Handling recent Kevlar Performance

Discussion in 'General Discussion' started by maxtodorov, Mar 1, 2017.

  1. maxtodorov

    maxtodorov Well-Known Member

    I am just wondering how some of you handling recent Kevlar Performance Psychologically.
    I am recent subscriber (November), and recent draw-downs just psychologically are messing with me.
    I feel, I jumped onto the service at the worst possible time.
    I know if I stop, most likely the market will slow down and Kevlar will become profitable trade again.....
    Just venting......
  2. Andreas

    Andreas Member

    Same to me. I signed up and started with the March trade. The same happened to me with the Roadtrip, my first trades produced a loss because of the brexit. But I'm glad that I didn't cancel, because the rest of the year it made good money and I learned a lot. So if I think about the latest kevlar performance I just remember how it was with the Roadtrip and hope that at some point the uptrend stops and we make good money with the Kevlar for the rest of the year.

    In Germany we would say "Augen zu und durch!"
  3. TOPS

    TOPS Member

    the recent performance data does not show any draw downs. Is that data misleading?
  4. Andreas

    Andreas Member

    I don't think so. The March trade is still open.
  5. maxtodorov

    maxtodorov Well-Known Member

    Data is accurate as posted.
    Just for some of us, who joined in November, (December would be first trade), so you would start with a looser. But this is NOT an ATM, so losses happen.
    The MAR and APR trades are not posted yet, but so far taking a beating from the raging BULL.
    So for me, considering market overall has been "crashing up" the trading portfolio is down.
    I fully understand that there are no grantees, and draw downs will happen. Just psychologically a bit hard :).

  6. Gabor Maly

    Gabor Maly Well-Known Member

    Max stopping now trading the Kevlar would be an emotional decision. For sure it is hard, and it is OK to be frustrated about it....for a day or two. If you backtest the heck out of your startegy, Kevlar, Road trip, etc you will know that they have an edge over the long run by stopping here and there that edge is lost. The crash up since last Nov is frustrating but it is nothing compared to challenges that a 2008 melt down would throw at us.
    kevins and maxtodorov like this.
  7. maxtodorov

    maxtodorov Well-Known Member

    Yes. just needed to hear someone say this. :)
  8. Scott Slivnik

    Scott Slivnik Well-Known Member

    February was a frustrating month for sure. I do not trade the Kevlar but do trade the M3 on SPX which is a similar structure. I converted a M3 opened on Feb 8th in the April 7th expiration to a BWB today. I closed the long call and closed butterflies to cut the delta to zero. It now looks like a Road Trip trade. It is at $-800 P&L. The trade cannot lose anymore if the market continues to rally and can recover the loss if time passes and the market falls. I decided to convert the trade because:

    1. I have been in the trade for nearly a month.
    2. The theta was near zero and the vega was positive so rolling butterflies was a must to continue as is.
    3. The delta of the shorts closest to ATM was low at only 13. This indicated to me that the entire structure needed to be rolled up rather than a portion of the butterflies to continue as is.

    Rolling up the entire structure is the same result as closing a trade and opening a new one. Would I open a new trade at 38 DTE? NO! I decided to accept the $-800 loss but leave a portion of the trade open to have an opportunity to make the money back.

    Finally, my point is... Do not overstay your welcome in trades as that is an easy way to turn a small loss into a big loss.

    Losses will happen so do not get discouraged.
    Murphy Tan likes this.
  9. Larry

    Larry Active Member

    I have been following the kevlar since the service was opened, around october of 2015. 2016, the kevlar, was by far the most profitable (as a % of margin) of any of the strategies that I trade. No doubt, the past couple have been a challenge, as Jim has mentioned many times over the past +year, the worst market for this trade is a black swan, second worst is a grind up, and the past few months have been more than a grind, more like parabolic. I did go long the xiv back in november but not at the suggested % compared to the kevlar, wish I had. When the opportunity presents itself, I plan to go with the suggested mix of a 50% allocation to the VolV trade. I'm not giving up on the march trade yet, but time is against us.
    maxtodorov likes this.
  10. PK

    PK Well-Known Member

    I am happy to hear that I am not alone with my inability to adapt to the up-trumping market after the US election. In the past, I would have stopped trading my losing strategies and started another one. I have gone through this cycle several times and you can imagine the result. A disaster. So I agree that the most important thing with trading a strategy that statistically makes money is to stick with it. Another good medicine against frustration in markets that are not favorable for one type of strategy could be to trade in parallel on or two complementary strategies. I am currently testing a simple combination of Road Trips and put credit spreads. When the market trends up, I shift half of my capital to put credit spreads. In addition, when volatility is contracting, I trade a few long positions in SVXY with an approach that is, though probably much less sophisticated, similar to the VolVantage strategy. The major problem for me has always been that it does not take much to convince me that the market goes down, but I usually react too late when the market is breaking out to the upside and initiating an up-trend. The problem here is what one believes. The best medicine is to stop thinking too much what the market might do and follow the trading plan based on what the market is actually doing, based on technical indicators and price movements you can objectively quantify. I am still struggling to trade this way, but since I have seriously started to make efforts in this direction, my returns have become substantially more stable.
    Rtb, vega4mike and Timo like this.
  11. Rtb

