riskarb's trading journal

[El OchoCinco]

Well 30 points OTM on your SPX no touch with about a little over a week. Seems like a winner at this point since the bulls do not want to concede 1245 without something more significant to push it down and the only significant thing likely to do that will occur after expiration.

Is the plan to hold until the 20th or if the value reaches $750K maybe take an easy stand-up triple?

 

[riskarb]

Quote from optioncoach:

Well 30 points OTM on your SPX no touch with about a little over a week. Seems like a winner at this point since the bulls do not want to concede 1245 without something more significant to push it down and the only significant thing likely to do that will occur after expiration.

Is the plan to hold until the 20th or if the value reaches $750K maybe take an easy stand-up triple?

$750k would require another 20-lower on cash. Fine, but I'd prefer a nice, leisurely drop to 1240 cash. Anything more than that will keep me up all night.

 

[El OchoCinco]

Why would a drop make the no touch at 1225 more valuable. Wouldn't just churning around make it more likely to not touch 1225 and therefore increase the marked to market value?

 

[riskarb]

Quote from optioncoach:

Why would a drop make the no touch at 1225 more valuable. Wouldn't just churning around make it more likely to not touch 1225 and therefore increase the marked to market value?

It wouldn't. I was referring to the short 270 ES hedge.

 

[El OchoCinco]

Oh yeah you added a hedge so closing out would leave you a losing futures position... got it

 

[riskarb]

Quote from riskarb:

SPX bull no touch // weak synthetic straddle

SPX bull no touch: 1225.00
Premium: $525,000
Payout: $1,000,000 [includes prem paid]
Expires: June 20, 2006
Negative edge: a lot
Strike/barrier volatility: 21%
Initial Hedge: Short 270 Sep ES from 125900 average
Symmetrical hedge: Short 500 ES
Vol edge/atm: +300bp

100 points off lows in Dow, although the internals looks horrific as one would expect. I have an added sell stops on futures for 200 more in the 1245-range on Sep futures.

Covered 270 at 125400 -- +$66,500 -- no hedge against 1225 bull barrier.

 

[Prevail]

I guess you see the 1225s as safe until the 20th?

 

[riskarb]

Quote from Prevail:

I guess you see the 1225s as safe until the 20th?

Well, I feel better now, but it was ill-advised to offset the hedge. I was on the road this morning and missed the retrace. I didn't want to keep a resting stop and have it reverse.

I feel fairly confident we'll not break 1229 on cash. I am less comfortable with the upside risk of selling 850 ES to hedge strong than I am letting the 1225 barrier ride.

 

[Prevail]

Quote from riskarb:

Well, I feel better now, but it was ill-advised to offset the hedge. I was on the road this morning and missed the retrace. I didn't want to keep a resting stop and have it reverse.

I feel fairly confident we'll not break 1229 on cash. I am less comfortable with the upside risk of selling 850 ES to hedge strong than I am letting the 1225 barrier ride.

I've got the vanilla 1220s and 1210s. 3 days to go. I'm concerned with a knee jerk tomorrow with the cpi though.

 

[riskarb]

Quote from Prevail:

I've got the vanilla 1220s and 1210s. 3 days to go. I'm concerned with a knee jerk tomorrow with the cpi though.

PPI didn't hurt. Some of the vol on the CPI should be mitigated by today's benign number.