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M21 Planning

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25 replies, 3 voices Last updated by virginie afota 11 months ago
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    • #16379

      virginie afota
      Participant
      @virginie.afota@gmail.com
      Points: 985
      APM2
      Rank: Freshman

      With the recent increase of volatility, I entered a 18DTE (September expiration) SPX Condor yesterday: +3450/-3460/-3550/-3560. For 10 lots, the cost is -$3550 for a max gain at expiration of +$6500 between 3457 and 3556.

      I do not plan to adjust on the downside. I will close the trade if SPX breaks its current up trendline. If that happens, I think I will lose less than -$2000.

      On the upside, if SPX continues to grind up without stalling or retracing, I plan to keep the trade on, possibly taking full loss of -$3550 but also giving myself a chance for a subsequent retracement. If SPX retraces  and shows signs of rebound, I will turn more bullish and I am allowed to adjust on the upside.

      Let me know your opinion on the trade.

       

       

    • #16078

      virginie afota
      Participant
      @virginie.afota@gmail.com
      Points: 985
      APM2
      Rank: Freshman
      • I bought 20 1400 butterflies and a 1510 Call in the July expiration
      • PLAN :
      • I am currently in a neutral mode. There are reasons for RUT to go up or down and RUT is currently at inflection point. NDX and QQQQ_ which have been the leaders in the move up_ and SPX are at a resistance.
      • I want to do a shorter term trade to gain Theta quicker and I have noticed that the T+0 line is still quite flat given the high volatility.
      • In the modified Rock configuration where I enter 20 1400 butterflies and hedge with a 1510 Call, I am well protected on the downside and I am making 130 Theta per day so I can wait.
      • On the upside, I should be fine until 1470 where I will lean bullish. From there, I will likely morph into a more bullish configuration like either a broken-wing butterfly or I will roll up and move my Call lower to gain positive Delta. I can add a Put at that time as well to protect downside On a large move up, I should be fine as well.
      • On the downside, I can hold the trade till 1340 where I believe there is a strong support. But if RUT does not get there in straight line, I will roll down as per the M3 guidelines, if RUT gets to 1390.
      • If RUT gets to 1340, I will want to protect myself for a big move where RUT breaks support and be also prepared for a bounce back at support. Adding a Calendar could be a good solution. Other alternatives would be to drop the Call, buy a put or bring the lower long up.
    • #16030

      virginie afota
      Participant
      @virginie.afota@gmail.com
      Points: 985
      APM2
      Rank: Freshman

      Well, the trade was short lived.

      RUT exceeded by far my exit target and I closed the trade tonight. It was closed at profit given the strong rally thanks to the call protection.

      I think taking John’s advice to be more protective of my risk proved a good idea. While I was expecting the resistance to hold, I could have chosen a bearish butterfly but, in that case, looking at protecting the upside risk with a Call proved a good idea.

    • #16022

      virginie afota
      Participant
      @virginie.afota@gmail.com
      Points: 985
      APM2
      Rank: Freshman

      Thank you John,

      I changed my exit strategy to:

      I will close the trade and move to something else if RUT closes above 1470 or below 1240.

      I also changed the nature of the trade:

      • I will enter 20 butterflies 20 points below the market and add one OTM Call at around 40 Delta.
      • I will not roll the trade up.
      • If RUT passes below 1340, I will scale and add another 20 butterflies centered around 1300 to cover until 1250.
      • If we then get to 1250 and the market rebounds, I will progressively peel out of the lower butterfly. I will then do a more detailed plan with a delta trigger to do so.

      Max gain and loss are $+-5000. I believe this is reasonable even with scaling.

       

      • #16034

        John Locke
        Keymaster
        @john-locke
        Going to The Trading Triangle LIVE 2016Locke In Your Success CoachAPM2Trade JournalsUltimate Income Trader Workshop

        Awesome, great trade! You were “wrong” and still made money!

      • #16033

        John Locke
        Keymaster
        @john-locke
        Going to The Trading Triangle LIVE 2016Locke In Your Success CoachAPM2Trade JournalsUltimate Income Trader Workshop

        Awesome, great trade!

    • #16017

      virginie afota
      Participant
      @virginie.afota@gmail.com
      Points: 985
      APM2
      Rank: Freshman

      Dear all,

      Another attempt for a new trading plan. Feedbacks are welcome !

