Weekly results of a wanna B algo trader - 2011

This has been another tough week (down 2k3). The last five weeks have been terrible, I hope this is somewhat related to this stupid debt ceiling increase and not to a major flaw in my automated trading systems. While S2 benefits from the increase in volatility, S10/11/21 are hurting in this environment. I am not sure where this market will go next week, I'm a little bit hedged to the downside right now. I don't think my systems could have done much better in this environment, this is just a tough market to trade in. As far as my systems go, I continue to invest big time into S22 (getting ready for a 50k home equity load on that one). It still shows very promising results so far. S81 reduced the leverage slightly, so next week or in two weeks I hope to close all trades and retire this system. S2 does ok in a high volatility/earnings environment, however it didn't find any new trades this week. S21 and 11 are hurt big time. S21 gave up so much of its profits that this almost makes me question the system. Times like this (and May 6th 2010) are not good to showcase a premium selling system I guess. I have no idea how others did this week, but I'm hoping you guys did better and didn't trade too much. I was tempted to play the futures market the last couple of days but I'm glad I didn't and that I got my gambling issue out of the way last week, this could have been very painful. My family came back from Europe on Monday, so I'm happy that there's finally some live in our home ;). Enjoy a nice summer weekend, let's hope we'll return to more "typical markets" (whatever that means ;) ) next week !!!
Here are the results in detail:
S1:-4460
S2: 16795
S10: -1615
S12: 782
S11: 9267
S21: 2004
S22: 1238
S81: 3978
Weekly Performance:
-2287
S&P 500 Weekly Performance:
-10389
Overall Performance since launch:
25909
S&P 500 Performance since launch:
8904.35
Risk Free Checking Account Performance since launch:
1309
 
Disgusting trading week (down 14k, sucked almost as bad as the S&P this week). I blew slightly over 14k yesterday, the rest of the week was somewhat breakeven. This sell off was nasty and as you can tell in my premium selling strategies (S11,10,21) they all got killed. Too bad S2 only has three half size positions, that strategy could have kicked butt with 10 or twleve full size ones. But woulda, coulda, shoulda doesn't make any money. Good news is I barely saw the blood bath yesterday, I was up in the mountains with the family and we did an all day mountain bike ride. I'm not sure what would have happened if I'd have been at home, but usually I've a hero/gambling tendency, so it could have been much worse. My accounting is messed up big time. S21 is somewhat hedged (manually) but I can't keep track of all these hedge trades, so the net loss may be 5 grand on it. Still crazy considering this was one of my best performing strategies a month ago. S22 is still trading nicely and showing decent gains. It has 64 trades so far (20 closed, 44 still open) and the results would be awesome if they were sustainable. I'm not thinking too much about this trading week, it has been the worst week since May 6th last year (remember the flash crash?), very demolishing when it comes to confidence in trading systems or trading in general. So the less I think about it, the better off I'll be. Otherwise I've to question my effort and look at putting my money into a saving account. S85 is all closed (closed with manual execution which sucked), and that strategy is retired now. Not bad considering it has a decent profit, but all new trades following the same criteria will be tracked in S22. Losing that much money is hard to swallow, drinking and fun ( & free) activities help out a lot (I'll go to a free Bret Michaels concert on Sunday, not cause I like the guy but it should be fun regardless). I honestly hope most of you did much better, this week had the tendency to a make or break week based on your trading style and capital preservation was my number one priority on Friday. When we were down another 25 S&P 500 points on Friday, I was so well hedged, it didn't make a difference to my trading results.
Here are the results in detail
S1:-4775
S2: 19652
S10: -5485
S12: 385
S11: 6607
S21: -13579
S22: 1701
S81: 5850
Weekly Performance:
-14259
S&P 500 Weekly Performance:
-18305
Overall Performance since launch:
11650
S&P 500 Performance since launch:
-9400.65
Risk Free Checking Account Performance since launch:
1355
 
Rumor has it if your trading positions follow you in your dreams, you're trading too big. Well that's exactly what happened to me last night.

