Thursday, June 17, 2010

Added some more inventory...

Update 6-22-10:

So since this post I added about 10 more 116/114/98/100 Iron Condors for about 0.79 credit per Iron Condor. I also took off my short 105 puts. I contemplated taking them off yesterday when I could by them back for a third of their value but I hesitated and bought them back today for about 80% of their value. I wanted to position my portfolio to profit even more on the downside and these were in the way. One thing I am learning about having a bunch of inventory on is that when you have some extreme moves it give you an opportunity to take some short premium off that has moved in your favor. For me this makes sense because by taking the short premium off from the short puts I allow some of my other purchased premium to work in my favor on a move to the downside because it is not being offset by the short premium that rises in value on a down move. It also alows my short premium that I sold on the higher end of the range I identified to have a larger impact on my P&L. But at some point it would make since on a large enough move to the downside to take off some short premium. Two such positions that I am looking at taking off is the ratio spread that I sold (short 20 118 call contracts, long 10 119 call contracts @ .46 credit) that today is trading at 0.16. I would take this completly off around 0.05 - 0.10. I am also looking to sell my 116/117/120 unblanced butterfly's that I actually put on for a 0.14 credit and today is trading around -.02. I actually tried to get out of this position today but did not get filled. I will try again tomorrow. There was about a $0.08 spread and I was not willing to give up more than the mark at 0.02.

Anyways here is a snapshot of my current SPY position:

I still have heavy risk to the upside that I will make adjustments as neccessary. But I am still more concerned with the downside. But by removing those two positons I mentioned above that would cut my upside risk in half from where it is now.

Ok so I have added a little more inventory and I beleive that I have my July portfolio built out and I do not plan to make any new trades as long as we stay within my range of profitability. As you will see I am profitable between 99 and 118 on the SPY. My largest risk is to the upside and I am okay with this. I am more scared of downside moves which I have very little exposure to once my 99ish breakeven is hit. I made another bone head mistake today, I basically put in two orders where I was buying and selling the same strike. So I really need to build in some kind of review process before I shoot my orders off. I also noticed that it was easier to get filled with smaller orders then trying to send them all off at once. I increased my margin requirment by a factor of 10 by adding these positions, but it also bought me an extra 4 points to my profitability zone.

The one thing that I was not paying much attention too was the commissions. So I have 128 contracts on which means I really need to make $256 just to break even on the commission plus the bone head mistakes brings it to $276.

So lets look at my profitability areas with commission considered.

I make money after commission in the following areas:

102.71 - 114.77 (I make anywhere from $270 - $840 in this area before commissions, after commission it is $0 - $570)

114.78 - 116.26 (I make anywhere from -$150 - $270 in this area before commissions, after commisisons is -$470 - $0)

116.27 -118 (I make anywhere from $270-$1500 in this area before commissions, after commission is $0 - $1,230)

So this is something I really need to remember to keep in mind next time as well as making sure I am not overlapping strikes, there is no reason to waist money on needless commissions.

1 comment:

  1. Sounds like you're doing inventory mgmt. Not quite trading delta neutral but similar, you're altering your exposure as the market changes. I don't have enough positions on yet that this comes in to play for me.