      • <b>Context</b><b>:</b>
      • RUT has traded in an uptrend since March 23rd. It is approaching an area of resistance where lie the 200MA, the 61.8% Fibonacci retracement and the 1460 which acted previously as support. Therefore, in my opinion, RUT would at least stall, or possibly retrace when getting to the 1430-1460 levels.
      • On the downside, in my opinion, 1340 is a support but the area around 1250 is a much stronger support.
      • <b>Trade parameters:</b>
      • I would like to construct a trade that reflects my expectations of a range between 1460 and 1250. I would tend to lean a bit more bearish from 1430 and bullish from 1250.
      • The market is choppy with a high ATR so I prefer to adjust slowly.
      • <b>Exit: </b>
      • I would exit the trade and move to something else if RUT goes below around 1250 or above around 1460.
      • <b>Trade Set-up</b>:
      • At the moment, I can enter a 50/40 broken-wing butterfly 20 points below the market which I can buy for a small credit. I will not roll it up but sit on it if RUT continues to go up.
      • If RUT reaches around 1450, I can scalp some small butterflies.
      • If RUT passes the short (at around 1370), I will bring the short up and morph into a butterfly, like trading a M3.4u.
      • If RUT passes below 1340, I will scale a second butterfly to cover the range till 1250.
      • <b>Max Loss</b> and target gain is -+$2500 with no scaling +-$5000 after scaling.
      • #16021

        John Locke
        Keymaster
        @john-locke
        Going to The Trading Triangle LIVE 2016Locke In Your Success CoachAPM2Trade JournalsUltimate Income Trader Workshop

        I would exit the trade and move to something else if RUT goes below around 1250 or above around 1460.

        If you plan on exiting with a down/up move, I’d like to see it clearly defined or at least given a range (not use “around”)

        If RUT reaches around 1450, I can scalp some small butterflies.

        I’d consider defining these as individual trades with entry, exit and risk parameters

        Again, I’d avoid “around” too open to interpretation

         

         

         

    • #15989

      virginie afota
      Participant
      @virginie.afota@gmail.com
      Points: 985
      APM2
      Rank: Freshman

      Thank John, I would benefit a lot from your comments and I will log in tonight.

      I reviewed the position this morning. Please see my observations below. I am concerned that the -$7500 max loss does not give enough breathing room to the trade. In my overall trading plan, I am allowed to go to -$10,000 and I am leaning towards this. Happy to receive your perspective on that decision.

      I also wanted to break down the two parts of the trade:

      The Brokenwing butterflies:

      • The BWB if RUT goes up:

      –If RUT goes up, my downside is capped at current level so Delta effect is minimal

      –If RUT goes up, I am negative Delta. If Volatility decreases, I would benefit slightly from a pop of the T+0 line

      –Overall, if RUT goes up, there is not much effect on P&L

      • The BWB if RUT stalls:

      –Theta is about 125 so I will gain a bit of P&L.

      –The T+0 line will start to go up for a maximum P&L of around +$2000

      • The BWB if RUT goes down:

      –My Delta is flat and will become positive, creating negative P&L from 3000

      –As time goes, my delta will become negative and my downside risk will diminish

      –If volatility goes up, my downside risk increases and my T+0 line collapses.

      –If RUT comes back down to the bottom of the range at 1250 quickly, I am expected to reach -$7500 max loss.

      • The best scenario for this part of the trade is a stall or even a run up followed by another move down
      • The worst scenario is a move down right away and an increase in volatility

      Calendars:

      • The 5 Calendars lose P&L if RUT goes up or down.
      • The 5 Calendars make money if volatility stays elevated or if the front month falls more than the back month.
      • If RUT goes up, I would anticipate the tent to shrink but my T+0 line might go up. I would be at best breaking-even and most possibly losing money to the tone of -$1500/-$2000.
      • If RUT stalls, I would stay on top on my T+0 line but volatility might drop leading to a P&L loss of about -$1000.
      • If RUT goes down, I would anticipate the tent to slightly go up but my T+0 line to decrease. I would possibly breakeven in a sell-off.
      • The best scenario for the calendars is a stall with elevated volatility. It is possible but not fully realistic. The scenario where the market sells off within the range is fine for the calendars.
      • The worst scenario for the calendars is a rally with a solid drop of the back month.

