Semana 39 / Week 39 ( 12/31/2015 expiration date )

Semana muy tranquila y ganadora, gracias señora navidad porque es la mejor fecha para operar esta estrategia !
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Quiet and winning week, Thank you Mrs. Christmas because This is the best time of the year to trade this strategy !

Trade Setup

Index Chart

RVX Chart, Volatility sleeping deeply

Track record after 39 weeks, 

Semana 38 / Week 38 ( 12/24/2015 expiration date )

Por fin una semana tranquila, con una volatilidad muy estable. Próximo vencimiento abriremos miercoles 23 en lugar del jueves al haber menos días hábiles.
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We had a quiet week with a very stable volatility at last ! . We will open next strangle on Wednesday 23 instead of Thursday as we have less business days.

Trade set up

Index Chart

RVX Chart

Track record since March ( 2015)

Semana 37 / Week 37 ( 12/18/2015 expiration date )

Semana muy complicada, en la que por primera vez en 37 trades no hemos respetado las reglas. Nuestro stop loss para la put estaba en 11.60$, nivel que tocó el viernes el a media sesión, tras la brusca baja del mercado. 11,60$ es el doble de la prima ingresada por el combo (5,80$). Sin embargo a ese nivel de prima correspondía un S&P en 2000 puntos zona clara de rebote, sin considerar el elevado nivel de sobreventa del mercado. Hemos salido bien parados, aunque con un riesgo excesivo ( la put vendida llegó a superar los 16$ lo que suponía 12$ de pérdidas por cada uno de los 5 contratos, es decir 6.000$ ). Este sistema tiene unas reglas definidas, pero tampoco es un sistema automático estricto, y esta vez si hemos sido totalmente discrecionales.

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Very complicated week , and for the first time in 37 trades have not respected the rules. Our stoploss for the sold put was set at  $ 11.60, a level touched on Friday mid session,  after a low sharp bearish market. Stop loss at 11.60$ is the double of the cashed premium  , when we built the combo ($ 5.80). But I noticed that level of 11.60$ corresponds with a cleear rebound area for the S&P 500 index around 2000 points; without considering the high level of oversold market. We had success with this idea, although we assumed excessive risk (the put reached a value of 16$, which meant a loss of 12$ for each one of the five contracts,  $ 6,000 at all). This system has defined rules, but It is not strictly automatic, and this time, exceptionally, we have decided to be totally discretionary.

Struggling with our put strike !! Notice initial stop loss breakout and reversal

Index chart

Rvx chart

Trade Setup

Track record

Semana 36 / Week 36 ( 12/04/2015 expiration date )

Gracias Sr. Draghi , gracias Sra.Yellen  por no decir nada en su comparencia del Jueves 3 de Diciembre, en 3 horas la weekly voló con un incremento brusco de la volatilidad > 10%. 

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Tank you Mr. Draghi, thanks Mrs.Yellen for saying nothing in your hearing on Thursday 3 December , in 3 hours our weekly  spoilt with a sharp increase in volatility> 10%. Let's say "daily" instead of "weekly".

Trade set up

Index Chart

RVX Chart

Track Record and money management

Semana 35 / Week 35 ( 12/04/2015 expiration date )

Semana muy extraña y complicada. Abrimos la posición el martes 24 en lugar del jueves 26, ya que el jueves teniamos el día de acción de gracias en USA , y el viernes 27 el mercado solo abría 3 horas.

Históricamente era una semana alcista casi con toda probabilidad, y así fue.

Esta situación nos ayuda a entender la asimetría del mercado en la que tanto insisto. Observemos como teniamos la posición al cierre del viernes. La cuna estaba casi dentro del dinero, y la call con una delta cercana a 0,50, sin embargo el mercado no nos echó, básicamente por dos razones:

1) La prima ingresada el martes 24 fue elevada ( 5,40$) , por lo que nuestro stop loss se fijó en 10,80$.

2) La brusca subida del mercado ocasionó una brusca caida de la volatilidad y esto nos ayudó a protegernos del mercado. Observese el óvalo dibujado en el gráfico del RVX al cierre del viernes.

Curiosamente esta semana tocamos el call strike y el mercado no nos echa, sin embargo hace 2 semanas nos quedamos a 15 puntos del put strike y el mercado si nos echó. La clave es la volatilidad (vega)  y no tanto como de cerca estemos del strike ( delta ) , aunque esta última sea importante.

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Very strange and difficult week. We opened the position on Tuesday 24 instead of Thursday 26, because on Thursday we had the Thanksgiving holiday in the US, and on Friday 27 the market was only open three hours. Historically this week was bullish , and so It happenned ...

This situation helps us understand the asymmetry of the market in which I always insist. Take a look at the position at Friday's close. The position was almost "in the money", and the call leg reached a delta close to 0.50, but the market didn't chase us out, basically for two reasons:

1) The premium cashed on Tuesday 24 was very reasonable (5.40$), so our stoploss was set at  10.80$.

2) The sharp rise in the market caused a sharp drop in volatility and this helped to protect us from the market. Note the oval drawn on the graph RVX Friday´s close.

This week our position touched the call strike call the market didn´t expel us curiously, however two weeks ago we were 15 points above our put strike and we were chased out. The key is the volatility (vega) and not how far we are positioned from both strikes levels (delta), although this last greek is important.

Provisional situation at Friday´s close ( real account in Interactive Brokers )

Weekly Setup and final performance

Index Chart

RVX chart ( note the oval on Friday´s close and the big drop in volatility )

Track record after 35 weeks