Tuesday, June 15, 2010

Trying to be an inventory Manager...

So I am trying to look at my account as a warehouse with tons of inventory. So today I added a few Calendars as well as a few put spreads. What I did is added them as simulated positions to see what the overall effect was on my portfolio with respect to my risk profile. Below you will see a screen shot of all the options I am holding as well as the overall risk profile of the entire portfolio.

With the below position statement one thing I want to draw your attention to is the BP effect. With all of these positions it is only requiring $400 of capital. This is kind of amazing to me and I feel so stupid for not realizing this before. I think a lot of time we trade so one dimensionally. But what I am learning is you can not only widen out your range of profitability but you can also significantly reduce your capital outlay.  I am really starting to see a much bigger world with my small $17,000 account. I have a profitability range from 99.35 to 114.70 and am only putting up $400 for that range..

As you can see from above, if we really start testing the 115 level I will need to add some more exposure to the long side to adjust my risk to the upside.


  1. I did have a stupid mistake when I was adding the positions. I bought the 110 put calendar for July/August but at the same time bought the 110/105 July put spread not realizing that in the calendar I was selling the July 110 puts and in the vertical I was buying them.

    The reason I did not notice is that I added them to the risk profile and was only looking at it in aggregate. So lesson learned I spent an extra $4 in commissions and gave up a little in the bid/ask spread. Just when you think you are done making stupid mistakes.

    It happens!

  2. I feel like I have a nice core position now and really do not feel the need to add much to it until we get to the extremes which for me would be 115 on the upside and 105 on the downside for the SPY.

    At these levels I would like to possible sell some more pemium to get more postive theta. I would possible be interested in buying an unbalnced butterfly if we trade up to 115, I was looking at the 114/115/118 and you can buy it at a credit of 0.32 vs normally a butterfly is put on for a debit. I am not saying I would do this particular butterfly but I would look at a similiar idea.

    I will tell you after the traders expo and just briefly cracking open that book from Dan, something in me just clicked and I am thinking about my account in a whole new light.

  3. I had a similar experience, I started to realize that I knew more than I thought and that putting the pieces together wasn't going to be that hard. I just finished my mentor session for today and feel much more comfortable on how to implement a balanced portfolio, and how to get it back in balance should things get out of whack. It makes position sizing easier to implement as well. Now it's just time to kind of get started, stay small and learn from mistakes while I absorb what I'm doing.