       

       

       

       

       

    • #15978

      virginie afota
      Participant
      @virginie.afota@gmail.com
      Points: 985
      APM2
      Rank: Freshman

      Here is an update on the current trade:

      • What happened to the trade so far:
      • Since my last update on May 3rd, RUT initially stayed in the identified range 1250-1350 but then broke what I thought would be a support at 1250, failed to follow through and quickly gapped up back to resistance
      • I had a 1250 fly on May 3rd. The move on May 8th led me to change my plan and take a more bullish stance: I closed the 1250, entered a 1300 broken wing butterfly.
      • Then, the market reverted right after and on May 14th, P&L was about -$2325.
      • Then, as RUT pierced through 1250, I again changed my market stance to a bearish scenario where RUT had broken down, would possibly backtest 1250 and then continue on the downside. I closed the 1290 fly, roll it down to 1180 and as RUT came back up, I added another 1200 fly.
      • Then, the market reverted higher again with a large gap up. At the end of day on Friday, P&L was -$4425 and on Monday, it reached -$6500.
      • On Monday, I bought 5 1330 Call calendars and did not reposition the butterflies. The rationale of the move was the following: I will not fight the trade to the upside and risk another whipsaw. If the market stalls, I would like to prop up my tent and increase my theta. If the market falls down, I will make money on my butterflies and I have a chance to get out of the calendar at break-even or better as volatility pops up.
      • My current plan:
      • In my opinion, we are at a market inflection point. There is a chance that the gap is filled back but there is also a chance that it is a runaway gap and RUT makes another run after this month of consolidation.
      • Upside case: If SPX breaks the 200MA and resistance on the upside materially, I am likely to reach my max loss of -$7500 and close the trade.
      • Range-bound case: If SPX and RUT stay in the current range, I stay as is and monitor the calendar individually for profit target. I will make a new plan if the calendar reaches profit target.
      • Downside case: If SPX and RUT fill the gap and break impulsively on the downside. I will close the calendar and keep trading the bearish butterfly strategy.
      • I am modelling one calendar independently: target profit is about $1000 and it is reasonable to set max loss at cost of -$1634, but it is unlikely to reach max loss given I will close the calendar if RUT moves out of the range.
      • Exit:
      • Target P&L is now breakeven.
      • Max loss is also -$7500.
      • #15982

        John Locke
        Keymaster
        @john-locke
        Going to The Trading Triangle LIVE 2016Locke In Your Success CoachAPM2Trade JournalsUltimate Income Trader Workshop

        Virginie,

         

        I’m not sure what I’ll have for time but is it OK to discuss this on the Pro Meeting tomorrow?

    • #15920

      virginie afota
      Participant
      @virginie.afota@gmail.com
      Points: 985
      APM2
      Rank: Freshman

      Here is an update on the current trade:

      • What happened to the trade so far:
      • Since April 21st when I put the trade on, RUT broke what I thought would be a resistance at 1250, went up to 1350 and retraced to 1250.
      • I initially entered a 1150 fly. I rolled it to a 1250 fly, then to a 1290 fly. And as RUT went down, I rolled back down to a 1250 fly.
      • I did not follow my initial plan to add a second fly as RUT pierced through quickly the 1250 resistance completing a cup pattern.
      • My P&L is currently -$2000. It is recoverable.
      • My current plan:
      • In my opinion, there are two scenarios:
      • 1. The market continues to consolidate: RUT stays in a 1250-1350 range.
      • In that case, I add a second butterfly at around 1310 centered at 1290. At that time, if I do not mitigate the delta, I will have lost another another -$500 depending on the timing. Then, if RUT stays in the range, I will collect theta.
      • Then, I will close the 1250 if RUT breaks 1350 to the upside and I will close the 1290 if RUT breaks to the downside below 1250.
      • In the meantime, if RUT rebounds at 1250, I can also mitigate negative Delta by bringing the upper leg in and maintaining a positive Delta.
      • 2. The market has started to roll off and completed its bear rally. RUT is breaking below 1250
      • In that case, I will trade according to the bearish butterfly rule. My first roll down will be 1210. I need to be careful of a bottoming at 1150.
      • Exit:
      • Target P&L is $5,000 and $7500 on two butterflies. If in my opinion, the market can stall, I am allowed to leave the trade after target P&L.
      • Max loss is also -$5000 on just one butterfly and -$7,500 on two butterflies.
      • #15933

