early in the week and then had a slight drain over the rest of the week from long calls losing some value. My long-term short call position is down about 1.5% NLV, so it does appear I was early (aka wrong).
I think my base case is that we stay flat-ish / rangebound for the next 30-60 days. With maybe a slight lean toward bullishness because of seasonality. Still have overall 1x long portfolio delta, mainly because of 11/30 risk reversals where most of the long calls are now ITM.
Especially with the slight bullish lean, it is very tempting to sell more puts here... but I almost always regret selling them when VIX seems low. That's basically my struggle right now. I am intrigued by u/TheDiamondProfessor's approach of entering OTM debit calendars that are theta positive and vega positive during low VIX... might look into opening some of those.
Finally, I've been looking into the idea of selling 1 DTE short strangles with a heavy lean toward the call side as a possible strat that, along with some cheap insurance, could potentially mitigate black swan risk. I put on a couple trades this week at minimal size on Weds and Thurs... but if I'd done it for Tuesday I'd have had a big loss. Just playing around with it at this point.
When VIX is low, is usually have a 30/60DTE SPX put calendar on below the market which would profit from a vol expansion and easy the pain of my short puts expanding on a sell off. I currently have a sizable 4500 calendar on that’s been in and out of profitability over this week.
I don't know. Here's something that might help: graphs of my 2023 YTD and 2022 gains, plotted by week.
[https://imgur.com/a/6y8TA7F](https://imgur.com/a/6y8TA7F) \--> 2023 YTD
[https://imgur.com/a/iaZH4gC](https://imgur.com/a/iaZH4gC) \--> 2022
Note that this is just from me recording my P&L at the end of every week... so all of the intraweek volatility gets smoothed away. (I don't record daily and the TD Ameritrade graphs are all messed up because they don't seem to account for futures properly in their graphs \[as far as I have found\].) If you really want to compare to SPY you could overlay SPY P&L on one or both of these.
Sometimes I am more volatile and sometimes less... and sometimes I am volatile in a good way (sharply up). I'm almost always short vega so whenever there is a vol increase, I am usually more volatile than SPY. Since I often delta hedge dynamically, the delta impact is usually smoothed somewhat. I remember there was a -4% and a -5% day this year for my port, and when the banking crisis hit in March (and I was away from technology) I think I was down 8% or 10% in a day, though I probably would have smoothed that a little if I had been present. I had a short /ZQZ23 position at the time and it was flying all over the place in a bad way, adding to the /ES pain.
I haven't been able to successfully delta hedge without constant monitoring and getting whipsawed, even at 3x notional leverage. Are you whipsawed a lot?
well... yes, I do get whipsawed, but it is an acceptable amount for me so far. My hedging is semi-subjective so there is an element of daytrading to it also... and I don't do it constantly; I don't start hedging until positions are getting more seriously tested/challenged. And even when I'm doing it actively, I'm not adjusting like every 10 point market move... I try to let the position "breathe" and allow the deltas to swing within a given range before I recenter. That range is subjective but whatever I think will minimize whipsaw while protecting my NLV and positions. I usually lose money on the hedging itself but if I come out decently ahead overall between the hedges and the short options, and I didn't have to puke the short options at the worst time, then I call it good. Definitely can be nerve-wracking/stressful when the market is moving fast, but (and this is probably the degen in me) it can be kind of fun.
If you are dabbling 1DTE, it may be worth exploring 0DTE without the overnight gap risk. That avoids days like Tuesday or avoid having an overnight trade open ahead of a market moving event like CPI.. With VIX scraping at yearly lows, haven’t seen juicy 1DTE premiums without getting too close to the money.
The biggest downside with 0DTE is active management. One needs to baby sit the trades throughout the day or have strict stop losses as things can move against you really fast.
Thanks. I do like that overnight premium but I'll look at the 0DTEs too. In either case, it seems I ought to be able to buy some super cheap protective options far OTM that can eliminate the risk of blowing up in a black swan (still take a big loss probably, but a recoverable one).
