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RUT M3 Trade Journal – July Entry (JW's Log)

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38 replies, 12 voices Last updated by John Locke 5 years, 1 month ago
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    • #8892

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

      Justin,

       

      It is likely the challenges you are having is directly due to ONE software. The conditions in general have not been great but you should be doing much better than you are assuming you are following guidelines of course.

       

      Generally you can get away with ONE in more normal markets but when the trade is pushed ONE can be problematic.

       

      John

       

      John

    • #8879

      Paul Booth
      Participant
      @paul@paulbooth.net
      Points: 554
      30 Day Affirmation Challenge
      Rank: Freshman

      Thanx for the update Justin. Sorry about the loss.

    • #8878

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      I ended up taking off my position today for a loss of roughly $2,200 or 7.3% planned capital. I have been backtesting this trade using a deeper ITM call and would be down about half of the live position I traded using a different call.  Rest assured, I will be using a much deeper ITM call going forward.

      <!–nextpage–>

      Additionally, I will not have access to the markets next week so I won’t be putting a position on until the following week (July 11th week).

    • #8866

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      Wow, what a day!  I made a small adjustment, however I clearly should’ve made a bigger adjustment as I’m very close to my max loss on the downside due to the large increase in volatility.  I am positioned inside my tent and theta is kicking in with 21 DTE so that will help if we get any sort of stabilization next week.

      Current Position:

      Long 1060 Puts (6)

      Long 1080 Puts (5)

      Short 1090 Puts (3)

      Short 1100 Puts (9)

      Short 1130 Puts (4)

      Long 1180 Puts (5)
      Long 1050 Call (1)

    • #8857

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      With the up move today due to non-Brexit optimism, I adjusted to increase my delta and fix my swoop on the upside.

      Current Position:

      Long 1060 Puts (6)

      Long 1080 Puts (5)

      Short 1090 Puts (1)

      Short 1100 Puts (11)

      Short 1130 Puts (4)

      Long 1180 Puts (5)
      Long 1050 Call (1)

       

    • #8807

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      Attached is a graph of my current position.  Had I started out the position with more flies and a higher delta call, my position would be down about half of what it is currently.  Lesson learned!

    • #8804

      Michael Durojaye
      Participant
      @mdurojaye@gmail.com
      Points: 598
      Rank: Freshman

      This has been a very tough month for M3 or any butterfly traders as the MM’s a have significantly raised the volatility levels just as money was supposed to be coming into these positions. This has the effect of lowering the butterfly prices making them cheap if your a buyer, but not much help if your selling or in a position waiting for theta to kick in, just look at how with little movement & with negative deltas, the T+0 line suddenly got massively depressed, that is what a spike in vol dose to a negative vega trade. Anyone trading in Vix calls, straddles or 1×2 spreads (sell 1put buy 2 puts for the indexes, use calls for VIX), would have benefited from this rise in vol.

      Lets see if some of the vol comes out today after the fed, after which we the mkt will focus solely on the Brexit vote next thursday.

      Notice yesterday there was a silght drop in the vol & fly prices improved, the T+0 line also improved slightly.

    • #8796

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      I rolled 2 of my short 1100 puts down to 1090 today to give myself a little more room to the downside.  I’m down roughly 5% on the trade, but theta is starting to pick up now.

      Long 1060 Puts (6)

      Long 1080 Puts (5)

      Short 1090 Puts (7)

      Short 1100 Puts (5)

      Short 1130 Puts (4)

      Long 1180 Puts (5)
      Long 1050 Call (1)

    • #8792

      Jordan Crews
      Participant
      @jordancrews@gmail.com
      Points: 155
      Rank: Newbie

      Great trade blog…this is a huge help to newer traders…and thanks to those who are offering feedback!

      Keep it coming

    • #8701

      Scott Slivnik
      Participant
      @sslivnik@gmail.com
      Points: 178
      Rank: Newbie

      I learned that lesson with the calls myself.  A few weeks ago I started using calls with a delta around 95 rather than around 85.  The problem with approx. 95 delta calls is the price.  I started using weekly calls to reduce the price of the call.  The call for the trade I shared was opened with a delta of 97 and less than $25 in time premium.

    • #8700

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      The move in RUT has been impressive to say the least and it still appears to be bullish.  This has definitely reinforced the need to use higher Delta calls when entering the trade in the future. Unfortunately, that doesn’t help me with this trade!

    • #8699

      Scott Slivnik
      Participant
      @sslivnik@gmail.com
      Points: 178
      Rank: Newbie

      Finally caved in and rolled butterflies up myself.  SPX was well outside the butterfly pre-adjustment.  The delta was positive and theta was low pre-adjustment. Looks like the rally in RUT was quite a bit more extreme than SPX.

       

       

    • #8698

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      I rolled some more puts up and corrected my vega today.

