Wednesday, March 6, 2013

April option selling portfolio adjustment

As market turned into bullish again, my April income portfolio showed a Delta of -38. The RUT double calendar position had its price in the right slope area as shown below. So an adjustment is necessary.
I decided to close the DC which contributed no gain or loss except transaction costs, in order to improve portfolio Delta. It also restored the portfolio Vega for bullish market outlook. Additionally, I sold April bull put spreads to maintain a reasonable profit potential. I could have sold IC's for more credits, but they would generate much less Delta that the portfolio needed.

After these adjustments, the new portfolio has a Delta of -19 (a reduction by 20) and Vega of -218 (equivalent to a Delta of +20 approximately). If SPX increases another $15, I might have to do some adjustments again.

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