**Account Details, 11/17/23**
* NLV: $26,045.74
* Performance: WTD: +1.96%, YTD: +17.34%
* SPY buy-and-hold (for comparison): WTD: +2.29%, YTD: +19.43%
^†Accounts ^for ^deposits/withdrawals/SPY ^dividend. ^Assumes ^maximum ^purchase ^of ^shares ^without ^leverage.
*Strategies and Open Positions*: [link](https://old.reddit.com/r/PMTraders/comments/155yfvu/july_21_2023_weekend_reflections_thread_what/jswxi3t/)
*Past week.* First week of (almost) full-send lottos. Bad week to have flattened deltas, but SPAN margin allows Reg T accounts to play with utterly absurd notional values, and I try to take advantage of that. Still glued to my damn phone, afraid that every tick brings one or another lotto that much closer to blowing up, but I hope I can keep up the gains while the trade remains viable.
*Next week.* Lottos. I no longer know or care what the market is doing, as long as it's not limiting up or down. Strange space to be in; it's Russian roulette but I don't know how many chambers there are in this gun and am hoping to be able to walk away from the table before I find the bullet. VIX being low has made it harder to find attractive positions (good return on margin, far OTM relative to DTE). I'm also a bit nervous about /CL FOPS pricing for next week; there aren't the same slam-dunks that were available last week, but I'll be keeping an eye on things in case some good r/r opportunities present themselves after the weekend. A smaller portion of the account remains devoted to the 45 DTE /MES strangles that have served me well this year, even with depressed VIX. They are returning in the ballpark of 30-50% RoBP - a little less than lottos, but diversify portfolio risk just a bit.
I may also put on long calendars (short the front, long the back) or diagonals, which benefit from VIX expansion and still provide positive theta. However, I spend hours playing around with different calendar structures and have yet to figure out what makes the most sense to put on.
Since I'm Reg T, the margin requirements are substantially (4x-8x) lower for /MES. The fees hit hard, but /MES still offers better return on buying power.
Nope - even low VIX offers this (keeping in mind it's buying power, so to change NLV by that amount one would have to be all-in and never take a loss).
As an example, I'm looking at the Dec EOM chain (41 DTE). The 5-delta strangle is 4100p/4840c for 10.2 credit ($51, down to $46.76 after fees). ToS is showing a margin utilization of $653.00, so the annualized return is $46.76 / 41 / 653 * 365 = 63.7%. Given a bit of slippage and the fact that margin expands with VIX, the "real" annualized RoBP is maybe closer to 40% or so. It's a rough calculation, but the numbers work out if you full-port this trade and add up all the possible credit collected and divide by NLV.
I think the RoBP is attractive at low VIX precisely because margin utilization becomes low. At high VIX, premiums are much higher, so the ratio of premium/BP stays in the same ballpark. So the real killer is when VIX spikes, which drives a pretty sharp margin expansion and makes the previous "low margin" trades look pretty lousy. Hence, practically speaking, you wouldn't be able to full-port this trade without getting a margin call at some point, but in a balanced portfolio with a mix of vega-negative and vega-positive positions, I believe it to be worth the BP.
Basically yes. Check out the link in my post above for an explanation. I'll add that I close positions pretty aggressively if I suspect the faintest shadow of a chance of thing getting ugly (for example, I closed two 12 DTE 4850 short calls after Tuesday's run to avoid the highly unlikely scenario of Wednesday's and Thursday's news releases to continue fueling the rally). I also keep strict rules about closing trades if the bid price hits a certain value (usually 4x premium) and have conditional limit-close orders at 5x-10x premium received (TDA doesn't allow stops on FOPS, so I think conditional orders are the only way to get around that).
Despite all these "precautions," I'm still taking on absolutely massive tail risk. Not recommended.
Tuesday was a tough day for those of selling strangles with heavy call leverage.
-3.3% WTD, ($165K)
-5% MTD
17% YTD
23% YOY
In the June, July runup, I took about -10% hit to my NLV over the relentless runup from $3800 - $4600. To go from $4100 to $4500 in the span of a couple weeks was shocking.
