Friday, November 30, 2012

Adjusted high probability portfolio with butterfly

The market has been showing signs of turning bullish at the intermediate term level, with the 2nd confirmation date on 11-23 (which is a half trading day due to Thanksgiving) as noted by IBD and an impressive bullish reversal day on 11-28.

Yesterday, RUT rose significantly and my RUT position reached the adjustment point due to both price increase and volatility drop.
I played with unbalanced butterfly spreads in order to reduce delta & vega while increase theta. Eventually, I settled on a 30 point wide Dec unbalanced butterfly as shown below.
The adjustment expanded the upper break-even point of my RUT position by about 10 points. So the overall portfolio P&L chart also has increased upper BE point as shown below. Note it's delta is still quite large at the moment.

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