HUH's crash and burn trading thread

Hey huh, two months ago I made a post in your journal, basically stating I had no idea how the strategy works.

For the last two weeks I've been reading the SPX Credit Spread Trader thread, I'm about half way through it. I wanted to because I read in your original post that you read that entire thread (346 pages with 40 posts per page)!!

Based on where I am in the spx credit trader thread, and after reading different options websites that summarize strategies, I have a decent understanding of options spreads, and your positions make much more sense to me as opposed to when I first started reading it.

As the only current journal regarding options spreads, I'd like to thank you for your consistency in your updates!

Eventually I'll be able to chime in with an observation :)
 
Quote from kroponer:

Hey huh, two months ago I made a post in your journal, basically stating I had no idea how the strategy works.

For the last two weeks I've been reading the SPX Credit Spread Trader thread, I'm about half way through it. I wanted to because I read in your original post that you read that entire thread (346 pages with 40 posts per page)!!

Based on where I am in the spx credit trader thread, and after reading different options websites that summarize strategies, I have a decent understanding of options spreads, and your positions make much more sense to me as opposed to when I first started reading it.

As the only current journal regarding options spreads, I'd like to thank you for your consistency in your updates!

Eventually I'll be able to chime in with an observation :)
More...

Thanks, I'm open to suggestions on improving. As much as I HATE losing money, this frustrating rally has been interesting to trade and its apparant I need to do some more tweaking. I'll just be happy when this option cycle is over and I can take my lumps! :)

Looking at the market, this market appears to just be shaking off any and all bad news. Today we got a pullback but the RUT and the S&P both bounced right off their respective 10 day EMA's so this market is still looking very bullish. Basically RUT held 520 on two or three occasions now and the RUT has also gotten slapped down from the 532 level two or three times, so something has got to give. At this point I'm not sure which way its going to go as a bear or a bull case can be made for a breakout or breakdown. I just hope it stays between 500 and 550!

I added the following two positions today:

bot jun 570/560 put/short 54 jun iwm put @ cost of $755.11
bot jun 570/560 put/short 54 jun iwm put @ cost of $733.75
 
bot jun 360/370 call/short junQ 37 iwm call @ cost of $118.34
bot jun 330/340 call/short junQ 34 iwm call @ cost of $155.06
bot jun 360/370 call/short junQ 34 iwm call @ cost of $153.51
bot jun 380/390 call/short junQ 39 iwm call @ cost of $138.06

Not sure why you would not move all of spreads to further towards money leaving naked calls alone. I thought that was the part of the strategy.
 
Quote from valpak:

bot jun 360/370 call/short junQ 37 iwm call @ cost of $118.34
bot jun 330/340 call/short junQ 34 iwm call @ cost of $155.06
bot jun 360/370 call/short junQ 34 iwm call @ cost of $153.51
bot jun 380/390 call/short junQ 39 iwm call @ cost of $138.06

Not sure why you would not move all of spreads to further towards money leaving naked calls alone. I thought that was the part of the strategy.
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Yes you are correct. This was a case of human emotion getting in the way. When I was paper trading this last year, I moved my spreads up closer to the money everytime which alleviated losses in a big way. So yes the rule of the strategy is to move these spreads up. Unfortunately I got in my own way. My analysis was that this rally would go to 470 off the lows and then pullback at least once to 420-430 and I'd be able to get out comfortably. So when we hit 470 I was waiting for the pullback...unfortuntely it never came. So then my next target was 500. When we hit 500 I wanted to move my 360/370 spreads up but I was waiting for the pullback after hitting 500, because I didn't want to move the spreads up and then have the market reverse on me.....once again no significant pullback. So then my final target was 520 and we hit that and once again I was even more hesitant to move up the spreads because now I was really expecting a pullback so I waited.....and once again no pullback!

So if I had just followed the strategy and moved the spreads up like I was supposed to, I'd actually have a small gain right now......but I didn't so now I'm paying the price. Luckily I'm giving back profits so I can sort of brush off the loss as a good tweaking opportunity.

Today I added
bot jun 570/560 put @ cost of $952
 
You could still move up and benefit...not by much but may be by 50-100 bucks on each contract I listed depending upon how much up you go. I believe 440/450 is safe. You could go up to (50 day EMA - 10 pts) and get more money.
 
