Sunday, July 28, 2013

Trade adjustments for the last couple of weeks

The market has been performed bullishly in the last 5 weeks. In the last couple of weeks, I had to make additional Delta adjustments for my non-directional portfolio. On 7-18, my portfolio SPX Beta weighted Delta reached more than -40. So I bought 90 shares of UPRO which is a 3x SPX ETF with equivalent Delta of 12 as shown in the chart below. As explained in my previous post, I used the ETF because I did not want to increase Gamma mainly.
This adjustment brought my Delta to the top limit of my acceptable Delta range, with 30 days to expiration. 2 trading days later (on 7-22), market continued its ascend. My portfolio Delta reached -50 so I had to make additional adjustments. The chart below showed a Delta of-65 due to a TOS SW issue. This was a Monday after a weekend TOS SW upgrade. The new version updated at last weekend did not show the 12 Delta of the UPRO. I was concerned about it and a few days later found the Delta field of UPRO came back.
On that Monday, I decided to close two most damaging positions of SPX (Iron conder) & RUT (double calendar) to make significant Delta reductions, because I had done many other adjustments already. In the end, I reduced my Delta to -27 as shown in the chart below. After that, the market had taken a 4 day rest giving me sometime to catch with Theta decay.
TOS software does not account for closed positions. So the realized loss for this cycle that is not accounted in the above diagram is about $2050. With about $950 profit shown in the above chart, the real loss at that date on paper is $1100.

As of today, it's apparent that my initial Delta adjustments were not big enough. I have to post my analysis of this month's adjustment later.

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