Somehow I didn't sleep well (probably cause I didn't participate in yesterday's rally, I know greed is far stronger than fear in my case) and had a dream that all my options got assigned and I didn't have the capital to cover it. (Good thing we're a week away).

And then there was this little computer glitch at IB which had the margin wrong late last night and showed the closing prices of the day before (Remember crashy Monday???). So if all my options get assigned (and I'll have to let them get assigned and can't roll since I'll need to pull out some money from my trading account for a potential real estate investment) I'll have to come up with about 460k (which I wouldn't have). With PM this should be roughly over 60k net new money, I still have about 20k cash balance that's not margined. Obviously my wife isn't happy about this situation but these are desperate times. Definitely reminds me why I thought that home equity loan is going to be a very valuable safety cushion.
 
Have you considered cutting down in size until the markets calm down a bit? My trading system has been on fire but the risk is too high for me, so I cut down in size. Normally I trade 4-5 contracts but I can't afford a daily loss of the $3000 it has been coming up with, due to volatility, so I cut down by 1/2 to 2/3, just so I don't suffer a catastrophic loss.
 
Quote from Engine99:

Rumor has it if your trading positions follow you in your dreams, you're trading too big. Well that's exactly what happened to me last night.

Somehow I didn't sleep well (probably cause I didn't participate in yesterday's rally, I know greed is far stronger than fear in my case) and had a dream that all my options got assigned and I didn't have the capital to cover it. (Good thing we're a week away).

And then there was this little computer glitch at IB which had the margin wrong late last night and showed the closing prices of the day before (Remember crashy Monday???). So if all my options get assigned (and I'll have to let them get assigned and can't roll since I'll need to pull out some money from my trading account for a potential real estate investment) I'll have to come up with about 460k (which I wouldn't have). With PM this should be roughly over 60k net new money, I still have about 20k cash balance that's not margined. Obviously my wife isn't happy about this situation but these are desperate times. Definitely reminds me why I thought that home equity loan is going to be a very valuable safety cushion.
More...

Yikes. Don't you think that the even the idea of dipping into your home equity to cover margin means that you are presently overleveraged given your current circumstances and more importantly your mental state?
 
I hear both of you, same comments came from my wife as well.

I'm basically not trading at all right now (stopped after a big loss last Thursday since I didn't want this year to turn red). I've liquidated whatever was somewhat easy to liquidate and I'm hedged on the remaining stuff. e.g. Yesterday's rally my account only went up 2k7, today it went down 900 bucks, so nothing compared to the moves in the market, based on the typical size I'd be up or down 15k the last couple of days.

My issue is that I can't get easily out of the options cause the volatility is so high and the spread so wide that I don't want to pay up for that.

For example I'm short 10 puts that are deep in the money and will expire on Friday. I'm also short 8 e-mini S&P Futures (that's my main Hedge). So come next week I'll end up long with 1000 shares of SPY in my account. They should move fairly hand in hand with my ES futures, so assuming I don't have a lot of execution risk (this market may cause some actually) I can sell the 1k SPY shares, buy back the 2 E-Mini contracts and basically reduce my leverage. The bigger issue is that the 1000 SPY shares will be around 110k (~20k on margin) and the current option position is much lower, so in order to get this trade done I'll have to temporarily increase my buying power.

Definitely not an ideal situation but I think it's better than scrambling for bad fills in this market environment. Any other ideas on how to solve this are definitely welcome ;) now the sad thing (there's a reason why my blog is called theclosetgambler.com) is that I opened the home equity line just for these type of scenarios to provide some cushion during volatile times.
 