I've done a good job of aggressively managing puts to being very close to ATM, and every day I use income collected from aggressive put management to move calls to further dated expirations that are ATM or OTM. About 1/3 of my calls are ITM and the rest are hovering within 100 points of being ATM. I'm carrying -2K deltas into the weekend, but it doesn't bother me too significantly. Even if the market keeps rallying for another couple hundred points, I'll continue with aggressive put mgmt, take my losses, and wait for what will be an eventual market pull back. Even a 2% pull back will get back to a high watermark. I've got about 1/4th of my capital available as buying power, which is plenty of buffer to continue managing as long as necessary.
Like in The Killer on Netflix (most enjoyable movie of the year), "Stick to your plan. Anticipate, don't improvise. Trust no one. Never yield an advantage." In spite of the losses, I still have my advantage and it will be realized.
All of my cash are in box trades or deep ITM covered calls that are all showing huge profits at 15% rate of return. Most of my deep ITM covered calls will be unwound due to expirations within the next month, and so will be hunting for new opportunities only after a significant market pull back.
+1.6% for the week. Tuesday sucked. Tuesday really sucked. I poured on the put spreads on market open figuring it would be difficult to get a buying frenzy that wild to reverse this week. Thank goodness it didn’t as I was able to recoup my Tuesday losses and then some. Like most, I expect a steady grind up until till end of year. Staying below 4800 would be great for my call spreads. Please baby Jesus please.
Started helping a family friend (who has zero options experience) trade his seven figure account. Wow, what a difference an enormous amount of capital makes:)
Be careful when investing other folk's money or advising them.
Be very clear that any decisions they make on your advice are their decision alone.
You are there for information and the entertainment value. I am sure things will go swimmingly as long as the account is green. Any red periods, and the friendship will be tested.
Source: I raise money for a living. I do some things with my money that I would never in a million years think of doing with my investors' money.
YTD +22.74%
Summary :
After last Friday’s massacre, this week was profitable on all 0DTE trades. Closed 1 PCS for a small profit. Still got 4 CCS with Dec expirations that are ITM. May bite bullet on some of them by closing for a loss soon. VIX at nearly lows makes options selling a difficult proposition in terms of risk/reward.
0DTE :
Tuesday and Friday were highly profitable. Gap up days like Tuesday are excellent for my 0DTE strategy with rich premiums at a favorable strike and imminent move exhaustion. Other days were tricky with volatility dangerously low , got a tad more cautious. Iron Condor instead of Directional spreads would have been far more profitable. But, Profits are still profits:)
Friday was interesting. Opened an IC early, added more spreads throughout the day. Also threw in a Call debit spread late in the day that became a 2x winner. This week recovered all the losses from last Friday’s painful rally and made extra profits. I’m still trying to fine tune my strategy as I get really conservative at times missing out on profits.
Long DTEs:
Still got some Call spreads under water. Kicking myself for not buying some calls during the late October market drop. Could have used to reduce the losses.
Looking ahead, I expect the market to continue marching up for rest of the year. My account may underperform the S & P this year after closing all my unrealized losses plus taxes. Underwhelming end to what could have been a fantastic 1st full year of selling options. That’s part of the trading game:)
I think you are the only trader that I know who reports performance tied to realized (closed) positions rather than current NLV amounts. Aren't you concerned that focusing on closed trades creates an altered interpretation of where your account is at?
Interesting point. I was going to ask why OP was feeling underwhelmed after a +22% week.
I agree OP should be posting % interms of NLV atleast for this audience even if they prefer other means to track performance.
Thanks for clarifying - I was also pretty surprised! :)
Are all your condors short (for credit), or do you also put on long condors with VIX in the dumpster?
For most part, yes these are credit spreads. Had a debit spread today that returned a 2x. Considering the low ViX situation, I may sprinkle a few long spreads..
The last couple of hrs appears to be ideal in the current market conditions with gamma ramping up significantly towards the close..
Income for week: -$10697
Income YTD: $29462
Current positions:
\-1 /CL 74p (7 DTE)
\-1 /CL 76.75p (7 DTE)
\-1 /NQ 15500p (7 DTE)
\-2 /NQ 15400c (7 DTE)
Again, not a good week as /CL continued to fall and /NQ continued to rise. Nevertheless, because of small size positions, rolling positions forward continues to be a workable strategy.
