TBT: Profit from higher interest rates

Interest rate sensitive ETF's reacted on Government job numbers strongly today. TBT jumped above the recent 2 month long down trending channel with strong volume. My naked put Dec$70p sold about 10 days ago reached most of its profit with current Delta 0.09 in a surprising period of short time. So I bought them back for $0.25 each to nail down the profits and initiated some June$73c contracts for a longer term trade at the cost of $8.5 each. My stop loss will be around the recent low of $71. If TBT pulls back without heavy volume, I'll look for an opportunity to double my contracts. I'm impressed by the large pullback yesterday and the huge breakout today. The trade is consistent with my long term view of the interest rate rise. I'll change it to diagonal call spread later when I see TBT become far extended in price.

Another major beneficiary of the rising interest rate is the regional banks ETF KRE which also made an impressive breakout with huge volume today. I'll continue to investigate the possibility of playing with this ETF in the future. The real estate ETF's IYR got hammered again as a result.

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Closure of IYR Bull Diagonal Spreads

Due to the current week market conditions outlined in the previous post, I decided to close all of my IYR bullish positions. I plan to enter new bull position trades for IYR when market resumes the uptrend.

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IYR Diagonal Rolled up to Feb

As market continues to show bullish signs, IYR rose steadily in the last week or so. I added another quarter position size to my IYR diaogonal spread holdings on Jan 2, after the big breakout. It doubled my position size on IYR since end of November, 2012. Now the Jan$66c has delta over 0.65, so I rolled it out to Feb$68c. I did not create any naked IYR position yet, due to the overbought condition. I'm looking for a pullback to close some short positions if market offers me a chance.

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Bullish position trades on GLD and IWM

I had been quite busy with my portfolio adjustments and new bullish position trades, as well as the blog in the last couple of days. So I decided to record the bullish position trades after blogging about the monthly income option portfolio to spread my limited time each day.

On Monday, I saw GLD and a couple of other ETF's meeting my bullish entry rules. Usually, I'd like to get into positions one by one. So I bought the GLD Jan14$157c LEAPS. I do intend to hold this one longer than other position trades as mentioned before, but I'm not sure if I have enough time to manage it later. So I may exit it along with other position trades if I have too many positions in my multiple portfolios.

On Tuesday (yesterday), I bought IWM June$80/Jan$86c diagonal for a position trade. I shorted the Jan$86c because IWM seemed to be risen quite a bit already. I may get rid of the short call later in a pullback.

For all of my position trades, I do plan to sell option premiums later when the stock rises extensively. I'll describe what I consider extensive later when I start to sell front month calls.

Additionally, I also increased my position size of IYR by 50% using a new bull call diagonal on Monday.

Rolling down IYR diagonal

IYR broke major up trend support and 200 dma. I rolled half to Dec$63c yesterday for a credit of $0.86 and another half to Dec$62c today for credit of $0.85.

On 11-2, I had to roll up to Dec$65c for a debit of $0.88 and Dec$66c for a debit of $1.33, due to short delta rising above 0.7.

Since IRY had been going down straight for many days, I'll wait to see if a rebounce is weak enough to headge the long term bullish position.

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Vertical Adjustment for the high probability portfolio

Market does not want to offer an exit for the November high probability trade portfolio this week and continued to drop. Even though the SPX and VIX are at the borders of their corresponding Bollinger bands, there is no sign a capitulation. I'm concerned that continued market sell-off would cause my delta even worse. So I played with calendar adjustment first and realized that an ATM vertical spread served the best for the smooth portfolio. So I sold a $15 wide RUT call spread to neutralized delta by 17. The adjusted portfolio P&L curve looks like the following.

As a record, the P&L curve before adjustment is shown below.

On the IYR front, I have rolled the Nov$65c down to Nov$63c a couple of times, one half yesterday for a credit of $0.84 and one half today for $0.75. The support appears to be at $62 area by 200DMA line.

Rolled diagonal for IYR

A couple days after rolling up the IYR Nov$67c, market started tanking. The IYR followed the market to a point where the $67c was only $0.05. So, I rolled it down to Nove$65c of Delta=0.39 for a credit of $0.50, even though the outlook of IYR has not been damaged by the market yet.

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Roling up IYR diagonal

IYR seems to have bottomed in the last 3 weeks. It jumped today and the delta of Nov$64c reached 0.7. So I rolled up to Nov$67c of delta 0.15. The overal short delta for my IYR positions is about 0.35 now, in alignment with changed bullish posture for it.

If market confirms the bullish projection, I'll add more IYR bullish positions next week.

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More Iron Condors for November Option Portfolio

In the last few days, I continued to build my monthly option income portfolio. Market are relatively calm with downward pressure. The portfolio looks good with one more position to be added next Monday.

With one week left for Oct, I rolled IYR Oct$64c to Nov$64c for $0.61, still slight bearish on it.

Rolling down IYR diagonal call spread

As IYR Oct$66c has its delta reduced to 0.1, I continued to roll down the diagonal to Nov$66c of delta 0.41, which is a little higher than what I usually do. It reflects my slightly bearish posture for the next couple of weeks. The credit was $0.70.

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Rolling down of IYR Diagonal Spread

As market weakens, IYR fell quickly. Since general market started rolling down for a few days only, there is some potential for it to go down further. Rolled Oct$66c to Oct$64c(delta=0.56) with a credit of $0.92. The new short delta overall is 0.37. This reflects my short term bearish posture.

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Rolling down IYR for diagonal call spread

As delta of IYR Oct$68c dropped to 0.9, it is rolled down to Oct$66c of delta 0.4. The delta of Oct$67 is 0.2.

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Roll out of IYR for bull call diagonal spread

IYR creeped up to the point where Sept$66c has delta=0.65. Roll out to Oct$67c(D=0.4) and $68c(D=0.22) for a combined Delta of 0.31.

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