        John Locke
        Keymaster
        @john-locke
        Going to The Trading Triangle LIVE 2016Locke In Your Success CoachAPM2Trade JournalsUltimate Income Trader Workshop

        So far we are holding range 🙂

    • #15890

      virginie afota
      Participant
      @virginie.afota@gmail.com
      Points: 985
      APM2
      Rank: Freshman
      • I do not have any option trade on. I am ready to enter a new trade for the June expiration.
      • PLAN:
      • Context: In my opinion, we are approaching resistance and a turning point for the market.
      • I am still leaning bearish but I am also conscious that if the current resistances are broken, that will be very bullish and I will change to a bullish stance.
      • Entry:
      • Enter a bearish butterfly that I will scale only once. I would like to have two butterflies if RUT reaches 1240 or 1250 depending on my entry. That means, either RUT is 1220 or slightly above and I enter a 1200 butterfly, or I enter a single lower butterfly which I will roll first. For example, if I enter a 1180, I will roll it at 1220 and then I will add a second one at 1240. If I enter a 1190, I will roll at 1230 and then add at 1250.
      • Adjustments:
      • If SPX passes the 2950 resistance, NDX goes over 9100 and RUT passes over 1250. My opinion will turn more bullish. Given T+O is fairly flat, I estimate the negative P&L not to exceed -$500. In that case, I will close the lower butterfly, bring the upper leg in, possibly bring the lower leg lower if the delta limits require it and trade a M3.4u.
      • If RUT rolls off at resistance as expected, I will continue to trade the bearish butterfly but I need to be mindful of reversals up. 1140, 1050 and 950 are three important levels where RUT could reverse. I will get prepared to turn more neutral if I observe signs of reversal around those levels (evidence of other indices reversing and bottoming price action). Turning more neutral means adding a Call to reduce Delta to close to zero. Note that away from expiration, delta is minimal at the moment so I might not need to add a call and can maybe just leave the position unadjusted. Delta within +-25/+-25 are acceptable. However, in that case, I will not continue to add new butterflies as the market would have had time to rest and the likelihood of breaking 1250 would be higher. I will just roll the butterfly/butterflies (if I have already two) up to stay under the tent.
      • Exit:
      • Target P&L is $5,000 on just one butterfly and $10,000 if I have two butterflies. If in my opinion, the market can stall, I am allowed to leave the trade after target P&L.
      • Max loss is also -$5000 on just one butterfly and -$10,000 on two butterflies.
      • #15897

        John Locke
        Keymaster
        @john-locke
        Going to The Trading Triangle LIVE 2016Locke In Your Success CoachAPM2Trade JournalsUltimate Income Trader Workshop

        Great improvement! These are getting much better.

    • #15865

      virginie afota
      Participant
      @virginie.afota@gmail.com
      Points: 985
      APM2
      Rank: Freshman

      My trade expired at max loss and this is my post-trade review:

      • <b>Entry:</b>
      • With hindsight, I entered on Friday April 3rd at a local bottom while I thought RUT was breaking support and would continue down. The other indices posted an inside bar on that day. On Monday April 6th, the inside bar was confirmed on the upside and set the pace for a bullish week.
      • Possibly the mistakes made were two-fold:
        • Choose a better entry point at resistance, rather than play a breakdown of a minor support
      • <li style=”list-style-type: none;”>

      • Wait for confirmation of the breakdown of the other indices. An indication would have been a break to the downside of the Friday Pinbar.
    • <b>Adjustments:</b>
    • No adjustments planned, no adjustments made
    • <b>Technical </b><b>Analysis:</b>
    • April 6th: The market did not react as expected. I wrote in my journal that the “indices are trading more bullish than anticipated.” At that time, P&L was already -$4650 and I wrote that there was “still a possibility for the trade to work and it was worth betting the additional $1500 to play this scenario”.
    • <b>Journaling:</b>
    • Good and regular journaling plus feedback from John Locke
    • <b>Exit:</b>
    • P&L was already close to max loss on Thursday April 16th when RUT traded down. There was no opportunity to save a few $ from Max loss.
    • Remarks:
    • Given the speculative nature of the trade, I think it was a good idea to do this trade with a structural max loss.
    • A two weeks expiration did not give me a lot of time to be wrong and the trade was lost already the day after entry. I do not consider that as a mistake as I was aware of it and I also decided on a short expiration to make a maximum gain if the trade was going my way.
    • I think I made a mistake at entry. I rushed the entry on what I thought was a breakdown but in reality, I entered at a local bottom in an environment where weakness was not confirmed on the other indices.
    • Several classical income trades did well on April expiration. A V32 mid March was an excellent trade for example. I should have continued to monitor the guideline trade to at least give me more chance to spot opportunities.
  • #15885

