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How is everyone handling the sell off?

Discussion in 'Options' started by tom, Aug 24, 2015.

  1. tom

    tom Administrator Staff Member

    I got nervous when I felt the market was heavy and my hedge put credit spread hit a loss of 2% of my portfolio so I got flat on Thursday near the close. I did put on a bullish back ratio on SPX near the close on Friday but I wanted to hedge for a down move so I sold 300 SPY to create a straddle type of trade. I closed that today for +$715 and I'm flat again. With the bid/ask spreads so wide, I'm likely going to wait to see where we go from here a day or two.

    BTW.. I was able to model the 300 short SPY shares in SPX by selling 30 SPX indexes :) Not perfect but pretty close.

    What are you doing?
  2. Kevin Lee

    Kevin Lee Well-Known Member

    Didn't do anything as the market rallied back after 30 mins or so. Crazy day. Like mini flash crash.

    Shows the resilience of M3. If I were trading other high gamma strategies, I probably would have been shaken out of my position in the morning, unless I started with huge negative delta.
  3. DavidF

    DavidF Well-Known Member

    As I wrote I fudge fingered an M3 trade in last 10 mins of Wed night (first mistake). In emotional reaction, sold some volatility to make up loss (2nd mistake). When market kept going down sold more volatility (3rd). Today I was short 20 /ES puts I´d sold for peanuts that were now worth 110 (or 55 since they´re /ES) on open. Didn´t even have hedge on (I normally short /ES). A few SPX puts too but they´re under control (had equivalent of 12 SPX puts, i.e, 20 ES and 2 SPX).

    Serendipity saved my account, broker was overloaded with margin calls and I didn´t have buying power to close trades, and in the meantime market reversed and I bought back puts for around 35.

    Embarrassing stuff, know it all in theory and had read all about it, but had never REALLY felt what it was like to be on wrong side of volatility. Went from trading to gambling.

    Still have an account and got a real-life lesson that will always stick with me. But to answer you´re original question Tom, not well.
    Last edited: Aug 24, 2015
  4. vega4mike

    vega4mike Well-Known Member

    Didn't like the action of the mkt on Friday, so closed all my positions, took a loss & went flat. With the futures in backwardation & the VIX trading above VXV ,didnt like mkt action, especially the spx. Glad i did, will wait for a few days, to see if some level of rationality returns.
  5. Trader G

    Trader G Well-Known Member

    I got out of my Sep m3 and didn't put on the Oct trade yet. Wish I could say that I saw all of this coming, but I have been trading scared for many months now. Watching the market this morning and listening to the market cast on TOS gave me chills and brought back the memories of the flash crash. I am just glad I was a spectator this time. I distinctly heard Ben saying there were sellers coming in and selling at 1831 on the emini. I think I might hold off on trading Oct until the dust settles. (or at least modify/drastically reduce my trade).

    Edit from 1830 to 1831
    Last edited: Aug 24, 2015
  6. Jonathan

    Jonathan Active Member

    not well...let my deltas get too high and thought i could manage around it. Position in a bad spot but i'll have to make an adjustment tomorrow. Weirdors go bad fast when deltas get too high!
  7. Meteor528

    Meteor528 Member

    The M3 is an amazing trade. My M3 had been up about 1/2 way to profit target on Wednesday. After Thursday's market action, I moved my Butterflies 40 points down between Thursday and Friday. When market gapped down today, I listened to John Locke and didn't do anything. Towards the end of today, I purchased a weekly OTM PUT to protect the downside which I plan on dumping as soon as it looks like the market is rebounding. The M3 is down some money, but still has legs to be profitable with a market rebound.
  8. Trader G

    Trader G Well-Known Member

    I will say this, I don't care what anyone says no one expected what happened yesterday at the open. Just like the flash crash. As income traders shooting for 3-10% return I think we sometimes lose sight of the risk (no matter how slight) our trades carry. That T+0 on the left side of your graph is real and unfortunately there will come a day when it comes in to play (I have been there many times) and there is no time to adjust. I go in to the weeklies to buy hedges/margin control just because of that 1 in a million chance they will come in handy.
    Jonathan likes this.
  9. Trader G

    Trader G Well-Known Member

    Just out of curiosity, is anyone trading with Option Elements? I know he does a lot of NDX and that market has bounced all over the place. Just curious how the trades fared, I got a notice that his webex was cancelled by SMB Options Tribe. I was hoping to hear his thoughts on the move and how he adjusted.
  10. LearPilot

    LearPilot Guest

    I am trading the SSS from JL with the Bear vs. Bull stategy. My bull got hammered on Thursday and started below my maximum loss exit point, but when the markets went back up during the day I was able to close it exactly at the max loss point. So basically a "normal" loss month of the strategy, nothing special, but if I had been close to the max loss exit point on Wednesday evening, it would have been much worse.
  11. Hugh

    Hugh Well-Known Member

    I feel like a bunny in the headlights! Took some pain on an ES condor/calendar combo, but I'm still in the game. I hope the market settles down and theta grinds backs some profit to cover the losses. Looks like we may get a rally based on Asian and European markets doing ok.
  12. Tps

    Tps Guest

    you mean the rally?
  13. N N

    N N Well-Known Member

    How many weeklies do you buy per M3 fly? Just curious from a position sizing aspect and what have been your take aways?

  14. Trader G

    Trader G Well-Known Member

    For me I look at the graph and determine what max % of my portfolio I am comfortable losing if we have a big event. The nice thing about weeklies is that you can control that risk with a very small amount of backspreads/naked puts etc. Of course they have to be replaced but my hope is that they never become useful.
  15. N N

    N N Well-Known Member

    Is there a max on any given cycle you would spend on insurance? On any given day we can have a 50% sell-off (flash crash, '87, or a serious terrorist attack) If you hedge the whole position wouldn't it cost 5% etc?

    Thanks again! More I think about it, more this seems the right way to go. If you average 5% monthly or even 3%, makes sense to spend 1% per month to reduce Draw Down by say 50%....
  16. Trader G

    Trader G Well-Known Member

    Keep in mind that the nature of the main trade itself is hedged (fly) so you are looking at the tail risk. Just looking at Oct 1 puts, you can get an 1100 for $350 and that will defend a lot of flys. Verticals/backspreads are even cheaper. I think a little bit differently on sizing my trades based on protection. So instead of shooting for 5% I would rather shoot for 8-9% and spend 1-2% on insurance along the way. Everyone has a different philosophy though, I have been over cautious this whole year so I have definitely sacrificed some returns for safety.
    Georges likes this.
  17. Georges

    Georges Well-Known Member

    The way you shoot for 8-9% in place of 5% and spend 1-2% on Insurance.
    You manage your positions some days longer, closer to expiration? To when you have reached that higher profit target?
  18. Trader G

    Trader G Well-Known Member

    That is what I try to do. I haven't mastered trading too close to expiration yet and how the trade looks makes a big difference on how long I will hold it. Market conditions will also determine how long I hold it. still a work in progress.
  19. Georges

    Georges Well-Known Member

    Trader G,
    Right, I agree.
    Thank You
  20. johnyoga

    johnyoga Guest

    I am long undervalued puts. My portfolio delta is -100.


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