Adjustment of both April and May Positions

       After a huge rally this week, I was forced to adjust my April position on Tuesday, March 29, because of positive Vega and negative Theta values. Currently, the trade is only 17 days until expiration so I plan on taking it out within the next couple of trading days, most likely early next week after gaining the buildup of Theta over the weekend. In order to fix the negative and positive Theta and Vega values, I had to both move up my butterfly and add verticals. When I checked the position, it was at 106 Vega, too high a quantity to lower with verticals. I had to buy a new butterfly at 1070 since the market is at 1109 and sell my old butterfly. Once I did this, there was too much negative Delta (around -260) so I had to add 5 verticals at 1090-1050. The position after the adjustment has -67 Delta, 285 Theta. and -480 Vega values. Today, Thursday, I had to adjust the position again because of too much negative Delta outside of the tent. The limit is -50 outside and -100 inside but the position had -134 outside which is not good. I had to add 6 more verticals at the same 1090-1050 spread and in doing so was able to reduce the negative Delta values to -34. The current position is at $280 profit.

The risk profile of the April position can be seen below:

        Now on to the May position which needed to be adjusted on Wednesday. This position did not have values as extreme as the April position since I just put it on but the Vega went slightly positive on Wednesday which I needed to adjust. I added a single vertical at a 1090-1060 spread to make the Vega negative again. After adjustment, the Vega value is -16, the Delta value is 0 and the Theta value is 22. Today, I moved the butterfly up from 1050 to 1070 because the position had positive Vega again and the Delta value starting to become positive. The current position after all adjustments has -190 Vega, -14.4 Delta, and 49 Theta and is down $333.

The risk profile graph of the May position can be found below:

Putting on May Position

 
       Yesterday, I put on my May position at 57 days to expiration. The market was at 1079 from Thursday since the markets were closed on Friday. I put on my butterfly at 1050, about 30 points below the current market position. I was debating putting it at 1060 but I would not have the correct amount of negative Delta from that butterfly causing me to buy a closer to the money call, a position that would most likely have negative repercussions as the trade continues. The butterfly gave me about -90 of Delta which caused me to buy a call that was at 85 Delta at 990. The current position (not including the market movement of today) has a Delta value of -5.08, a Theta value of 53.96 and a Vega value of -260.9. 

        My April position still looks good. It is up about $200 currently which is not that significant because it is only 22 days until expiration. The minimal gain shows how volatile the market was over the span of the trade and how many times I had to adjust it, never giving the t + 0 line a chance to build up. I will keep posting as both trades continue!

Adjustment of April Position

     Because of the market rising so consistently over the past few days, the position started to accumulate lots of negative Delta and the Vega value became positive. Currently, the position without any adjustment has -83 Delta, 115 Vega, and only 22 Theta. The market is outside of the tent so I had to add verticals since the negative Delta has surpassed the limit. I added four verticals to the position at 1080 and 1050 (the ones I bought at 1050 were the ones I had sold in the previous adjustment and doing this would be helpful in a real trade because it decreases execution costs) which helped to lower the negative Delta value (made it more positive) and decrease the Vega value. With the adjustments, the Delta value is -17.76, the Vega value is -11.69, and the Theta value is 58.04. The position is currently down $232 which is a big jump from the $1200 it was up only five days ago.

The current risk profile graph is pictured below:

Adding Verticals to April Position

           Today, I switched back to OptionVue to conduct my trades on. Surprisingly, as I went into the BackTrader mode and put in the position as I had before, I saw very different Greeks and would have likely not put on the same position (the Delta value was around -17 which is too much negative Delta to start off a position). Noting this, I continued to simulate the position as I had over the past two weeks and I adjusted the position again.

           I made this adjustment because the market is currently sitting outside of my tent but the position has an overall Delta value of -75. Because the limit for the position outside of the tent is -50, I had to add verticals. I sold three calls at 1050 and bought three at 1030 in order to make the overall Delta -49. I did not want to add too much positive Delta because the market could always reverse and if it does so, not only would the negative Vega value hurt the position but the Delta would start to also. Currently, the Theta value is 98.9, the Vega value is -170.9 (with the addition of the verticals) and the Gamma value is -0.64 (also something to watch, especially as the trade approaches expiration).


Of course the risk profile graphs are also going to be from OptionVue also.

Moving the Butterfly

         Over the weekend, because of the continuous bullish movement of the market, I had to adjust my position. The main reason was because my Vega value became positive, so in order to change it back to negative, I moved the butterfly from 1010 to 1040. The position I had to remove I took a loss. At the time, I was down about $950 but now the position is down about $1,367. While this may seem like a large loss after only a few days of implementing the position, I am not worried. The market has been bullish for the past two weeks and has risen 16% in only 16 days, a trend that is incredible. My position is ready for the market to retrace a percent or two but if it opens 3-4% down tomorrow, I may need to adjust the position again.

        Currently, the Greeks are all within their limits. The Delta value is -25.8, the Theta value is 48.8 (which will continue to build) and the Vega value is -55.7, all of which as suitable for the position.
Below is a picture of the current position and t + 0 line. I hope you all are enjoying this blog and don't forget to leave any questions or concerns in the comments.

Starting the Blog Again

         Hello Again! To start off, I want to apologize for being so quiet on the blog over the past few months. Over the next few weeks, I plan on restarting my updates continuing to put on live 'fake' trades. I will try to keep up to date while posting to the best of my ability but it is possible that I will miss an adjustment or two if I am busy. One thing to note is that I am now putting on my positions on the Think or Swim platform rather than OptionVue. This should not affect anything greatly but be ready for different colored charts.

       Yesterday, I put on a butterfly hedged with a call, just like I had been doing before. The butterfly was bought for the April expiration date which was 45 days but shouldn't be a major issue. I bought the butterfly at the 1010 strike price and my wings (remember they are 50 points wide) are located at 1060 and 960. The Delta of the butterfly came out to be about -76 so I bought a call with a Delta value of 70. Currently, even though the market is still fluctuating, the values of the Delta for the butterfly and the call are -90.12 and 80.56 respectively. The current position is down about $228, probably because of the 1.5% rally today right after I put on my position.

I am excited to continue doing this blog and am ready to continue expanding my knowledge of the options market!