    John Locke
    Keymaster
    @john-locke
    Going to The Trading Triangle LIVE 2016Locke In Your Success CoachAPM2Trade JournalsUltimate Income Trader Workshop

    Or perhaps choose a point where the bias changes and use that to exit the position at a small/smaller loss

  • #15853

    virginie afota
    Participant
    @virginie.afota@gmail.com
    Points: 985
    APM2
    Rank: Freshman

    Thank you John for your feedback.

    The trade is expiring this week and here is an update:

    In my opinion, the medium-term context is the same as the one I described in my previous post. I believe we are observing a bear market rally. NDX has lead that rally and it is now at resistance: at 61.8% Fibonacci. In 2007, it reached a high of 2239 on 31/10 then bottomed 11% lower and retraced to 61.8% Fibonacci, made a double top end on 26/12 before going breaking a new low. It also moved above the 20, 50 and 200 MA just like it has done in the current rally.

    RUT is trading 150 points higher than on my entry but so far 1250 acted as a resistance as discussed. At expiration, the break-even for the trade is 994. I would need a 200 points move down to break-even at expiration. There are three days remaining, including today so it is very unlikely I can reach break-even.  Reaching 1100 is still a possibility. I had accounted for a max loss and I am fine with that outcome. However, if I can save $1000 by closing the trade early if RUT reaches 1150/1100 , I will do it.

    I will take on board John’s comments on my entry point. I entered at a local low. Given my opinion, an entry at what I thought was a resistance of 1140 was a better entry point. Actually, another entry if RUT back-test 1250 again is also a better entry.

    I am going to post a new trading plan for my next trade.

     

     

     

    • #15860

      John Locke
      Keymaster
      @john-locke
      Going to The Trading Triangle LIVE 2016Locke In Your Success CoachAPM2Trade JournalsUltimate Income Trader Workshop

      Thanks for the update

  • #15807

    virginie afota
    Participant
    @virginie.afota@gmail.com
    Points: 985
    APM2
    Rank: Freshman

    I also made a new trade on Friday and this was my trading plan. In this market, I prefer to make simpler directional trades and leave to paper trading our usual income strategies. This might sound outside this community’s focus but, on the other hand, it still involves options…

    Context:

    In my opinion, the overall market is bearish:

    • Monthly long-term indicator bearish on $SPX, $DJI and RUT. NDX is the only indice which has not broken long-term trend.
    • The order on Moving Average is 20/50/200
    • Lower highs and lower lows
    • So far, SPX, $DJI and NDX have only rebounded to 38.2 Fibonacci retracement. RUT only to 23.6
    • SPX, $DJI, NDX and RUT were going up with negative divergence.
    • In my opinion, the fundamental picture is not favoring a V shape bounce. In addition, in my opinion, the dire economic situation and its consequences could lead to more than -38% retracement on the SPX after such a long 11 year rally.

    The indices (SPX, $DJI, NDX and RUT) trade with a high correlation at the moment. In my opinion, we have had a dead cat bounce and the indices have a higher probability of at least revisiting the previous lows. RUT trades the weakest: it has had the largest drawdown so far, it did not reach 38.2 Fibonacci retracement on the rebound, it broke  a temporary 1h support at 1050 while the other indices have held that weak support so far.

    I find it harder to express a bearish opinion via a butterfly rather than a put bear spread for two reasons: if I am right and the RUT sells off, volatility might go up and might put me in drawdown. In addition, RUT can exceeds the previous lows and go outside the tent if I choose to trade a butterfly.

    I also prefer to choose a shorter maturity like mid April to express this view as I have more chance to expire the trade at profit. A longer maturity would give the trade more time to play but also would create more uncertain outcome even if RUT sells off as volatility might increase and hold the P&L away from the expiration line.

    I am happy to have feedback on those statements above.  

    Trade:

    Put bear spread : Buy 1000 Put and Sell 980 Put for April 17th expiration at $6.2. Cost of $6.2 for a potential gain of $13.8 or more than 2×1 risk/reward ratio. I like the fact that my downside is structurally capped, in a very volatile market.

