Tuesday, November 27, 2012

RUT Calendar adjustments to high probability portfolio

RUT has been rising for the last 7 days. Though it may be near the end of this rally, the RUT position P&L curve showed the price entered its right sloping side. It's also reflected on the overall portfolio chart as shown below.
I did play with possible vertical adjustment for the RUT and could not find good trades that can keep the chart smooth. So I used calendars to extend the high break-even point of RUT by about 10 points higher. However, it did not add much distance to the right side of the overall portfolio chart as shown below. After the adjustment, the potential profit at the right side of the chart has good amount of increase while the potential loss at the right side also increased modestly. There was not much Delta neutralization in this adjustment.

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