My Bread and Butter Trade

[ernsttanaka]

Yesterday, I had to make another adjustment. Taking of again a 790/840 spread would have create a (for me) too big an imbalance between the put and the call side. Of course you can put you head in the sand and just keep removing 790/840's but a market which returns south would then really have the potential to hurt. So I preferred to remove a 790/840 in combination with a put spread 740/790. In effect removing a 2 lot Iron condor (see below).

Now I "waiting" for a couple of days of weakness. I am giving the market as much time as I can, expecting that window-dressing @ Q-end will follow by some selling into the long weekend.

To Ken's question - I have been toying in my analyze page with adding a new ATM butterfly on top of this trade. I have been playing that in combination with removing the last of the prior iron butterfly. For so far I have decided to sit and wait. Partly because I am on vacation and have less screen time.

By itself I have nothing against adding a fly here ATM, but I would not place the fly above the market. We already made a big move up, some consolidation would be very normal. The usual aspects come into the equation when you add to a trade; Risk and possible reward. Getting closer to expiration you have to appreciate the risk in Gamma. Gamma is becoming larger closer to expiration and is more factor the daily trade management. Due to gamma you will have bigger swings in daily P/L.

I attached three graphs;
1. my risk graph
2. my adjustment
3. my account page giving you an overview of what I have left in this small 5 lot account.