Oh, one more quick note. Someone mentioned that you have exposure if there is a grind down market. What I really like about my strategy is that I'm able to "scalp" against my deltas with futures and/or micro futures to adjust my deltas. So I need any delta adjustment, I just go into the futures market and buy or sale what I need.
The Beauty of Options - Portfolio Insurance at a Discount
- Thread starter Sweet Bobby
- Start date
Strategy loses money when market creeps lower and overall IV increases the same across all expirations, which adds losses to your losing long equity portfolio. However, to your advantage, markets rarely "creep lower".
Overall strategy can also bleed money (time decay) in a range-bound market environment and calendar IV differentials flatten out from steep levels. If we stay in this range and vol continues to creep in your overall position will bleed money. If we continue to slowly rally, the IV term structure will normalize and your options position will likely lose money as your long front end IVs collapse more than your short far-out IVs, which could negate your long equity portfolio winnings.
In March, your options put calendar position probably protected you from huge losses in your long equity portfolio....not sure if you were up or down money overall on the March lows. In April, even though your long front month IVs crashed relative to your short back month IVs, your overall position benefitted from a massive rally, and your front month gamma saved you from the term structure IV collapse (calendar skew flattening).
If you sold out of your short calendar position during the crash in March, then you should be up pretty good money for the year, since your long equity position is basically a scratch for 2020.
Overall strategy can also bleed money (time decay) in a range-bound market environment and calendar IV differentials flatten out from steep levels. If we stay in this range and vol continues to creep in your overall position will bleed money. If we continue to slowly rally, the IV term structure will normalize and your options position will likely lose money as your long front end IVs collapse more than your short far-out IVs, which could negate your long equity portfolio winnings.
In March, your options put calendar position probably protected you from huge losses in your long equity portfolio....not sure if you were up or down money overall on the March lows. In April, even though your long front month IVs crashed relative to your short back month IVs, your overall position benefitted from a massive rally, and your front month gamma saved you from the term structure IV collapse (calendar skew flattening).
If you sold out of your short calendar position during the crash in March, then you should be up pretty good money for the year, since your long equity position is basically a scratch for 2020.
Hi VolSkewTrader, could you please elaborate on ... "In April, even though your long front month IVs crashed relative to your short back month IVs, your overall position benefitted from a massive rally, and your front month gamma saved you from the term structure IV collapse"
1-Is he not overall long gamma in his portfolio?
2-So, why in that particular April occasion he benefited from the front month gamma? (I mean should he not suffer from being long gamma in a market that grinds higher and higher)?
3-The speedy V-bottom helped him?
Thanks for explaining.
I was able to exit during two different days - one in February 2020 and one in March 2020. Those two exits resulted in the portfolio being up 208% for the year. Since then, I have begun the process of rebuilding the hedge for the next anticipated correction.
good answer and you are right. The world saw the biggest explosion in economic wealth from 1984 to 2007.
magically, before that period of extreme boomage, markets move pretty stagnantly. So this whole buy the dip, sell the top phenomenon is “fairly” new. Before this bull market it wouldn’t of worked out. But that’s nor here or there.
let me rephrase my question..not a bear market, but a decline, such as we just saw earlier this year. How did you trade that move? Did you journal it? I’ll go check.
Hello Sigma,
February and March were the best months of my trading career. The portfolio was up 208% for the year after I closed the entire portfolio. It was an amazing time for an extraordinary trader!
Best wishes!
Sweet Bobby
i love it.. you are grinding a lot of the old heads gears with posts like these.
but bro, what happens when shit hits the fan? And I’m not talking about a crash... just what do you do when you sell some puts at the wrong time and the market dips and starts breaching? Just curious. Cheers Roberto
that’s amazing man. May I ask what specifically did you do? Like when the market started to “crash” around 2/25 were you already in the market? (Assuming you were), didn’t your already open puts get breached? Or no? Also what did you do strategically as the market continued to implode and the world end? Let’s get a diatribe going my man! Another classic on the way. Baron should be proud of Young Noble Bobby