More High Octane Alpha

PORTFOLIO GREEKS
(SPX beta-weighted)
Delta: 114
Gamma: -3.5
Theta: 159
Vega: 156
"Paper-folio" Value: $137,276


Wild day today! Israeli war in the Middle Easet started mid-day! The paperfolio made $502 all because of being prepared and knowing how to trade futures around short-term support and resisitance levels. The futures trades earned $2725 which more than made up for a day where the VIX was up 3.81 closing at 17.79 and the S&P500 was down 16.31 points which pretty much murdered my options positions for a loss of a little more than $2200. But who cares, it all nets out to making just over $500 on the day, and that ain't bad!

These are the type of days certain "delta-neutral only," and "short volaltility only" hedge funds get their rear-ends handed to them because of their inflexibility of trading futures "conservatively aggresive" around their core options positions. I say "conservatively aggresive" because I'm conservative about the small number of futures I'll take on for a position, and "aggresive" because I'm willing to take directional risk when the probability are with me to make simple intraday directional long/short trades. In short, I typically try to trade the right number of contracts that will somewhat equal and opposite hedge my intra day options deltas that are going against me.

The big point that marks the "easy" point to sell short through was yesterday's low in the S&P futures which was 1264.25... this is a pretty standard strategy, especially since yesterday was an "bearish engulfing bar":

Here are the futures trades that made up the profit:

1) SELL SHORT 3 contracts at 1264 STOP

2) BUY TO COVER 2 contracts at 1258.25 LIMIT (profit=$575, this hit within 1 hour, and still held 1 contract short through the end of the day.)

3) SELL SHORT 3 contracts at 1263.50 (The market actually rallied to over 1264 again, after order #2 was hit, so I re-sold short again a bit below my big point of 1264, and am short a total of 4 contracts now))

4) BUY TO COVER 2 contracts at 1258.25 LIMIT (profit=$525, this hit within minutes after Israel war news hit the tape, still short 2 contracts to hold into the close)

5) BUY TO COVER 2 contract MOC (The MOC order was filled at 1247.5, resulting in a profit of $1625)

(To the right is the 60 min. intraday chart of the S&P e-mini futures contract to see how these trade fit into the whole picture of the day. Below the 60 min chart is the chart with the daily bars also showing how 1264 was the "big point" and how 1258 was good support for a first round of profit taking.)

These aren't really that hard of trades to make, and are VERY SYSTEMATIC:

Sell through the low of the previous day's engulfing bar and take partial profit into short-term suppor (the 1258.25 level) then let the rest of the position ride into the close and close out MOC. The initial stop loss is set at either a couple ticks (or a full point) beyond the midpoint of the engulfing bar, or a point beyond the high of the engulfing bar--you must decide how much you are willing to risk based on the entire range (high minus low)of the engulfing bar.

If the market rallies above the low of the previous day after you've already taken partial profit, then look to sell through that same price level again, and again take a partial profit at around the same level you first took partial profit (again, the 1258.25 level)--the let the rest of the position ride and cover it into the close. I really just think a couple steps ahead the night before, see the support and resistance level, and have the whole game plan (and even orders set!) before the market opens the next day. The game plan just gets executed when the market is open. After getting practice and experience with this, I've become pretty confident in this type of planning the night ahead and execution during the day.