    Rtb Well-Known Member

    Max if you are finding the drawdowns hard to deal with. I would cut your position size down so its not such an issue. When the market finishes this crazy trend upwards and the Kevlar starts to perform well again, you will build up profits and then you can increase your position size. Its alot easier to deal with drawdowns when you losing previous profits rather than starting capital. I like PK point from the above post "The most important thing with trading a strategy that statistically makes money is to stick with it" Until you can stick with a system through the tough times you will never make money in the markets as there's no Holy Grail.
    maxtodorov likes this.
  12. PK

    PK Well-Known Member

    Rtb mentioned another important point. How you experience your losses depends a lot on its impact on your economic situation. The less experience you have, the more important it is to trade small. For me, one of the most significant steps forward on the long and winding road to become a profitable trader has been to cut down my capital at risk in each trade to a level that allowed me to feel proud about losses that happened despite having done a good job in executing a trade. And I am still following up my closed positions by classifying them into five categories on a range from excellent to catastrophic. And it may happen that I classify a losing trade as excellent because I have followed my rules and defended the position according to my plan; and some of my big winners are classified as catastrophic because I made money the casino-style.
    Hllbnt, Murphy Tan and Paul Demers like this.
  13. maxtodorov

    maxtodorov Well-Known Member

    Agree. I only have 10% of my total portfolio allocated to Kevlar. Just poor/unlucky timing on getting onto the strategy. I have recently moved more to cash, so daily fluctuation of NetLiq is highly impacted by Kevlar. I am sticking to the strategy, just needed to find an audience to "cry". Everyone around me is happy as a pig, with 15% gain from index funds. So I am "using" you guys as free therapy. :)
  14. Murphy Tan

    Murphy Tan Well-Known Member

    Hi Maxtodorov, I'm a new Kevlar trader for 2 months and yes the March trade was indeed very difficult and losing almost all the time until today. I didn't follow exactly Jim's adjustments for these reasons 1)I'm using iron butterflies 2) I always analysed his trade adjustment before adjusting the next day 3) whenever I don't agree with his greeks.

    Despite my difficult start, I learned a lot from the Kevlar's philosophies and Jim's thought behind the trade. So far my biggest problem is when the VIX increased despite the SPX's stock rise during last week. The vega hedge I was expecting didn't work and my trade took a fairly heavy beating.

    I suppose no trade is invincible.:)

  15. JoeLeTrader

    JoeLeTrader Member

    Hi Maxtorov,
    if its any comfort to you, you are not alone :)

    I started the service in Dec and watch the trades in OV which I align with may account. I set up a new account for each trade in OV with planned capital as initial investment. And based on OV calculation I got the following results:
    Dec -9.3 %, Jan - 5.9 %, Feb +0.4 %, March (open) -7.5 %, April (open) +0.1 %.

    To be honest part of the bad performance is on my part - I made execution mistakes and one time I missed an adjustment completely in a fast moving market. Dec I had to close earlier.
    Part is pricing too - very rarely I got the prices that Jim gets. Not so much in the initial trade but in case of adjustments - you really need to do them in time, meaning: directly when the alert comes out - otherwise price can move away a lot.

    Its still a great learning experience though to watch Jim explain every adjustment in great detail. And I am sure that there will come better times for the strategy again which keeps me going.
    Last edited: Mar 5, 2017
  16. Mark Joseph

    Mark Joseph Guest

    Here is an interesting paper by Andrew Falde at SMB on combining strategies to smooth out the equity curve:
    PK and Murphy Tan like this.
  17. Mark Joseph

    Mark Joseph Guest

    I believe this is known as "trading the equity curve". (That is, stopping actual trading or reducing size when a system is in a drawdown and then resuming real trading when the system starts performing again. ) At first glance this seems intuitive and reasonable. But if you look again, it is based on a couple of fallacies. First, you can never know if the next trade will win or lose or if the market is done trending. Second, each trade is generally independent of the one before it (or at least close to independent.)
    I was intrigued by this idea a few years ago and spent a bit of time coding to test it in Easy Language on various non-options systems. The general results confirmed the second part of your post: if you have a system with an edge your best course of action is to take the next trade, regardless of your hunches or emotions. Trading the equity curve always underperformed the system traded without interruption. My two cents.
    PK and Murphy Tan like this.
  18. PK

    PK Well-Known Member

    Thanks a lot for sharing this interesting material and insightful comments !
  19. Murphy Tan

    Murphy Tan Well-Known Member

    Hi Mark, thanks for sharing this with us! It made me realised that Kevlar does have its strengths despite the relatively hostile market of late to this trade. It might be better for us to hedge the upside using other asset classes such long XIV or SPY rather than modifying the Kevlar system which I was planning to do.

  20. Mark Joseph

    Mark Joseph Guest

    That guy, Falde is a smart guy and has done his research!

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