Crazy times, Monday, Tuesday Wednesday and Thursday were unreal. ThinkOrSwim had trouble keeping up with the quotes, sometimes my hedge would literally fall by two grand before the associated other positions would catch up. I'm basically in account liquidation or reset mode. The hope is to have 90% of my positions closed by Wednesday the 24th and then start up again fresh.As you can see most of my reporting is severely impacted, I don't have any means to see how much each strategy lost or won. S22 is flat and the results are real. That was one of the benefits in this market that at least stock based strategies let you get out without having to pay up for this crazy volatility. That's good cause you've seen in my previous post that I'll need to free up some serious cash to survive next week. I'll do another post today that'll show why it's almost impossible to get out of options right now at a reasonable price, even with expiration approaching. Unfortunately when things go wrong they go wrong in spades. ThinkOrSwim is going to perform the account move (clearing for equities is going to move from pension to TD Ameritrade) this weekend. So no after hour trading on the TOS platform. No big deal since I don't trade after hrs anyway. Unfortunately the new accounts will have sub accounts, so some of my current positions (short deep in the money puts, short S&P futures) will not be considered hedged any more because they're in two different accounts with two different balances (kind of like they do today with the Forex accounts). Because of that I've transferred most of my futures hedge from TOS to IB, not knowing what next week will look like (how much money they will allocate for the futures sub-account ….). Next week I'll also get assigned on the first set of options so I'll be long 1000 SPY shares (and the associated 118k) on Monday. That will allow me to test how reasonable this exit strategy really is. 118K in PM should only require about 20k of exess liquidity so I should be fine. I've checked with the IB trade desk and if you don't have enough liquidity you'll get liquidated 10 minutes into the new trading day, at that point in time at least the 1:4 daytrade margin is going to kick in. The real estate deal (we tried to buy a house that was a short sale) also fell through, we tried to squeeze a little bit more out of the bank and they wouldn't agree, so the net net is that I won't have to worry about bringing my finances in order right away. I am somewhat bummed that I has come to that and I'll have to really close most of my positions to get out of this (by the way if anyone has insight into the IB Close All Position feature, I'm all ears).
http://www.elitetrader.com/vb/showthread.php?s=&threadid=225141
126 Views, nobody every painted themselves into a corner to have to use this feature :(

On the flip side I'm glad I survived this and still am green by 12 grand for the year, and since we seem to have a crashy market on a yearly basis now, it'll be the yearly reset for me and my trading activities. I'm not sure what's causing these wild swings since 08, since I'm an algo trader and therefore first cousin to HFTs I don't want to blame them but I thing there's some serious risk in today's market. Anyway, sorry I don't really have anything exciting to report, no real wins or losses but I hope some of you still find this thread interesting and see some reasoning for some trader action (as you see in some replies they may not consider the actions rational though ;-)
For all the folks following, I hope you did well and have a good weekend
Here are the results in detail
S1:-4775
S2: 19759
S12: 445
S22: 1452

Weekly Performance:
557
S&P 500 Weekly Performance:
-3878
Overall Performance since launch:
12207
S&P 500 Performance since launch:
-13278.65
Risk Free Checking Account Performance since launch:
1401
 
There's endless hope in the option market. This screen shot shows why I'm letting my positions get exercised. (I know I'm not an artist when it comes to screen shots ;) )



9 minutes (the time is in US Mountain time) before the market closes, the SPY is trading @ 118. So the 118 put options are basically worthless. However the sellers (initially they probably bought options) still want 16 cents per contract. That's close to two Dollar per minute in time decay. Quite frankly I'm not in the mood to pay this extra premium, so I've let them run out. The 2nd option position (short 8 126 puts) they should be worth 8 bucks (126-8=118) Now the mid price is close to that (8.02) but the execution risk in this market is crazy (look at the bid/ask spread). So again, two options to close this trade.
I can hope for the best which would be a mid-price execution, pay 16 bucks premium and close the trade (probably wouldn't get filled @ the mid-price anyway) or I can just pay the 15 bucks and get assigned without the risk but with a significant margin hit.
 
No post today, heading out for a fun weekend with the family and without internet. Will post on Sunday if my assignment theory worked or if I'm in margin hell. Very frustrated right now, one of the positions was long HPQ and that stock dropped like a rock, so even though i thought I was hedged well I wasn't fully. Anyway, the plan is still to be flat by mid next week and get my finances back in order then start fresh next Friday (with or without a journal). Lots of scary liquidation posts lately on IB, so I hope I won't have to add another one ;) And guess what, I beat the S&P (lol).

Good luck and I'm sure most folks did better the last couple of month !!
 
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