one/off

atticus · Nov 22, 2011

Bought to open the AAPL Dec 55/80/05 fly at 8.00. 10% of account.

I'll post account metrics (screenshots) going forward. Shooting for a double by the end of 2012 at a MAR/Calmar of 10. IOW, a double is targeted at a DD not to exceed 10% (peak to trough). I will stop the journal if I take heat in excess of 10% over the period.

Blue for opening positions. Red for closing a position at a loss. Green for closing a position at a profit

newwurldmn · Nov 22, 2011

Quote from atticus:

Bought to open the AAPL Dec 55/80/05 fly at 8.00. 10% of account.

I'll post account metrics (screenshots) going forward. Shooting for a double by the end of 2012 at a MAR/Calmar of 10. IOW, a double is targeted at a DD not to exceed 10% (peak to trough). I will stop the journal if I take heat in excess of 10% over the period.

Blue for opening positions. Red for closing a position at a loss. Green for closing a position at a profit

10% of account means 10% of account in notional or in premium?
where notional = spot * size of the bottom wing.

atticus · Nov 22, 2011

Quote from newwurldmn:

10% of account means 10% of account in notional or in premium?
where notional = spot * size of the bottom wing.

Premium/risk. If risk is undefined then some hard-stop would be mentioned. I only trade naked on risk-reversals and LEAPS into earnings, but both are rare.

newwurldmn · Nov 22, 2011

Quote from atticus:

Premium/risk. If risk is undefined then some hard-stop would be mentioned. I only trade naked on risk-reversals and LEAPS into earnings, but both are rare.

That's an enormous position. I didn't do the math, but a 3-4% selloff in apple tomorrow would probably get you half way to your aggregate drawdown limit.

atticus · Nov 22, 2011

Quote from newwurldmn:

That's an enormous position. I didn't do the math, but a 3-4% selloff in apple tomorrow would probably get you half way to your aggregate drawdown limit.

In reality it's 8%. I missed the 30-minute window to edit the %. I will keep it tight. I'd intended on trading it a bit larger (hedged), but didn't want to allocate the $ to a hedge position. Ya it's sizable, but I am confident that the fly will not go under 6.00 bid.

ATM risk (AAPL=355) is a $3.00 loss of premium, but I begin to go long vola at that point. I would feel comfortable holding it at $355 on shares. I would close the position (at the day's close) if AAPL is <$352.

newwurldmn · Nov 22, 2011

Quote from atticus:

In reality it's 8%. I missed the 30-minute window to edit the %. I will keep it tight. Ya, it's a sizable position, but I am confident that the fly will not go under 6.00 bid.

It seems you have a few of these on your book at any given time. Aren't you concerned that you are running correlation risk on that much leverage?

I do some similar style trades, but I would have done it for 10% notional. Then again, i am not trying to double my account. 10-15% is good enough for me.

EDIT: Correlation and gap risk.

atticus · Nov 22, 2011

Quote from newwurldmn:

It seems you have a few of these on your book at any given time. Aren't you concerned that you are running correlation risk on that much leverage?

I do some similar style trades, but I would have done it for 10% notional. Then again, i am not trying to double my account. 10-15% is good enough for me.

This account is pure-spec. I have other accounts in arb, but functionally all vol-trades are in this IB account. I built the position yesterday and this morning. The AAPL fly is the only position. I will go up to 25% in risk-premium. I consider all vol-trades to be a 1corr to equities (CL, ZN, FX etc.). I consider all trades to be equity proxies.

I have another account funded to the same level that is in dispersion.

atticus · Nov 22, 2011

Long the GOOG Dec 50/85/20 fly from 11.30 risk (iron, short vol) at 4.5% risk.

Risk (all positions) is at 12.5% of account (total loss of risk-premium). FWIW, I did ~13x in one account trading 5-10% risk-positions since 2005.

jtrader33 · Nov 22, 2011

Not trying to get at the secret sauce, but just curious, are you mostly discretionary in finding these trades? mostly quant/stat based? something else?

atticus · Nov 22, 2011

Quote from bs2167:

Not trying to get at the secret sauce, but just curious, are you mostly discretionary in finding these trades? mostly quant/stat based? something else?

Yes.

I have a vol and timing model. The timing model is based upon Inventure's Ranger, and the vol-model is home-brew. The discretionary component is large.