I am feeling very fortunate. This market is a very tricky place. However, I think by breaking below 1373 on the SPX friday, and then retesing that level again before failing today, the market has tipped it’s hand. We didn’t fall into oblivion today, however it does feel as though it is just a matter of time.
I exited all but 10 of my once 680 spreads in PM for .18, as well as make some very nice adjustments to my IWM position. I exited some of my PM trade and took a 40% loss on one of my legs. In doing so, I am now sitting on 79% cash, and that feels pretty good. Each of the past 6 sessions I am seeing profit, and now that I have pulled 10% of my acct off the table and locked it the gains, I am pleased.
A few of my calendar positions which are holding nice gains, and will benefit if the underlying declines are MFE, UST. Other positions which will benefit from a decline in prices are AEE, and CHTT.
I am sitting on a very balanced portfolio. My position greeks (weighted to the SPX) are:
Delta: 12.2 (I want to create some negative bias by wednesday)
Gamma: -1.3 (this has been as high as 1200 prior to last expiration, I would like to increase this prior to a big down move)
Theta : 195 (I would like to have more, but I am still cautious of volatility here)
Vega: 780 (I would like to boost this as well, as I believe we will be seeing a rise in Volatility very soon).
This market is going to get CRAZYYY. Are you ready to go for a ride?
PM: dec/jan 50c for .17 and .18. I exited 5 units. I only hold on to a 10 lot. I may just sit on this for awhile since the 50c PM in OTM. The underlying dropped 2% today and is down 8% in the past week. I would pick up more if the opportunity presented itself
KO – I exited 6 of 12 units of the July/Aug 60p calendar for .16. This was disappointing, but it was according to plan. I have enough positive delta exposure with the 57.5p calendar. Perhaps more than I should, with the current state of the index charts. I am lightening, I may lighten more if the opportunity presents itself.
SPY – bought 1 more unit of the June 133/135/137p butterfly for .25. This neutral position is part of a double butterfly I put on near the close of Friday’s session. This is a 8:1 reward to risk (less commission). I would like to find a trade which will give me more negative delta exposure. Perhaps a Credit spread play.
IWM – Rolled remainder of June 71c to July 71c for .80 and .82.
And added 3 units of Jun08 quarterly/Aug 73c calendar for 1.34. I bought this with the IWM @ 73.80, Which offered some mildly bearish exposure. I chose this for several reasons. The IWM has NOT broken its uptrend. The front month Volatility was close to the back month (1.2% difference), and I picked up an edge on the trade. The mid price was 1.37, and I picked it up for 1.34. This is a piece of a larger position.
Current IWM position (calendars)I have 5x @ 71c, 2x @ 73c, 1x @ 75c, 2x @ 76c. Each combination spread has a very neutral delta of -.37, Theta= 8.6, and Vega 41. I have several of these across 3 different accts. The breakevens are 69 and 77, 1.2 standard deviations from the current price. The position is perfect for the status quo.
EWZ – 1 unit of Sept 90/100c for 4.95 with the underlying @ 94.52. I have a defined stop loss of .45 on the spread, profit target of 107.80 by Aug 4.
This chart is very interesting. As I look it over, this is my thought:
1) Hitting the 50% retracement (SPY 135.2) is a foregone conclusion. And I believe the 133 level is a very high probability happening too.
2) We have been having alternate weeks of strength and weakness. I think we have a scary tuesday and wednesday, and by week’s end the market moves back up at a higher level than where tuesday closes.
3) Within a few weeks (perhaps July 4th ($150 oil spike forecast)), seek the primary uptrend line. Won’t that be a thill…
How do I play this? I think we see some heavy selling, i which I will buy, and hedge for an upside move, then I would like to see a strong upward retracement and sell into it near the 1390/1400 level. I am mid-term very bearish here. My current positions are ready for this increased Volatility (except for KO).