Thursday, December 6, 2012

Bought SPY to increase delta of option premium selling portfolio

Yesterday, my December option premium selling portfolio delta reached close to -60, a level that I have not experienced before. Although I was not terribly uncomfortable with the value, this market typically don't skyrocket high rapidly and there are about 15 days to expiration, I still felt I had to do some risk management to my portfolio to avoid the unlikely but possible damaging event. So I bought 200 shares of SPY to reduce my delta by 200. I also got rid of a hedging calendar of RUT $740c to reduce the delta by another 10. This resulted a total reduction of delta by 30 approximately and a theta increase by a few dollars since the RUT calendar had negative theta.
I also found EEM had a breakout after Chinese market and ETF jumped. The EEM met my bullish position trading rules so I bought June$40.5c in this account which helped the delta by 1 or 2 points while reducing theta a little. I plan to hold the position trade until my rules telling me the uptrend is about to end.

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