Shooter short vol
- Thread starter shooter
- Start date
FWIW, I've been trading since I started this journal but had to make some adjustments. I miscalculated how much margin it would take for delta hedging. Initially I was going to trade ES options but delta hedging with SPY to handle the fractional sizing for a small account. However I was testing delta hedging with ES futs margin so that was just a mistake. To explain, 500 SPY shares on Reg T with IB is $22,000. 1 ES future (roughly 500 SPY) is $2,500. My fault.
Anyhow, I switched to Euro and Euro futs options (6E) because hedge sizing and margin is easy with OTC FX (using IB idealpro, and oanda as a backup just in case). Trading this 'system' on 6E and OTC FX is something I've tested before, so, even though I switched out of necessity, I knew what I was getting into. I'm also trying to balance this with a new semester and getting a part time job, so I'm long stimulants.
As for the system, I'm in a trade that expires with the Feb 6E options (2/8/14), so when I wrap it up I will post a IB snapshot to summarize my results. Generally, I'm short ATM and long wing verticals at various strikes/sizes, and delta hedging.
newwurldmn, what did the 'shooter' guy blow up on in 2006, equities?
Anyhow, I switched to Euro and Euro futs options (6E) because hedge sizing and margin is easy with OTC FX (using IB idealpro, and oanda as a backup just in case). Trading this 'system' on 6E and OTC FX is something I've tested before, so, even though I switched out of necessity, I knew what I was getting into. I'm also trying to balance this with a new semester and getting a part time job, so I'm long stimulants.
As for the system, I'm in a trade that expires with the Feb 6E options (2/8/14), so when I wrap it up I will post a IB snapshot to summarize my results. Generally, I'm short ATM and long wing verticals at various strikes/sizes, and delta hedging.
newwurldmn, what did the 'shooter' guy blow up on in 2006, equities?
Interesting week for sure, I was way short delta coming in to Thurs, everything peeled off as price moved to the upside back towards my short strike (1.37), also owned some cheap OTM call verticals in FXE/6E for just this situation.
Bought some more cheap otm verticals that expire with my main spread on 2/7 so lots to manage the next two weeks. I also made $58 with an ES short late in the day
good luck to anyone net short vola, especially in the equity indices.
Bought some more cheap otm verticals that expire with my main spread on 2/7 so lots to manage the next two weeks. I also made $58 with an ES short late in the day
good luck to anyone net short vola, especially in the equity indices.Nice moves in eur/usd, I've actually bought in some of my OTM Bear verticals here as we've breached 1.35. This will preserve some p/l in case we rally hard next week (lots of data points out of Europe and the US, who knows what'll happen), and, if it continue this move lower, my current hedges in spot will cover me through the low 1.30's if we move there next week.
Overall it looks like I might get around 4% return on my account from approx 12/26/13 - 2/8/14, which is basically $1,000. Barring I don't mess up next week.
Overall it looks like I might get around 4% return on my account from approx 12/26/13 - 2/8/14, which is basically $1,000. Barring I don't mess up next week.
For whatever reason I got cold feet and did not want to hold through NFP, so I closed out yesterday morning right after Draghi's press conference. It'll be unfortunate if price ends somewhere between 1.364-1.37, because my returns would be 2-3x in a few hours 
Oh well.
There isn't a good way to get a good summary off of IB for this trade for a few reasons: I put in a withdrawal request yesterday right after closing out and it was already processed. Second, I don't realize positions in one go, throughout the course of the trade I was taking profits/losses in eur/usd as I was putting hedges back on and off. And lastly, the Mark-to-market columns on IB statements don't include FX trades, they are a separate category. Which makes sense I guess, not many idiots are hedging in spot, lol. Nonetheless, the NAV column does the best job, so:
Mark-to-Market : + 6,132.01
FX Translation : - 4,129.89
Commissions : - 687.16
Interest: - 261.82
Fees: - 9.50
Net = +1,043.64
My starting cash value says $29,000 but I withdrew a few thousand during the course of the trade, so really I was trading on $23,000 cash. My margin varied anywhere from $11,000-$21,000 (north of $20k I was fully hedged).
So, $1,043.64 / $23,000 = 4.5% return on account over 7 weeks.
The real question, does the premium earned overcome the delta hedging costs? Yes, but eur/usd was very quite, except for around ECB/Fed/NFP. With a larger average true range at the same premium (I sold 7% volatility, my God), certainly returns would have been smaller. That said, part of my mark to market returns are a bunch of OTM verticals that lost money because price made no substantial moves. So with a larger ATR I could assume some of those verticals would have made money, increasing my mark-to-market gains, while my FX losses would have been larger.
Interest is from being short eur/usd most of the time. Commissions would be a smaller percentage at larger size (for example, if I traded double the size, my FX commissions would have been cut in half). Fees were negligible (IB data subscriptions).
In conclusion, I don't think 'edge' could be perceived without a better delta-hedge cost assumption ahead of time. If the costs were higher, are there 'reactionary' measures that would reduce them going forward in the life of the trade (without increasing risk substantially) ?
It was an interesting trade. For now I need to focus on the rest of the semester. Thanks for reading.
Oh well.There isn't a good way to get a good summary off of IB for this trade for a few reasons: I put in a withdrawal request yesterday right after closing out and it was already processed. Second, I don't realize positions in one go, throughout the course of the trade I was taking profits/losses in eur/usd as I was putting hedges back on and off. And lastly, the Mark-to-market columns on IB statements don't include FX trades, they are a separate category. Which makes sense I guess, not many idiots are hedging in spot, lol. Nonetheless, the NAV column does the best job, so:
Mark-to-Market : + 6,132.01
FX Translation : - 4,129.89
Commissions : - 687.16
Interest: - 261.82
Fees: - 9.50
Net = +1,043.64
My starting cash value says $29,000 but I withdrew a few thousand during the course of the trade, so really I was trading on $23,000 cash. My margin varied anywhere from $11,000-$21,000 (north of $20k I was fully hedged).
So, $1,043.64 / $23,000 = 4.5% return on account over 7 weeks.
The real question, does the premium earned overcome the delta hedging costs? Yes, but eur/usd was very quite, except for around ECB/Fed/NFP. With a larger average true range at the same premium (I sold 7% volatility, my God), certainly returns would have been smaller. That said, part of my mark to market returns are a bunch of OTM verticals that lost money because price made no substantial moves. So with a larger ATR I could assume some of those verticals would have made money, increasing my mark-to-market gains, while my FX losses would have been larger.
Interest is from being short eur/usd most of the time. Commissions would be a smaller percentage at larger size (for example, if I traded double the size, my FX commissions would have been cut in half). Fees were negligible (IB data subscriptions).
In conclusion, I don't think 'edge' could be perceived without a better delta-hedge cost assumption ahead of time. If the costs were higher, are there 'reactionary' measures that would reduce them going forward in the life of the trade (without increasing risk substantially) ?
It was an interesting trade. For now I need to focus on the rest of the semester. Thanks for reading.
