Thursday, April 25, 2013

Second Delta Adjustment for May non-directional option income portfolio

In the last 3 days, the market started to rise significantly again. My last adjustment to support a market correction scenario appeared to be invalidated. This will be the 2nd time this strong bullish market has done that this year if IBD declares correction over later today or tomorrow. My high probability option selling portfolio has Delta reaching over -50 level as shown below. In particular, the RUT position chart had its price beyond the far right side of P&L zone.

So I made some calendar adjustments to neutralized Delta by 7 points or so. The adjustment made Gamma/Theta to increase as well. Vega changed from -110 to +170. There are some capital increases due to the adjustments. The portfolio overall risk is increased close to $10K. The Greek value changes are acceptable for me so for.

Even though the mid price of the double call calendar was moving up and down, I had difficulty to get it filled within 30 minutes. I had to break the single order as two separate calendars to get them filled today. I'm starting to feel that it's easier to get index calendars filled in market falling days. A standard double calendars with calls and puts on each side may also help it getting filled.

Now, there is still opportunity to profit in the next week or so if market (SPX) does not continue to rise to 1600 level. If that happen, I have to make new adjustments which will include trimming down losing positions.

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