    Positive scenario: RUT revisits or extends the previous lows of 966. My breakeven is at 993 and at expiration, my max gain starts below 980. I chose the April 17th maturity to give me a chance to expire the trade at max gain.

    If RUT were to sell off aggressively and pass 980 early, I can look at taking partial profit by selling 1000 and buying 990 Put, and maybe create a no risk trade with a smaller max gain.

    If RUT lingers around 1000, we will be in a scenario where the trade can go either way. I sized the trade at a maximum loss of -$6200 and I am comfortable losing that amount. So I will calmly study the market technicals and decide to keep it on or take a smaller loss.

    Negative scenario: RUT rebounds and creates a higher high by trading above 1180. In that case, I anticipate that P&L will be very close to max loss and there will be little advantage of closing the position. I would have lost the trade at this stage but keep a low cost option if the RUT would go back down again.

     

     

     

     

     

    • #15818

      John Locke
      Keymaster
      @john-locke
      Going to The Trading Triangle LIVE 2016Locke In Your Success CoachAPM2Trade JournalsUltimate Income Trader Workshop

      Virginie,

      Thank you for posting and yes this is very appropriate.

      In your initial statement I’d like to see an “if” statement as to when you decide you’re wrong and perhaps what you’re going to do about it. Even it’s simply to exit and regroup. This is assuming of course there is something that could happen to switch that opinion.

      I think the trade itself is fine. I like the low structural risk in this environment.

      An “opinion” comment on my part is I’d rather wait and see if we bounce to a resistance level and place this trade at higher strikes so I could potentially profit without a breakout to the downside.

      That said, learn to trust your own opinion.

  • #15775

    Anil Rajgor
    Participant
    @arajgor2000@gmail.com
    Points: 859
    Rank: Freshman

    Hi John,

    Thank you for your feedback – I’ve amended the plan taking your points on board (https://www.evernote.com/shard/s119/sh/c408ae2f-da29-dc92-9180-8b4f9bf0703b/8f4293a546679a3d95ab6fa2d2340b0c).  Is it now looking better?  Essentially, I plan on staying in a Modified Rock / M3 trade in April expiration cycle until price hits 0 or 1260 or I hit my max loss or profit target.  Once 1260 is hit, a new plan will be constructed with a Bearish Butterfly entry with the criteria I mention in this plan – that is just a scenario that I perceive as being a high probability entry and that immediately came to me as I was constructing this plan, so thought I’d put some loose numbers in there so I have it documented.  I realise that to the downside, the 860 and 600 levels may be good entry points for a BULL trade, but with the choppy conditions we have, I feel more comfortable staying in a Butterfly structure.

    Regards,

    Anil.

    • #15781

      John Locke
      Keymaster
      @john-locke
      Going to The Trading Triangle LIVE 2016Locke In Your Success CoachAPM2Trade JournalsUltimate Income Trader Workshop

      Yes, that is better. Something you may want to consider is the way that modified ROCK position is likely to play out with various price movement scenarios and if there are other exit scenarios or scenarios where you might change your profit target or max loss numbers. It may be challenging to do so given the environment but just making the attempt to play out the trade in your mind can bring a lot of insights and give you valuable information for the next trade plan.

      Something you should realize visualizing the trade is that it would be very unlikely to hit $1500 profit if you stay in modified ROCK or M3 position of that size. You’d have to either have to let those trades go way outside standard guidelines and take a directional bet or be in ROCK position. And with this specific environment where RUT is moving 70 points a day, you’ll need a considerable environment shift for the standard ROCK position to be effective as well.

       

  • #15762

    John Locke
    Keymaster
    @john-locke
    Going to The Trading Triangle LIVE 2016Locke In Your Success CoachAPM2Trade JournalsUltimate Income Trader Workshop

    ” RE: your question….. Also, given the crazy skew we have at the moment, is it worth buying a low Delta OTM call for a Modified Rock entry when the Butterfly itself is pretty flat delta?  I plan on entering this position tomorrow, but am wondering if buying an OTM call will be beneficial given that they are pretty expensive (a 1 delta call costs around $5)?”

    The analytical software is projecting a T+0 profile that is obviously not correct, it’s actually projecting + Delta, and therefore we need to assume that Greeks are unreliable. This being the case we need to draw on experience and essentially guess what the correct Delta would be.