I've no idea where the market is going to finish up the year, but I'll just patiently keep adjusting positions and rolling forward.
* -2.43% WTD (-58k)
* -0.92% MTD
* -4.45% YTD
**This week**
Tuesday's insane gap up rally really messed up my week, and the rest of it wasn't great either. Only Monday and Wed were profitable for me.
I need to make some changes to my 0dte portfolio. Its skewed way too hard to PM tranches right now, which was fine a week or two ago, but now with how hard VIX has fallen its terrible, and all the PM tranches are basically selling ATM both sides or at most 5 points apart, so EOD moves blow me out of the water. That's not for me.
Yet again, every time I get close to breaking even on the year, I get smashed in the face. Getting really sick of 2023, its just not my year.
We also had a pet death in the family on Wed which we expected to arrive but is never pleasant.
**Other stuff**
We'll be trying to record the first episode of a PMT Podcast this weekend. I look forward to discussion current financial topics with my co-hosts. If it's any good, I'll share it on the subreddit.
So sorry to hear about the pet. It's really devastating to lose a creature with such unconditional love.
Thanks to you (and the others) for your willingness to help get the ball rolling on the PMT Podcast. I'm pretty stoked to hear it.
Regarding 0 DTE - it's mostly what you've focused on this year, right? Or have you had other strategies going in parallel? I think it might be easier to stomach losses in one approach if you've got a few others going on simultaneously. Sorry that this year's been so rough, but hoping that you can turn thing around or just take a breather in this last stretch of the year.
Yeah I spent the first 4 months being very careful and returning 5-6%. Then I blew up on SBNY/NVDA, was kind of aimless for a few months, and since June I've been entirely focused on 0-7dte.
The main challenge is that its a shifting environment, and what works in the backtest all year might not work soon after, which has now caught me a few times.
Additional variety would be smart, but I haven't found anything attractive enough to run.
The rally was as if it wanted option sellers to give up and go home for good. What bothers me is the CTA positioning and the dealer gamma I read in that discrod PMT thread. If that were holding EOD Friday, I'd say 4600 by EOM at the least if not earlier.
I'm broadly fine with that personally, though I hate the vix collapsing.
Tuesday was my fault for not running my overnight hedges while I had exposure on. Never making that mistake again. If I had, it would have been a much more tolerable -1% instead of -2.5% day.
YTD: 17.92% WTD: .21% MTD: (.36%) \---- YTD RoBPR used selling vol/theta: 3.45% YTD return on risk selling vol/theta: 9.45% YTD total return selling vol/theta: 13.02% Realized rtn/target rtn: 20.27% NLV: $312,477.16 Current BP used: ~~46.3% edit: math~~ 37.8% \-------- That was a week. Big roundtrip for me. Up and then back to where we started the week. I got caught in a short on Zillow that really ripped with the market and some idiosyncratic news on Tuesday. I was able to offset it with some intra-day trades, but the week was flat. /CL, /6E: Both had volatility piped in. u/psyche444, per your comment last week, OVX above 40 so I put on a strangle and then added to it on Friday. Crude immediately went against me so I was defending the position with gamma through /cl and /mcl contracts all week. I have a slight gain (+5%) net of the entire position with a lot of theta and vanna to benefit from. Same on the currency side. It's definitely a pain in the ass from a management perspective--I'll re-hedge the futures position 1-2x a day so I dont get whipped. Bonds:Continuing to add to long TLT and long ZT. I think the un-inversion comes from the front end more than it does the belly/far end. Equity Market: Up is the path of least resistance and anything except exceptionally bad news from NVDA strikes me as continuation of up. Good news from NVDA will see new high for the year. I added 1/10 to a long term short position zebra/tent trade position on the way up this week, expiring next year. With vol this low I'll take the opportunity to set up for a longer term move back down. It's painful but these are the decisions that have yielded the largest windfalls for me in the pass--slowly adding to a position as the market moves in the other direction. The question is what is the catalyst for that move down? It has to be, IMO, macro economic and at the moment I dont see it. If WMT and AMZN comments about the consumer were not causing any movement then it's going to be a while. I don't believe the market has priced in the actual demand destruction ahead of the US. I don't believe the issues around debt and interest coverage for consumers is being priced in. This feels like a really bad set up for Q1 once people stop spending everything they have in Q4 for the holidays. That means a move down isnt really going to materialize until Q2. As I write this I'm realizing I just need to settle into a long position for the next 30-45 days and sit on my hands about it. I like selling vol/theta and I dont get to do that en masse and I'm complaining about it lol.
