Friday, October 26, 2012

Vertical Adjustment for the high probability portfolio

Market does not want to offer an exit for the November high probability trade portfolio this week and continued to drop. Even though the SPX and VIX are at the borders of their corresponding Bollinger bands, there is no sign a capitulation. I'm concerned that continued market sell-off would cause my delta even worse. So I played with calendar adjustment first and realized that an ATM vertical spread served the best for the smooth portfolio. So I sold a $15 wide RUT call spread to neutralized delta by 17. The adjusted portfolio P&L curve looks like the following.

As a record, the P&L curve before adjustment is shown below.
On the IYR front, I have rolled the Nov$65c down to Nov$63c a couple of times, one half yesterday for a credit of $0.84 and one half today for $0.75. The support appears to be at $62 area by 200DMA line.

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