      Long 1060 Puts (6)

      Long 1080 Puts (5)

      Short 1090 Puts (5)

      Short 1100 Puts (7)

      Short 1130 Puts (4)

      Long 1180 Puts (5)
      Long 1050 Call (1)

    • #8683

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      I rolled up some shorts due to positive vega today.  I also noticed that I was modeling an incorrect strike in ONE.  The correct position and graph are below.

      Long 1050 Puts (6)

      Long 1080 Puts (5)

      Short 1090 Puts (10)

      Short 1100 Puts (2)

      Short 1130 Puts (4)

      Long 1180 Puts (5)
      Long 1050 Call (1)

    • #8656

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      Position as of 06/04/16:

      Long 1050 Puts (6)

      Long 1080 Puts (5)

      Short 1090 Puts (12)

      Short 1130 Puts (4)

      Long 1180 Puts (5)
      Long 1050 Call (1)

    • #8643

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      No trades today, I will provide an updated graph this weekend.  Hope everyone’s trading is going well!

    • #8635

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      I did a reverse Harvey and rolled up my long puts from 1040 to 1050 today.  This rally has been relentless!

    • #8614

      Sherri Locke
      Keymaster
      @KDAKSj4ux
      Going to The Trading Triangle LIVE 2016Ultimate Income Trader Workshop

      We have received a 30 day free trial link from OptionVue if anyone would like to give it a try. Just click here to register: https://www.lockeinyoursuccess.com/optionvue-trial/

      • #8634

        Justin Ware
        Participant
        @wareinjust@hotmail.com
        Points: 1 014
        30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
        Rank: Sophomore

        Thanks for posting this link!

    • #8590

      Chan Chen
      Participant
      @change11417@yahoo.com
      Points: 200
      30 Day Affirmation Challenge
      Rank: Newbie

      I echo David’s suggestion above. Also, I really think, if M3 is going to be someone’s core trade then getting optionvue is totally worth it.

    • #8584

      David Heinzen
      Participant
      @Davidcfi@yahoo.com
      Points: 738
      Successful Options Trader of the MonthGoing to The Trading Triangle LIVE 2016APM2 LIVE Attendee30 Day Affirmation ChallengeThe Trading Triangle Maui 2016Ultimate Income Trader Workshop
      Rank: Freshman

      Hi Justin, thanks for sharing your trades, it would be super if more people did that here!  It helps us out and helps you at the same time.  May I also suggest to use a higher delta call (at least high 80s to mid 90s) when you initiate your M3, regardless of which program you use.  From prices shown there in ONE, it looks like the 1050 call had approx. $11 of time premium in your first pic.  While the RUT has moved higher, your call has increased in intrinsic value, but extrinsic value has been sucked out in a big way.  In your recent pic, the 1050 call shows only approx. $2 of time premium, or a total of $900 in value lost on your purchased call, or about the cost of Optionvue for the year.

      Granted, even a higher strike call would’ve lost some time premium too, but not quite as much.

    • #8575

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      I will be flying during my normal adjustment time so I adjusted this morning.  With the market still chugging up, I took off some flies and moved them up.

      Current Position:

      Long 1040 Puts (6)

      Long 1080 Puts (5)

      Short 1090 Puts (12)

      Short 1130 Puts (4)

      Long 1180 Puts (5)
      Long 1050 Call (1)

       

    • #8572

      Scott Slivnik
      Participant
      @sslivnik@gmail.com
      Points: 178
      Rank: Newbie

      I would like to expand on John Locke’s reply.  Here is Justin’s trade on 5-20 at 14:00cst in OV.  Justin’s initial trade was much more bearish than what ONE showed on 5-20.  Buying the 980 call results in a -5 delta in OV.  The combination of the negative delta and the time premium in the 1050 call hurt the trade during this rally.  The 980 call had nearly $1000 less in time premium.  From my experience, OV’s delta is too negative but not by a significant amount.

       

      I do know of a few M3 butterfly traders that use ONE and are successful.  They use the Volatility Surface modeling that I believe is still only available in beta versions.  They stated that Volatility Surface should be used and not CEV.  I would never use beta software to manage live trades but may be something to look into.  I also know there are M3 butterfly traders that use TOS in Volatility Smile mode and do well.  The default ONE/TOS models are terrible when trading M3 butterflies.  If I had ONE and wanted to stick with it, I would trade iron condor variants rather than M3 butterflies.

       

    • #8567

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      Jason, that is correct.

    • #8558

      Jason Ang
      Participant
      @angjason9@gmail.com
      Points: 498
      30 Day Affirmation Challenge
      Rank: Freshman

      JW, in other words, this current position you are in now allows you buy some time and check and see how the market will move next week before deciding whether to shift your Butterfly or not. Right ?