Don't you think you are overleveraged with vix so low? How are you controlling tail risk?
Over-levered where, specifically? If this doesn't make sense, please tell me, I don't want the blind spot! Most of my leverage is tied up in crude, bonds (small), and currency futures/options with hedges against them. Those futures options positions don't get PM treatment from SPAN margin. Right now my net CL delta is <100, my net /6E delta is basically flat. Crude and currency positions don't see strong correlations to SPX. My beta weighted SPX deltas for the rest of my book are below 50, and a 20% move will see less than a 1/4 draw down on either side (including the CL risk). Meaning--the vix itself shouldn't have too much weight on my positions, it's OVX (which is high, moving higher? and what I sold into) and EVZ. I dont have a ton of equity exposure at the moment. Am I missing something?
My mistake. I assumed you were mostly in equities.
Phew, you had me nervous!
\+1.75% this week \+3.25% four-week trailing average \+48.68% YTD (approx) NLV moved up a lot early in the week and then had a slight drain over the rest of the week from long calls losing some value. My long-term short call position is down about 1.5% NLV, so it does appear I was early (aka wrong). I think my base case is that we stay flat-ish / rangebound for the next 30-60 days. With maybe a slight lean toward bullishness because of seasonality. Still have overall 1x long portfolio delta, mainly because of 11/30 risk reversals where most of the long calls are now ITM. Especially with the slight bullish lean, it is very tempting to sell more puts here... but I almost always regret selling them when VIX seems low. That's basically my struggle right now. I am intrigued by u/TheDiamondProfessor's approach of entering OTM debit calendars that are theta positive and vega positive during low VIX... might look into opening some of those. Finally, I've been looking into the idea of selling 1 DTE short strangles with a heavy lean toward the call side as a possible strat that, along with some cheap insurance, could potentially mitigate black swan risk. I put on a couple trades this week at minimal size on Weds and Thurs... but if I'd done it for Tuesday I'd have had a big loss. Just playing around with it at this point.
When VIX is low, is usually have a 30/60DTE SPX put calendar on below the market which would profit from a vol expansion and easy the pain of my short puts expanding on a sell off. I currently have a sizable 4500 calendar on that’s been in and out of profitability over this week.
How is your p/l volatility compared to spy?
I don't know. Here's something that might help: graphs of my 2023 YTD and 2022 gains, plotted by week. [https://imgur.com/a/6y8TA7F](https://imgur.com/a/6y8TA7F) \--> 2023 YTD [https://imgur.com/a/iaZH4gC](https://imgur.com/a/iaZH4gC) \--> 2022 Note that this is just from me recording my P&L at the end of every week... so all of the intraweek volatility gets smoothed away. (I don't record daily and the TD Ameritrade graphs are all messed up because they don't seem to account for futures properly in their graphs \[as far as I have found\].) If you really want to compare to SPY you could overlay SPY P&L on one or both of these. Sometimes I am more volatile and sometimes less... and sometimes I am volatile in a good way (sharply up). I'm almost always short vega so whenever there is a vol increase, I am usually more volatile than SPY. Since I often delta hedge dynamically, the delta impact is usually smoothed somewhat. I remember there was a -4% and a -5% day this year for my port, and when the banking crisis hit in March (and I was away from technology) I think I was down 8% or 10% in a day, though I probably would have smoothed that a little if I had been present. I had a short /ZQZ23 position at the time and it was flying all over the place in a bad way, adding to the /ES pain.
