Start of September Position

       On Friday, I put on my September position. Generally, I like to wait until the market moves significantly up or down before I put the position on. This causes the butterflies to have better pricing. Since the market ended at 1,225 on Friday, I placed my butterflies at 1,200. Like always, the butterfly has 50 point wide wingspan so the wing are located at 1,250 and 1,150. The call I put on in order to start the position with -5 Delta was an 1,140 call. My Theta is 36 and my Vega is -342.

Closing the Position

       After the markets fell yesterday, they entered the tent of my butterfly giving me the most profit. It has been brought to my attention that when I last updated the position, I did not use the proper rules of the M3 and the $4,580 can be regarded as a fluke since I would have only made money if the market had gone down which it did. The rule I did not follow was to keep my t + 0 line flat so that no matter which way the market goes there will be no severe losses. Since I did not adjust it in this manner and only fixed my Delta value, the t + 0 and risk profile curved down in front of the tent of the butterfly. I apologize for this mistake but am still satisfied with the return. I will be putting on the September position on Monday.

    After the markets rallied up over the past few days, I had to move my butterflies forward. Not knowing if I have stated it before, I move my butterflies forward when the market is ten points over my upper wing. Before I moved them, I had ten 1210 butterflies but the market closed at 1273 which is more than ten points above 1260 (50 point wide wingspans). Before I moved them, my Theta was negative and my Vega was positive but was fixed when I adjusted the position. My current Greek values are Delta: -95, Theta: 157, Vega: -639, Gamma: 0.13. I am currently up $610.

 

August M3 Update

    After the rise in the market on Friday to 1,252 my position still has good Greek values and the market falls just outside of the upper wing of my butterfly. Currently, I am down $540 but since all my Greeks are within the limit I have set for them, I don't need to adjust the position. Even though I stated that I was not going to update the blog if I didn't change the position in the first post, I decided it was better if i posted constant updates.

Adjustment after Greece Declines Financial Aid

     After the 1% drop in the markets yesterday caused by Greece declining the financial offers made by the European countries, I adjusted my position. The Gamma trend was very risky since my butterfly was in front of the market and my Delta value went over my limit of 50 as well.

     Once I moved my butterfly back from 1250 to 1210, the value of my Greeks changed as well. The Delta of the position went from 60 to 7 (a much more comfortable level). The Theta decreased, but will rise steadily throughout the course of the trade so its nothing to worry about. The Vega of the position became less negative but like the Theta, the position will continue to accumulate more negative Vega. The Gamma also showed a decrease from -1.9 to -0.4 so the Gamma trend is less of a concern. The t + 0 line is now flat and and the market is currently in the upper part of my butterfly.