HUH's crash and burn trading thread

Quote from valpak:

Any updates?
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No nothing new to report at this point. I am in a holding pattern along with the market until the fed reaction tomorrow. We're essentially sitting on the 50 day on the S&P so if the reaction to the fed is negative then it sets the stage for the S&P to drop quite a bit down to the 200 day around the 990-1000 area. This means that I will have the opportunity to close my iwm shorts around the 53 area on IWM. If we rally then its a missed opportunity to close some shorts but not the end of the world as my RUT call spreads will gain in value.

So just in wait and see mode at this point. I am looking for either a pullback to the 1000 area on the S&P to start doing some stuff or a rally above 590 on the RUT otherwise I am comfortable with holding tight.
 
Quote from riskfreetrading:

I expect a lift off tomorrow, then a sell off after fed or on Thursday and Friday.
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I did was expected. At 10:59AM, taking the longs off, and starting to layer the shorts with Qs at 41.86. Time is now 11:00AM (so in real time).

:p
 
Well the S&P recovered off the 50 day for now, however the RUT just has not responded as expected. I went ahead and closed the following position on friday:
bot nov 530/540 RUT call @ cost of $892
I sold back the spread for $908 which results in a profit of $16.

Its not much, more of me closing a trade that didn't work the way I expected. The reason I put it on was I expected a bounce off the 50 day initially and a significant move higher, however the RUT is just flat out underperforming the S&P. Its dropping point for point and its not quite rallying point for point with the S&P. So the danger here is that if we do test the 200 day on the S&P that means the RUT could potentially drop all the way down to the 520-530 range the way its falling with the S&P. Which of course would be very bad for the position I had open.

So I decided to just close, if the market falls then I did the right thing.....if the market rallies then no big deal I still am long the 610/620 call spread, and with 2 weeks to go there's a good chance that we might get back in that area.

With my closing the 530/540 call, I would like to see a breakdown here on the market as a test of long term support on the S&P at the 200 day would be VERY healthy. Looking back once the bear market ends you typically see a retest of the 200 day to confirm long term support and if it holds thats when you get the nice long bull market runs. In the current market, long term support on the 200 day has not been confirmed yet as we just haven't really looked back since blasting off in March. So I am patiently waiting for a test of the 200 day on the S&P. If the test passes then I'll be looking to go ahead and go long via covering remaining IWM shorts and riding the short IWM puts up out of the money. Otherwise its just going to be a slow grind higher which is fine although a sharp correction to the 200 day would be preferred.

Here is the current holdings:

CLOSED POSITIONS
bot nov 530/540 RUT call @ profit of $16

OPEN POSITIONS
short 100 shares iwm @ credit of $4525.79
short 100 shares iwm @ credit of $4976.66
short 100 shares iwm @ credit of $4830.38
short 100 shares iwm @ credit of $4886.13
short 100 shares iwm @ credit of $4990.94
bot nov 610/620 RUT call @ cost of $562
sold 65 nov iwm put @ credit of $374
sold 65 nov iwm put @ credit of $409
sold 65 nov iwm put @ credit of $374
sold 65 nov iwm put @ credit of $519
 
Looking at your position, especially the Nov 610/620, it was a good day for you. I am hoping that you will roll the IWM puts which are not that big of a deal.
 
Quote from valpak:

Looking at your position, especially the Nov 610/620, it was a good day for you. I am hoping that you will roll the IWM puts which are not that big of a deal.
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Yeah not a bad day at all. I made some changes to take advantage of the pop higher today.

I went ahead and rolled the following three iwm puts into december:
sold 65 nov iwm put @ credit of $374
sold 65 nov iwm put @ credit of $409
sold 65 nov iwm put @ credit of $374
I was able to roll them into december for a credit of $43.60 each which wasn't bad.

I also want to see how far up this move can go. There's a pretty decent chance that we could see 620 on the RUT by expiration so would be worthwhile to see if it happens. As a result I closed the following posiiton:
sold 65 nov iwm put @ credit of $519
I bought back the put for $484 resulting in a profit of $35.
The reason is because now I am still short an extra 200 shares of iwm that aren't a covered put against my long 610/620 rut spread. So if the market sells off here then I'll be gaining on 200 shares of short iwm to offset the loss on the 610/620. If the market rallies higher to 620 then I'm looking at about $340 of additional losses from my 200 short iwms but the potential of gaining an addition $700 on the 610/620 so it'll be an interesting week. Here is a list of my posiitons after todays changes:

CLOSED POSITIONS
bot nov 530/540 RUT call @ profit of $16
sold 65 nov iwm put @ profit of $35
OPEN POSITIONS
short 100 shares iwm @ credit of $4525.79
short 100 shares iwm @ credit of $4976.66
short 100 shares iwm @ credit of $4830.38
short 100 shares iwm @ credit of $4886.13
short 100 shares iwm @ credit of $4990.94
bot nov 610/620 RUT call @ cost of $562
sold 65 dec iwm put @ credit of $417.60
sold 65 dec iwm put @ credit of $452.60
sold 65 dec iwm put @ credit of $417.60
 
Well that sort of worked out okay for me. Obviously the 610/620 spread is going to expire worthless creating a big loss but I was able to recoup some of it with the extra 200 short shares.

I went ahead and covered the following two positions for $5850.7 each:

short 100 shares iwm @ credit of $4525.79
short 100 shares iwm @ credit of $4976.66
which results in the following losses:

short 100 shares iwm @ loss of $1394.21
short 100 shares iwm @ loss of $874.04

So at this point I've basically thrown in the towel that this strategy over promised and under delivered as the profit will be negligible so I'll be going back and disecting the journal for improvements. The most glaring is to go ahead and buy a cheap OTM iwm option to go ahead and trade a RUT vert against a vert IWM spread. I need to wind down the remaining 3 covered put positions which will occur by end of next option cycle.
 
Quote from valpak:

Does that mean you are putting an end to this thread next month?
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Possibly, I'm going to spend december going back through the thread and see if I want to bother tweaking this strat or move on to something else. Although its been a big disappointment, I'm still walking away relatively unscathed considering we basically had a horribly 1 sided market since march which isn't exactly a good environment for this type of trade. If I decide to tweak and go for another year then I'll continue the thread, otherwise I may start a new one if I decide to go another trading route.
 
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