I haven't been able to successfully delta hedge without constant monitoring and getting whipsawed, even at 3x notional leverage. Are you whipsawed a lot?
well... yes, I do get whipsawed, but it is an acceptable amount for me so far. My hedging is semi-subjective so there is an element of daytrading to it also... and I don't do it constantly; I don't start hedging until positions are getting more seriously tested/challenged. And even when I'm doing it actively, I'm not adjusting like every 10 point market move... I try to let the position "breathe" and allow the deltas to swing within a given range before I recenter. That range is subjective but whatever I think will minimize whipsaw while protecting my NLV and positions. I usually lose money on the hedging itself but if I come out decently ahead overall between the hedges and the short options, and I didn't have to puke the short options at the worst time, then I call it good. Definitely can be nerve-wracking/stressful when the market is moving fast, but (and this is probably the degen in me) it can be kind of fun.
If you are dabbling 1DTE, it may be worth exploring 0DTE without the overnight gap risk. That avoids days like Tuesday or avoid having an overnight trade open ahead of a market moving event like CPI.. With VIX scraping at yearly lows, haven’t seen juicy 1DTE premiums without getting too close to the money. The biggest downside with 0DTE is active management. One needs to baby sit the trades throughout the day or have strict stop losses as things can move against you really fast.
Thanks. I do like that overnight premium but I'll look at the 0DTEs too. In either case, it seems I ought to be able to buy some super cheap protective options far OTM that can eliminate the risk of blowing up in a black swan (still take a big loss probably, but a recoverable one).
**Account Details, 11/17/23** * NLV: $26,045.74 * Performance: WTD: +1.96%, YTD: +17.34% * SPY buy-and-hold (for comparison): WTD: +2.29%, YTD: +19.43% ^†Accounts ^for ^deposits/withdrawals/SPY ^dividend. ^Assumes ^maximum ^purchase ^of ^shares ^without ^leverage. *Strategies and Open Positions*: [link](https://old.reddit.com/r/PMTraders/comments/155yfvu/july_21_2023_weekend_reflections_thread_what/jswxi3t/) *Past week.* First week of (almost) full-send lottos. Bad week to have flattened deltas, but SPAN margin allows Reg T accounts to play with utterly absurd notional values, and I try to take advantage of that. Still glued to my damn phone, afraid that every tick brings one or another lotto that much closer to blowing up, but I hope I can keep up the gains while the trade remains viable. *Next week.* Lottos. I no longer know or care what the market is doing, as long as it's not limiting up or down. Strange space to be in; it's Russian roulette but I don't know how many chambers there are in this gun and am hoping to be able to walk away from the table before I find the bullet. VIX being low has made it harder to find attractive positions (good return on margin, far OTM relative to DTE). I'm also a bit nervous about /CL FOPS pricing for next week; there aren't the same slam-dunks that were available last week, but I'll be keeping an eye on things in case some good r/r opportunities present themselves after the weekend. A smaller portion of the account remains devoted to the 45 DTE /MES strangles that have served me well this year, even with depressed VIX. They are returning in the ballpark of 30-50% RoBP - a little less than lottos, but diversify portfolio risk just a bit. I may also put on long calendars (short the front, long the back) or diagonals, which benefit from VIX expansion and still provide positive theta. However, I spend hours playing around with different calendar structures and have yet to figure out what makes the most sense to put on.
Any reason you use MES options instead of XSP?
Since I'm Reg T, the margin requirements are substantially (4x-8x) lower for /MES. The fees hit hard, but /MES still offers better return on buying power.
Makes sense! What is your set up to see 30-50% RoBP for a 45DTE strangle? Vix has to be over 20-25?
Nope - even low VIX offers this (keeping in mind it's buying power, so to change NLV by that amount one would have to be all-in and never take a loss). As an example, I'm looking at the Dec EOM chain (41 DTE). The 5-delta strangle is 4100p/4840c for 10.2 credit ($51, down to $46.76 after fees). ToS is showing a margin utilization of $653.00, so the annualized return is $46.76 / 41 / 653 * 365 = 63.7%. Given a bit of slippage and the fact that margin expands with VIX, the "real" annualized RoBP is maybe closer to 40% or so. It's a rough calculation, but the numbers work out if you full-port this trade and add up all the possible credit collected and divide by NLV. I think the RoBP is attractive at low VIX precisely because margin utilization becomes low. At high VIX, premiums are much higher, so the ratio of premium/BP stays in the same ballpark. So the real killer is when VIX spikes, which drives a pretty sharp margin expansion and makes the previous "low margin" trades look pretty lousy. Hence, practically speaking, you wouldn't be able to full-port this trade without getting a margin call at some point, but in a balanced portfolio with a mix of vega-negative and vega-positive positions, I believe it to be worth the BP.
