The Monkey Calendar
- Thread starter cdowis
- Start date
There's a good article on gamma scalping that appeared in Futures Magazine, at http://findarticles.com/p/articles/mi_qa5282/is_200709/ai_n21255481/pg_1 written by a very brilliant (and handsome) option trader.
RUT lost money on the strong down market but the other positions actually made money, especially the BIDU,
Liquidated the RUT vertical for 32 cents.
In hindsight, my trading plan told me to take profit on one RUT calendar a couple of days ago, but I got greedy.
Need to follow the plan.
Anyway, it needs some attention.
Liquidated the RUT vertical for 32 cents.
In hindsight, my trading plan told me to take profit on one RUT calendar a couple of days ago, but I got greedy.
Need to follow the plan.
Anyway, it needs some attention.
no picture in the article to confirm or deny hansome...
Some observations over the weekend:
1. Considering the major move in the market, the system seems to have held up. Considering both booked and unbooked profits, it is better than break-even.
(Ignoring the BIDU, which is a long term position and bounces around several hundred dollars on a daily basis)
2. RUT -- what can I say. The plan told me to book half of the position but I didn't. I continue to pay "tuition".
There is enough time to place another position, but volty is higher than I like, and a risk/reward is only around 30%.
Will give it more thought.
3. FXI -- the vertical is at 30, the calendars at breakeven. Leave it alone for now, but a little concerned about the downside.
Possibly rolling the vertical, or getting out all together if it appears to continue its downward move.
Analysis shows it is probably close to the bottom. It is delta positive.
4. RIG -- wonderful. Following the trading plan, already booked some profit. "Letting the profits run" on the remainder, especially since the vertical still has alot of premium left. It is delta negative, and could quickly become a problem if there is a sharp move up.
Analysis is somewhat mixed. The general trend is up, but rather choppy. It was relatively immune to the drop in the rest of the market, so an overall rebound could indeed bring a large move in the RIG.
But looking for chop.
Between rhe FXI and RIG, the portfolio is pretty much delta neutral.
BIDU -- Again, ignoring the BIDU in my analysis since the vertical is gone, and it is a long term position. If it goes up somewhat, may throw another Jul call vertical onto the position -- a quirky way of doing gamma scalping.
+++++++++++++++++++++++++
Any ideas or suggestions? Please point out any faulty analysis. I posted my spreadsheet along with my thought process for your ideas.
1. Considering the major move in the market, the system seems to have held up. Considering both booked and unbooked profits, it is better than break-even.
(Ignoring the BIDU, which is a long term position and bounces around several hundred dollars on a daily basis)
2. RUT -- what can I say. The plan told me to book half of the position but I didn't. I continue to pay "tuition".
There is enough time to place another position, but volty is higher than I like, and a risk/reward is only around 30%.
Will give it more thought.
3. FXI -- the vertical is at 30, the calendars at breakeven. Leave it alone for now, but a little concerned about the downside.
Possibly rolling the vertical, or getting out all together if it appears to continue its downward move.
Analysis shows it is probably close to the bottom. It is delta positive.
4. RIG -- wonderful. Following the trading plan, already booked some profit. "Letting the profits run" on the remainder, especially since the vertical still has alot of premium left. It is delta negative, and could quickly become a problem if there is a sharp move up.
Analysis is somewhat mixed. The general trend is up, but rather choppy. It was relatively immune to the drop in the rest of the market, so an overall rebound could indeed bring a large move in the RIG.
But looking for chop.
Between rhe FXI and RIG, the portfolio is pretty much delta neutral.
BIDU -- Again, ignoring the BIDU in my analysis since the vertical is gone, and it is a long term position. If it goes up somewhat, may throw another Jul call vertical onto the position -- a quirky way of doing gamma scalping.
+++++++++++++++++++++++++
Any ideas or suggestions? Please point out any faulty analysis. I posted my spreadsheet along with my thought process for your ideas.
