Long-scalping equity options against time decay and market drift

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Ending the week with an even lower value for ES than last week:

https://www.aljazeera.com/economy/2...at-it-means-and-how-long-the-us-may-be-in-one

upload_2022-10-1_14-22-26.png


The lowest value recorded was 3595.25, while the previous week we had 3613.75.

I have been doing a few "layer transfers" as illustrated in the previous post, to manage the fund's usage and the "investment pressure".

We end the week in DD with PNL at 133.2K and a 95.8% of funds usage:

upload_2022-10-1_14-31-55.png


A view of all layers:

upload_2022-10-1_14-26-3.png


where the green peak on the right is given by the 5 long options of our "protective structure". So they have been anyway useful in mitigating the DD.
 

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Taking advantage of the small rise of ES:

upload_2022-10-3_15-49-43.png

ES FUT 202212 GLOBEX 50 E-mini S&P 500 [ESZ2, 495512551, mult: 50]

to move further down our "protective leg" and lock the layer profit:

upload_2022-10-3_15-50-5.png

ES FOP 20230131 3500 P GLOBEX 50 E-mini S&P 500 [EWF3 P3500, 577410041, mult: 50]

At this point, I prefer to lower the "protection" so that I can take advantage of the next rise in volatility with a lower price level, should the mkt go further down.

So moving this "leg" to the new layer:

upload_2022-10-3_15-51-46.png

ES FOP 20230331 3000 P GLOBEX 50 E-mini S&P 500 [EWH3 P3000, 589483727, mult: 50]

Global situation:

upload_2022-10-3_15-55-30.png


upload_2022-10-3_15-55-44.png
 
Note that ES has been going down throughout our trading session (the last 245 days):

upload_2022-10-4_0-1-40.png


while we are essentially mostly selling ES PUTs (so working in the most unfavourable condition and without making any prediction), and still the little spike we got today managed to bring us back to 183K (actually exceeding 190K at one point):

upload_2022-10-3_23-58-18.png


This is why I mostly switched from FUTs to FOPs in the latest years.

Drawdowns have much shorter durations and are more bearable because the decay is a real "force" actively working for you, even when the price goes against you so that we can continue locking in profit layers as the options expire:


upload_2022-10-3_23-58-33.png


(not to mention that risk can be easily "modulated" dynamically, transferring at will layers across the options matrix, and many stop-loss orders can be recovered).
 
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Today, mkt running, is characterized by a powerful move up (I hope you are enjoying it :-):

upload_2022-10-4_16-27-36.png


Accordingly, we have reached a new record PNL of 214K. Currently 212.7K:

upload_2022-10-4_16-28-40.png


At this point, I am locking the profit on various layers to reduce the "investment pressure" (% funds used), in order also to be able to ride another fall down (should it come):

upload_2022-10-4_16-29-54.png


Funds currently used are about 68% now.

Note that we do not predict anything. We just do systematically the "right" thing to increase our chances of survival.
 
This morning (my time) we have hit a new record high (221.5K)

upload_2022-10-6_7-53-58.png


247 days elapsed, 18K commissions (this does not include the interests from IB, 2.58%:

upload_2022-10-6_8-27-52.png


but it's just the PNL scalped away by the strategy). We are in good shape to face the new challenges, should ES continue to decline:

upload_2022-10-6_7-54-50.png
 
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After touching the lowest point at 3502.25 last week:

upload_2022-10-17_20-28-33.png

ES FUT 202212 GLOBEX 50 E-mini S&P 500 [ESZ2, 495512551, mult: 50]

Friday and today we have been experiencing a nice rally which allows us to reach a new record PNL of 237.8K (even if ES declined sharply since the start). Currently 233K (259 days elapsed so far, 18.3K commissions):

upload_2022-10-17_20-30-14.png



upload_2022-10-17_20-30-23.png
 
Time to create another of those "protective structures", we have seen before.

Recall that last time we were able to scalp out about 18K using the long position.

This time I have done the following:

+5:
ES FOP 20230519 3500 P GLOBEX 50 E-mini S&P 500 [EW3K3 P3500, 557298027, mult: 50]
upload_2022-10-18_15-45-41.png


-40
ES FOP 20230317 1500 P GLOBEX 50 E-mini S&P 500 [ESH3 P1500, 581168464, mult: 50]
upload_2022-10-18_15-45-55.png


-35
ES FOP 20230317 2000 P GLOBEX 50 E-mini S&P 500 [ESH3 P2000, 553644420, mult: 50]
upload_2022-10-18_15-46-5.png


-20
ES FOP 20230317 2500 P GLOBEX 50 E-mini S&P 500 [ESH3 P2500, 495666377, mult: 50]
upload_2022-10-18_15-46-13.png


So you get:

( - ( 174.5 * 5) + ( 4.40 * 40 + 10.25 * 35 + 22.25 * 20 ) ) * 50 = 5362.5


But, of course, as before, we hope to grab also the long leg if ES falls :)

Long leg vega is pretty high: ν=9.98.
 
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Sorry to sidetrack in yer journal, but you typed "FOP" too many times in the journal this month, and my OCD kicked in.

Replace the word "bop" with "fop" in this song. So sorry, but I have an affliction, hehe.

The blitzkrieg fop!

 
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