Thursday, November 15, 2012

Adjusting portfolio with calendars

Market continued to drop in the last couple of days. The portfolio reached a delta of 22 with price shifting to the middle left side slop of the P&L curve. If SPX dropped 1o (78 points), the portfolio loss would be around $3000 as indicated by the analyzer.
So, it's time for an adjustment. The suffering side is the RUT double calendar. The Dec/Jan$740p calendar would be normal adjustment for RUT. But there is already a Dec$740p long position in the portfolio. So I used the Dec/Jan$740c instead. The call calendar costs (<$1.00) less, has a little higher delta and provides less ($2) Theta as well. Vega of the two calendars appear to be similar.

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