MONEY MANAGEMENT
All right, here we go.
Lots of fancy ideas on fixed ratio, etc etc, but one important thing is often overlooked ==>> the probability that my system will make a profit.
Here I am, a light weight, newbie boxer and I'm going against George Foreman. What is my likelihood of survival.
Zip, zero.
Same thing in trading. Right now the market is George Forman -- major moves up, major moves down. Whipsawed, my account goes busted.
So I don't look for the knockout punch, but just small victories. But most important, I protect my gut and my head. I protect my assets, and don't try anything stupid.
In the beginning (the Big Inning), I trade small. One contract. Build up my trading skills. Small losses, small profits.
As I move forward, as my skills develop, I set up an expectation of profitability. I trade larger size, as the *probability* of my trades are profitable.
I become skilled at the game, and increase the bet size. I know my methods, my system, and know when to fold, and when to stay in the game (pardon the mixed metaphores).
In this market, I take profits sooner, and more aggressively. Today's profits are tomorrow's losses (see the RUT position). Weaving and ducking, I find a balance between booking profits and letting them run.
Every trading system consists of entry, exit, and adjustments. The entry point has now become less important than the other two.
That is what money management is all about, especially in this crazy market.
All right, here we go.
Lots of fancy ideas on fixed ratio, etc etc, but one important thing is often overlooked ==>> the probability that my system will make a profit.
Here I am, a light weight, newbie boxer and I'm going against George Foreman. What is my likelihood of survival.
Zip, zero.
Same thing in trading. Right now the market is George Forman -- major moves up, major moves down. Whipsawed, my account goes busted.
So I don't look for the knockout punch, but just small victories. But most important, I protect my gut and my head. I protect my assets, and don't try anything stupid.
In the beginning (the Big Inning), I trade small. One contract. Build up my trading skills. Small losses, small profits.
As I move forward, as my skills develop, I set up an expectation of profitability. I trade larger size, as the *probability* of my trades are profitable.
I become skilled at the game, and increase the bet size. I know my methods, my system, and know when to fold, and when to stay in the game (pardon the mixed metaphores).
In this market, I take profits sooner, and more aggressively. Today's profits are tomorrow's losses (see the RUT position). Weaving and ducking, I find a balance between booking profits and letting them run.
Every trading system consists of entry, exit, and adjustments. The entry point has now become less important than the other two.
That is what money management is all about, especially in this crazy market.
Do you think opening Double Calendar would have helped?
Once the position is closed, the loss is booked. Instead of closing the shop, the hot dog vendor moves the stand ....
Edit: OK I tried it and it helps give a room to move (the BE is lower), the Vega increases (no wonder). With the medium/high vol we are in that may be a problem if volty drops.
I have been using the calendar as an adjustment (creating the double calendar) for over a year, and designed the monkey calendar to overcome some of the failings in that position.
The second calendar is rather unresponsive to continued move downward, relative to the call vertical. You need to make the adjustment sooner to get the full effect.
The second calendar is rather "kludgy" in trying to hedge the initial calendar. It is too "heavy".
The short call calendar is "lighter on its feet", immediately responsive to market movement. As the market falls, the vertical allows a softer landing.
I feel more comfortable in placing the monkey calendar as an initial position rather than a single calendar with the expectation of a second calendar. I can leave it alone longer without making adjustments.
And, it does give some hedge against the vega as well.
I have been listening to Dan Sheridan's webcasts over the past couple of years, and he seems to be moving closer to my opinion in this regard, except he has not explicitly recommended this position. He seems more of an advocate of the calendar recently, while before he mostly talked about the IC. He also is talking about adjusting the calendar *sooner*, not waiting for the B/E point -- IMO, BECAUSE the second calendar is so heavy. He has been mentioning the credit spread (as opposed to the IC) more often as well.
If you are more worried about the down side, relative to the up side move, the monkey calendar is the way to go.