Monday, July 15, 2013

Another Delta cut for August non-directional option portfolio

Today is the 8th day of RUT consecutive rises. It looks like the RUT is running outside the top Bollinger band for 6 days now. I had refrained from adjusting the Delta of my RUT positions in the last few days. However, my current portfolio Delta is approaching -45 from last Friday's value around -36. It's a little bit over may desired range. Hence, I cut the portfolio Delta by 5 using TNA (the 3 X RUT ETF equivalent) as I planned before. I could not find a satisfactory option strategy for the adjustment at the moment. I think this happens after a few calendar adjustments which increase the Gamma and Vega of the portfolio significantly. The black horizontal line in the chart below represents the real zero profit level.
Since the market is due for a pullback (just my opinion which market does not care), I did not use more shares and UPRO to further Delta reduction, as I think market is unlikely to jump continuously in the next few days.

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