Wednesday, April 17, 2013

Adjusted May non-directional option portfolio for more neutral Delta

Market was selling off early today and my RUT position showed some damage as RUT dropped below $905 while the SPX gained some value as its position had some negative Delta. The following chart was intended to recreate the portfolio P&L situation before adjustments (but it's captured after adjustment since I forgot to capture it before adjustments). I also marked the P&L zone changes in the chart.
Since the recent dramatic market moves happened 3 weeks after the initial positions were established, there was no major damage to the portfolio and the Delta was close to -20 before my adjustment (not -36 at which point I usually make adjustments).

When looking for adjustment strategies, I felt the VIX shot up way above the Bollinger band and may come down later. So I did not use calendars alone and used a bear call vertical spread as well. After the adjustments, my portfolio has a significantly reduced Delta and acceptable Vega. The Theta is also significantly higher as well. My goal is to close the portfolio some time next week if market gives me a profit opportunity.
It should be noted that in this highly volatile day, my orders for the RUT spreads were all filled with market price quickly.

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