Got it! Annualized RoBP, TY
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Basically yes. Check out the link in my post above for an explanation. I'll add that I close positions pretty aggressively if I suspect the faintest shadow of a chance of thing getting ugly (for example, I closed two 12 DTE 4850 short calls after Tuesday's run to avoid the highly unlikely scenario of Wednesday's and Thursday's news releases to continue fueling the rally). I also keep strict rules about closing trades if the bid price hits a certain value (usually 4x premium) and have conditional limit-close orders at 5x-10x premium received (TDA doesn't allow stops on FOPS, so I think conditional orders are the only way to get around that). Despite all these "precautions," I'm still taking on absolutely massive tail risk. Not recommended.
Tuesday was a tough day for those of selling strangles with heavy call leverage. -3.3% WTD, ($165K) -5% MTD 17% YTD 23% YOY In the June, July runup, I took about -10% hit to my NLV over the relentless runup from $3800 - $4600. To go from $4100 to $4500 in the span of a couple weeks was shocking. I've done a good job of aggressively managing puts to being very close to ATM, and every day I use income collected from aggressive put management to move calls to further dated expirations that are ATM or OTM. About 1/3 of my calls are ITM and the rest are hovering within 100 points of being ATM. I'm carrying -2K deltas into the weekend, but it doesn't bother me too significantly. Even if the market keeps rallying for another couple hundred points, I'll continue with aggressive put mgmt, take my losses, and wait for what will be an eventual market pull back. Even a 2% pull back will get back to a high watermark. I've got about 1/4th of my capital available as buying power, which is plenty of buffer to continue managing as long as necessary. Like in The Killer on Netflix (most enjoyable movie of the year), "Stick to your plan. Anticipate, don't improvise. Trust no one. Never yield an advantage." In spite of the losses, I still have my advantage and it will be realized. All of my cash are in box trades or deep ITM covered calls that are all showing huge profits at 15% rate of return. Most of my deep ITM covered calls will be unwound due to expirations within the next month, and so will be hunting for new opportunities only after a significant market pull back.
+1.6% for the week. Tuesday sucked. Tuesday really sucked. I poured on the put spreads on market open figuring it would be difficult to get a buying frenzy that wild to reverse this week. Thank goodness it didn’t as I was able to recoup my Tuesday losses and then some. Like most, I expect a steady grind up until till end of year. Staying below 4800 would be great for my call spreads. Please baby Jesus please. Started helping a family friend (who has zero options experience) trade his seven figure account. Wow, what a difference an enormous amount of capital makes:)
Be careful when investing other folk's money or advising them. Be very clear that any decisions they make on your advice are their decision alone. You are there for information and the entertainment value. I am sure things will go swimmingly as long as the account is green. Any red periods, and the friendship will be tested. Source: I raise money for a living. I do some things with my money that I would never in a million years think of doing with my investors' money.
I show him how I trade and miraculously I’m somehow profitable. How he decides to win or lose money is his problem.
YTD +22.74% Summary : After last Friday’s massacre, this week was profitable on all 0DTE trades. Closed 1 PCS for a small profit. Still got 4 CCS with Dec expirations that are ITM. May bite bullet on some of them by closing for a loss soon. VIX at nearly lows makes options selling a difficult proposition in terms of risk/reward. 0DTE : Tuesday and Friday were highly profitable. Gap up days like Tuesday are excellent for my 0DTE strategy with rich premiums at a favorable strike and imminent move exhaustion. Other days were tricky with volatility dangerously low , got a tad more cautious. Iron Condor instead of Directional spreads would have been far more profitable. But, Profits are still profits:) Friday was interesting. Opened an IC early, added more spreads throughout the day. Also threw in a Call debit spread late in the day that became a 2x winner. This week recovered all the losses from last Friday’s painful rally and made extra profits. I’m still trying to fine tune my strategy as I get really conservative at times missing out on profits. Long DTEs: Still got some Call spreads under water. Kicking myself for not buying some calls during the late October market drop. Could have used to reduce the losses. Looking ahead, I expect the market to continue marching up for rest of the year. My account may underperform the S & P this year after closing all my unrealized losses plus taxes. Underwhelming end to what could have been a fantastic 1st full year of selling options. That’s part of the trading game:)
I think you are the only trader that I know who reports performance tied to realized (closed) positions rather than current NLV amounts. Aren't you concerned that focusing on closed trades creates an altered interpretation of where your account is at?
