Moving the Butterfly Forward (May Position)

        I apologize for not updating sooner but I have been busy with school. On Friday, I had to add verticals because the position Delta surpassed the allotted -50. I put the spread at 1120 and 1110 which brought the Delta back to within limits. Over the weekend, I had to move the remaining butterflies forward from the original 1070 position because the Vega became positive but the rest of the Greeks still fine, making it not possible to put in verticals. I moved the rest of the butterflies up to 1110 but doing so made the Delta -60 so I had to add verticals in order to bring it back to the limits. I added four verticals from 1120 and 1100. The Greeks are currently as follows: Delta value is -63 (this is fine because the market is under the tent and -100 is allowed in this area), Theta is 170 (notice this is starting to build up since there are only 25 days until expiration), and the Vega value is -370.

The current risk profile looks like this:

May Position Update

           After a few days of calm waters, the position finally encountered a storm. With the market up two percent today, the Vega became positive and I had no choice but the adjust the position. Because the Vega was only positive eight, instead of moving the whole 10 butterflies, I only pushed forward five. This is a technique I learned over the weekend while backtesting in a very volatile market. If the market continues to jump up and down constantly, it would be safer to move up part of the butterfly position and suffer minor losses instead of major ones. My original 10 butterflies were at 1070 and with the market currently at 1130, it was imperative that I adjusted. Currently, I have five butterflies at the original strike price and five butterflies at 1100. With just the moving of the butterflies, the t + 0 line began to sag in the area between the butterfly and the call so I had to add a vertical in as well. The vertical is located at 1110-1190 and helped bring the Vega even more negative (-229), the Theta slightly more positive (77), and the Delta a slightly more negative value (-34). The current position is at a loss of about $393 which was a big change from being up $350 just yesterday. Hopefully in the coming weeks, the market will settle and give a chance for the t + 0 line to build up in the back to increase the possible profit.

The current risk profile looks like this:

Closing of the April Position

      With the slight downwards move today, I have decided to take out my April position. This trade had many adjustments over the past few months and has been down many times. With only eleven days left for expiration, I was able to remove the position with a profit of $1,570. If this was the position at 30 days until expiration, I would have probably adjusted the position instead of cashing out but at this point in the trade, the Gamma started accumulating and even a slight shift of the market could throw the whole position off. The Greeks Theta and Vega are well in the limit (even flourishing if you will) but the Delta value currently is -170 and cannot be easily corrected by verticals. I look forward to continuing to post about the May position and the starting of the June position will be soon. The Greek's of the May position are well under the limit and no adjustments are needed at this time.

Below is the final risk profile graph of the April position:

                                        If you have questions or suggestions please comment!