Quote from valpak:

You could still move up and benefit...not by much but may be by 50-100 bucks on each contract I listed depending upon how much up you go. I believe 440/450 is safe. You could go up to (50 day EMA - 10 pts) and get more money.
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Yes I am adding to the put side just under the 50 day. I'm probably just going to add a couple of positions. At this point I don't want to overdo it and get run over trying to pick up a few bucks. Nothing worse than turning a small loss into a blow up.

I added the following on friday:
bot jun 480/490 call @ cost of $951
 
Well the S&P never really broke its 200 day EMA cleanly and as a result the first attempt by the RUT, Naz, and S&P failed to hold above the 200. The RUT has also fallen below its 10, 20, and 200 day EMAs. Whats more the RUT tried retesting and was slapped down by the 20 day which is around 511 for two days in a row. Obviously its Option Expiration so we're just seeing a bunch of market manipulation and pinning attempts so there's not much of a conclusion I can draw until next monday when the manipulation party ends for another 4 weeks.

The thing to watch next week is that you've got a fast declining 20 day and an ascending 50 day. The assumption that I'll be trading on is that a retest of the 50 day will occur next week and the 50 day will hold which means we'll finally get a nice rally back up towards that 550 level. If the 50 day breaks then I'll reassess and deal with what I'm dealt.

I HATE SET. In the time I've traded I've been bitten by SET twice and now I tend to avoid it as much as I can. Whats more, tomorrow could really be an interesting SET with the witching so I decided to just close a couple of positions that were within 10 to 20 pts of todays close.

I closed the following position today that I had opened last friday
bot jun 480/490 call @ profit of $37

I also have the following two positions open:
bot jun 490/500 call @ cost of $602
short junQ 39 iwm call@ credit of $394.53

I went ahead and closed the 490/500 position today for $952.82 for a profit of $350.82, I am going to go ahead and just combine the profit from this position into the short junQ 39 call so that I have the following:
short junQ 39 iwm call@ credit of ($394.53+350.82) = $745.35
Confusing I know but it helps me keep track of my breakeven.
Finally here is a list of my current open and closed positions. I figured I'd post them since there will be several positions expiring tomorrow for comparison sake.

CLOSED POSITIONS
short junQ 39 iwm put @ profit of $23.35
short junQ 40 iwm put @ profit of $49.83
short junQ 41 iwm put @ profit of $22.38
short junQ 44 iwm put @ profit of $59.01
short junQ 44 iwm put @ profit of $54.49
bot jun 480/490 call @ profit of $37

OPEN POSITIONS
short junQ 47 iwm put @ credit of $179.89
short junQ 47 iwm put @ credit of $104.49
bot jun 450/460 call/short junQ 34 iwm call @ credit of $305.58
short junQ 39 iwm call@ credit of $745.35
bot jun 360/370 call/short junQ 37 iwm call @ cost of $118.34
bot jun 470/480 call/short 33 junQ iwm call @ credit of $282.13
bot jun 350/340 put @ cost of $492.36
bot jun 330/340 call/short junQ 34 iwm call @ cost of $155.06
bot jun 360/370 call/short junQ 34 iwm call @ cost of $153.51
bot jun 380/390 call/short junQ 39 iwm call @ cost of $138.06
bot jun 540/530 short 53 jun iwm put @ cost $293.18
bot jun 560/550 put/short jun 53 iwm put @ cost of $348.18
bot jun 560/550 put/short jun 53 iwm put @ cost of $418.00
bot jun 440/450 call @ cost of $742
bot jun 560/550 put/short jun 54 iwm put @ cost of $551.00
short jun 54 iwm put @ credit of $176.25
bot jun 570/560 put/short 54 jun iwm put @ cost of $755.11
bot jun 570/560 put/short 54 jun iwm put @ cost of $733.75
bot jun 570/560 put @ cost of $952
 
I had a bunch of june RUT and iwm positions expire. All my open RUT june put and call spreads expired in the money and I closed my 54 iwms for 258.75, 268.75, 268.75, and 268.90. I closed my 53 iwms for 165.45, 161.75, and 151.75. So here is the list of the gains and losses for the positions that closed:

CLOSED POSITIONS
short junQ 39 iwm put @ profit of $23.35
short junQ 40 iwm put @ profit of $49.83
short junQ 41 iwm put @ profit of $22.38
short junQ 44 iwm put @ profit of $59.01
short junQ 44 iwm put @ profit of $54.49
bot jun 480/490 call @ profit of $37
short junQ 47 iwm put @ profit of $164.44
short junQ 47 iwm put @ profit of $89.04
bot jun 350/340 put @ loss of ($492.36)
bot jun 540/530 short 53 jun iwm put @ proft of $545.07
bot jun 560/550 put/short jun 53 iwm put @ profit of $500.07
bot jun 560/550 put/short jun 53 iwm put @ profit of $416.55
bot jun 560/550 put/short jun 54 iwm put @ profit of $180.25
short jun 54 iwm put @ loss of ($82.5)
bot jun 570/560 put/short 54 jun iwm put @ loss of ($24.01)
bot jun 570/560 put/short 54 jun iwm put @ loss of ($2.65)
bot jun 570/560 put @ profit of $48

Total profit for June cycle = $1587.96

So far we have the following returns:
Jan cycle = $683.17
Feb cycle = $2051.06
Mar cycle = $796.14
Apr cycle = $389.58
May cycle = $681.73
June cycle = $1587.96
Total gain = $6189.64
Percent return = 6189.64/30000 = 20.63%
Goal = 30-20.63= 9.37% until goal reached.

LETS NOT GET TOO EXCITED, I STILL HAVE SIGNIFICANT LOSSES TO MAKE UP ON THE REMAINING OPEN POSITIONS! Also a note on the following two positions:
bot jun 330/340 call/short junQ 34 iwm call @ cost of $155.06
bot jun 440/450 call @ cost of $742
Both the 330/340 and 440/450 rut call spreads expired fully in the money. The 330/340 call gives me $1000 so that position results in
short junQ 34 iwm call @ credit of $844.94
I am going to take the $258 gain from the expiring 440/450 spread (1000-742 = 258) and add it into the short 34 iwm call which results in
short junQ 34 iwm call @ credit of (844.94+258= 1102.94)
The reason for this will make sense in the next post.

:)
 
Looking forward into july, the way I am going to play it is that the probability is high that we will retest the 50 day EMA on RUT which is at 493.19. The first 3 days of this week would be a good time to do the test on low to moderate volume as people do some more profit taking before the fed announcement. I don't think the fed is going to say anything unexpected so I think probability favors the 50 day holding and we get a bounce off the 50 day and a rally higher into the 540 - 550 range. So my trading plan is not too complicated. I added the following positions:

bot july 480/490 RUT call @ cost of $771.40
bot july 480/490 RUT call @ cost of $771.40
bot july 480/490 RUT call @ cost of $766.40
bot july 480/490 RUT call @ cost of $766.40
bot july 480/490 RUT call @ cost of $761.40
bot july 480/490 RUT call @ cost of $761.40
bot july 480/490 RUT call @ cost of $761.40

I am going to combine these with my open junQ 33, 34, 34, 37, 37, 39, 39 iwm positions which results in the following:

bot july 480/490 call/short junQ 33 iwm call @ credit of $515.73
bot july 480/490 call/short junQ 34 iwm call @ credit of $539.18
bot july 480/490 call/short junQ 34 iwm call @ credit of $341.54
bot july 480/490 call/short junQ 37 iwm call @ credit of $103.26
bot july 480/490 call/short junQ 37 iwm call @ credit of $85.09
bot july 480/490 call/short junQ 39 iwm call @ cost of $26.05
bot july 480/490 call/short junQ 39 iwm call @ credit of $100.54

Now the short iwm JunQ's are going to expire in 7 trading days so there is very little time premium left in them which also means that if the market breaks the 50 day, we should start a pretty significant pullback as far as 450! There should still be pretty good support around that 470 level as well. So if the breakdown occurs then the junQ iwms should lose value almost point for point with the drop since there is virtually no time left. And the 480/490 call spreads shouldn't lose as much value because they are spreads and they have a lot more time premium.

The other scenario is that the market essentially moves side ways in which case I gain a little bit of value in the 480/490 spreads because of the time decay on the ITM spreads. Then I will simply roll the quarterlys.

Finally the market may just rally up which is okay because the 480/490 spreads will give me about $2.30 of upside protection on the iwms losses and at the sametime will allow me to set up some july short 45 iwm/long 570/580 RUT put positions. On paper it sounds great but we'll have to wait and see how the market plays out the next 7 trading days.
 
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