Sunday, January 13, 2013

4th Quarter Adjustment Trade Review for High Probability Portfolio

As part of the trading process, I need to review past trades regularly to improve future performance. Today, I analyzed the past trade adjustments from an option adjustment strategy and SPX price level perspective using the following color coded graph.
The green box indicates the starting portfolio until 1st adjustment for each month. Other colored box represents strategies such as (multiple) calendars, IC (iron condor), vertical spread, butterfly, ETF trades. The blue oval indicates position exits.

It looks like the October portfolio was the lucky one offered by the market which ended at the same level as the start by SPX price. The double calendar adjustment worked perfectly for the month.

For November portfolio, it looks like the IC rolling up adjustment on 10-17 belongs to over-adjustment and the IC roll should have been risen to the point where the deficit was reset by the profit from closing of the put spread. If one of the above errors was not there, the portfolio would have ended much better. I think I was tricked by the stronger volume advances of the market for a couple of days at the time of the IC roll, even though the market did not reach confirmed uptrend state yet. I somehow mishandled the IC rolling rules at that moment.

For December portfolio, there were quite a number of adjustments (may be over-adjustments?). The 1st calendar adjustment on 11-15 started when portfolio Delta was 22 only and this adjustment was one sided calendar (Usually multiple calendars are required to maintain smoother P&L curve). The butterfly adjustments, including the one on 12-04, and the unbalanced butterfly on 11-29 seemed to offer little changes to the Delta.

Although it was a profitable quarter, I still need to sharpen my rules on adjustment points and the associated strategies.

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