    • #8549

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      I’m maintaining a flat T+0 line and a slight positive delta over the holiday weekend.  Because of the speed of this move, I’m cautious with rolling up my position, however if the market continues up next week, I’ll roll the entire position up.  One of the benefits of the M3 is that it allows us to essentially hit the pause button on our trade to the upside so I am comfortable waiting a few days in a flat T+0 structure.

    • #8513

      Jason Ang
      Participant
      @angjason9@gmail.com
      Points: 498
      30 Day Affirmation Challenge
      Rank: Freshman

      Thanks for clarification on the term “stretching the tent”. I have a question on this    and I want to hear some of your ideas.

       

      When the price is out of the tent beyond the upper strike, we could possibly make adjustments to ensure that the T + 0 line remains flat and maintain a health Theta and Vega number. However after that adjustment, our price may still remain outside the tent.

       

      Another possibility is is to stretch the tent so that the price now is at least within the tent. Between these 2 possibilities, I believe getting the price between the tent could fetch us better Theta and Vega numbers.

       

      My question is this. Which adjustment would you do ? This is my train of thought. Please correct me if I am wrong. If the market has had a big up run and I think a pullback might happen soon, perhaps I might go with the first option and achieve flat T + 0 line with healthy Theta and Vega number and trend. If I feel that the market will continue to stay out of the tent for quite sometime, it is better to either shift the entire butterfly or stretch the tent so that the market stays within the tent.

    • #8509

      Jwilliam Varner
      Participant
      @nutsryou@hotmail.com
      Points: 770
      30 Day Affirmation ChallengeAPM2
      Rank: Freshman

      As I understand it, in a stretch trade, a condor is used to reposition the upper long position and one or more of the short strikes so that that your position is closer to the edge of or within the tent repositioning the lower leg at the same time unless there is a need to reposition it also so as to stay within your capital limits. Its called a stretch trade because it stretches the tent out. It is simply a different way of repositioning the tent without taking the whole butterfly off. Either way works and I haven’t done enough backtesting to say if one way is better than the other. Justin’s moving some of the butterflies up while leaving others in place achieves the same goal.

    • #8506

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      I did a small adjustment today to flatten out my T+0 while I wait for the market to give me a better signal.  I am debating on whether to do the trade in my post above tomorrow, assuming the market stays put or has a slight move up.  If the market moves up substantially, I’ll take off my current position and reestablish at a higher strike.

    • #8501

      Paul Booth
      Participant
      @paul@paulbooth.net
      Points: 554
      30 Day Affirmation Challenge
      Rank: Freshman

      what is a “stretch” move?

      thank you

      Paul

      • #8505

        Justin Ware
        Participant
        @wareinjust@hotmail.com
        Points: 1 014
        30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
        Rank: Sophomore

        I can’t speak for Jwilliam, but a stretch trade to me would to take off half of my flies and buy new flies at a higher strike.

    • #8499

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

      Yes you need to watch TOS/ONE Greeks. They notoriously underestimate losses with up moves, especially if there is an IV drop.

    • #8498

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      I use ToS’s greeks when entering my trades.  When I entered this position, the long call had a delta of 80 according to ToS which has hurt me this month and previous months.

    • #8497

      Andrew John
      Participant
      @ajohnnd@gmail.com
      Points: 544
      Rank: Freshman

      Justin, I know others have mentioned this to you before; have you compared and analyzed the positioning of your long call relative to what John is doing on his webinar demo trades? You seem to be consistently placing your calls at a higher strike. Are you doing this on purpose? Is this a result of differences in the greeks modeling in ONE versus OV?

    • #8496

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      If we get a continued strong move up tomorrow (~10 points), I’ll likely take my current position off and put on a new one.  One of the things that has hurt me in my M3 trades are large up moves in the first of week of the trade so if we get a smaller up move tomorrow (<8 points), I’ll roll some of my shorts up to reduce my vega and allow me to wait a bit in the trade.

    • #8495

      Jwilliam Varner
      Participant
      @nutsryou@hotmail.com
      Points: 770
      30 Day Affirmation ChallengeAPM2
      Rank: Freshman

      Justin,

      any thoughts on how you will adjust the trade if you find that you need to, will you do a stretch trade, simply take the position off and enter a new one, or are you considering adjusting the trade some other way?

    • #8494

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      Here we go again!  No adjustments today, we’ll see what tomorrow brings.  If we get another substantial move up, I’ll look to roll up my entire position.

    • #8464

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      Position ended the day looking like this:

    • #8463

      Justin Ware
      Participant
      @wareinjust@hotmail.com
      Points: 1 014
      30 Day Affirmation ChallengeThe Trading Triangle Maui 2016APM2
      Rank: Sophomore

      I entered my July M3 position this afternoon with RUT at $1110.  Profit goal and max loss are 10% on planned capital of $30k.

      Current Position:

      DTE: 56
      Butterflies (12): 1030/1080/1130
      Long Call (1): 1050

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