    That said, yes I would use a call, you are compensated of the extra cost of call with the low cost of the butterflies.

    Using a 1 lot I’d buy a call in IWM to get closer to the money

    Comments on the plan:

    Good points:

    You identified potential psychology issue and adjusted trade size

    Clear max loss and planned capital levels

    Trade size is identified in secondary trade

    Areas for improvement:

    RTE The exit conditions are the most important feature of a trade plan:

    I’d like to see some more defined Reasons To Exit and remove the reasons that you’re not going to abide by:

    “Stop out 1310-1320 area”  being more specific would be good. What is actual exit point?

    Exit metric should have either defined fixed price level (you posted an area in plan), a defined estimated draw down level with XX points of price movement, and/or a scenario trigger. In other words if something happens outside expectations and the trade starts to go sideways.

    I’d argue that we currently have a technology failure in OV meaning we already may not know the implications of certain price movement on entry which is a RTE

    You mentioned you are psychologically compromised which is also RTE. Yes I know that you are addressing this with trade size but which is good, however this is not longer a reason to exit but rather and accepted risk that has been accounted for with trade size.

    Other suggestions

    You should consider and record what your expected draw down likely to be at technical exit points as well as in various stages of transitions during the trade considering DTE (the effect of time passage on P/L and T+0 risk profile)

    Check viability of plan expectations: Consider future positioning and consider things like: Is it reasonable to expect RUT to go xx points without being drawn down close enough to max loss where if I get a “normal move against me”? (for the current environment and expected environment)  IE. What are consequences of a gap up through technical exit number, when the position is under xx DTE?  Am I willing to accept the extra loss?

    Plan was not clear to me:  Initially in plan, I got impression you were going to wait for 1280 as entry trigger for a BB

    In design specs I see a mod rock entry converting to M3/ROCK AND then going to BB at 1280 in different cycle.  This is fine but if a flowing trade, I’d like to see a plan for each trade as well as how being down or up money in trade 1 is going to effect your entry and/or decisions in trade 2

    Are the capital parameters and/or exit parameters different for trade 1 and trade 2? Does P/L on trade 1 affect trade 2?

    At what point do you give up on BB entry trigger or can something happen that would make trigger no longer valid? trigger no long valid?

    I would also like to know if you’re looking forward to what the next move would be if the market doesn’t hit conversion point or legs down.

    I’d also like to see acknowledgement that analytical model is not currently reliable and how you are  planning to deal with that.

    Summary:

    This is a good start and I compliment you on making an effort. Very few traders even get this far.

    Always remember, M21 is meant to allow you to create great, purposeful decisions with your trading. M21 is NOT meant to confine you to M3/BB/ROCK

    Consider:

    Is there easier money to be made elsewhere. M21 is not meant to lock you into M3/BB/ROCK those are merely examples of effective strategies one “could” use as part of your plan. M21 is meant to free you from rigid rules that may not make sense in the given situation and allow you to be effective at adapting to changes during the trade. Cash, buying stock, verticals, puts, calls, calendars, or any strategy you understand should also be considered.

    Realize: The actual market analysis and your initial market entry are MUCH less less important than being very clear about having expectations of how the trade is going to play out, identifying when things are not going as expected, knowing what factors change your opinion, and knowing what you are going to do about it.

  • #15751

    Anil Rajgor
    Participant
    @arajgor2000@gmail.com
    Points: 859
    Rank: Freshman

    Also, it would be great if other people can share their subjective trading plans BEFORE the trade occurs so that we can analyse, critique, learn and improve our planning process together as a group.  Please feel free to post your plans in this forum – lets improve and make some huge returns together 🙂

  • #15750

    Anil Rajgor
    Participant
    @arajgor2000@gmail.com
    Points: 859
    Rank: Freshman

    Hi all,

    Here is a M21 trade plan I’ve constructed.  Any thoughts / feedback?

    https://www.evernote.com/shard/s119/sh/c408ae2f-da29-dc92-9180-8b4f9bf0703b/8f4293a546679a3d95ab6fa2d2340b0c

    Also, given the crazy skew we have at the moment, is it worth buying a low Delta OTM call for a Modified Rock entry when the Butterfly itself is pretty flat delta?  I plan on entering this position tomorrow, but am wondering if buying an OTM call will be beneficial given that they are pretty expensive (a 1 delta call costs around $5)?

    Regards,

    Anil.

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