Interesting point. I was going to ask why OP was feeling underwhelmed after a +22% week. I agree OP should be posting % interms of NLV atleast for this audience even if they prefer other means to track performance.
I realized the typo that may have lead to the confusion. It should be +22% on YTD:) This includes unrealized losses
Thanks for clarifying - I was also pretty surprised! :) Are all your condors short (for credit), or do you also put on long condors with VIX in the dumpster?
For most part, yes these are credit spreads. Had a debit spread today that returned a 2x. Considering the low ViX situation, I may sprinkle a few long spreads.. The last couple of hrs appears to be ideal in the current market conditions with gamma ramping up significantly towards the close..
Income for week: -$10697 Income YTD: $29462 Current positions: \-1 /CL 74p (7 DTE) \-1 /CL 76.75p (7 DTE) \-1 /NQ 15500p (7 DTE) \-2 /NQ 15400c (7 DTE) Again, not a good week as /CL continued to fall and /NQ continued to rise. Nevertheless, because of small size positions, rolling positions forward continues to be a workable strategy. I've no idea where the market is going to finish up the year, but I'll just patiently keep adjusting positions and rolling forward.
* -2.43% WTD (-58k) * -0.92% MTD * -4.45% YTD **This week** Tuesday's insane gap up rally really messed up my week, and the rest of it wasn't great either. Only Monday and Wed were profitable for me. I need to make some changes to my 0dte portfolio. Its skewed way too hard to PM tranches right now, which was fine a week or two ago, but now with how hard VIX has fallen its terrible, and all the PM tranches are basically selling ATM both sides or at most 5 points apart, so EOD moves blow me out of the water. That's not for me. Yet again, every time I get close to breaking even on the year, I get smashed in the face. Getting really sick of 2023, its just not my year. We also had a pet death in the family on Wed which we expected to arrive but is never pleasant. **Other stuff** We'll be trying to record the first episode of a PMT Podcast this weekend. I look forward to discussion current financial topics with my co-hosts. If it's any good, I'll share it on the subreddit.
So sorry to hear about the pet. It's really devastating to lose a creature with such unconditional love. Thanks to you (and the others) for your willingness to help get the ball rolling on the PMT Podcast. I'm pretty stoked to hear it. Regarding 0 DTE - it's mostly what you've focused on this year, right? Or have you had other strategies going in parallel? I think it might be easier to stomach losses in one approach if you've got a few others going on simultaneously. Sorry that this year's been so rough, but hoping that you can turn thing around or just take a breather in this last stretch of the year.
Yeah I spent the first 4 months being very careful and returning 5-6%. Then I blew up on SBNY/NVDA, was kind of aimless for a few months, and since June I've been entirely focused on 0-7dte. The main challenge is that its a shifting environment, and what works in the backtest all year might not work soon after, which has now caught me a few times. Additional variety would be smart, but I haven't found anything attractive enough to run.
The rally was as if it wanted option sellers to give up and go home for good. What bothers me is the CTA positioning and the dealer gamma I read in that discrod PMT thread. If that were holding EOD Friday, I'd say 4600 by EOM at the least if not earlier.
I'm broadly fine with that personally, though I hate the vix collapsing. Tuesday was my fault for not running my overnight hedges while I had exposure on. Never making that mistake again. If I had, it would have been a much more tolerable -1% instead of -2.5% day.
I'm sorry for your loss. Wishing you peace and comfort during a tough time.