TRADE 3

“And the sun went down as I crossed the hill.  And the town lit up, the world got still” – Tom Petty & The Heartbreakers

One of the best ever – his songs are part of life’s soundtrack and will remain timeless.  Thank you, Tom.

I hit an exit point on trade 2 after 14 days and a 1.1% loss.  Volatility skew is extremely steep right now and as the market continued to move up, the right leg of my butterfly was getting crushed.  It was time to exit and put on a new trade.  Most of the time, losses on these trades are smaller than the gains.  Also, the days in the trade are usually less.

Trade 3 is another SPX broken wing butterfly with strikes at 2560-2525-2465.

Here is the 7 day step view.

For those not familiar with Think or Swim’s software, each curved line represents the theoretical P&L in 7 day increments – today, 7 days, 14 days, etc.  The vertical line represents the current SPX price around 2542.  This is another great way to look at the structure.  The biggest profits will come when the market stays relatively neutral and time decay does it’s work.

I’ll be updating this trade in the coming weeks.  I’m also planning to post the statistics for the trades I’m documenting here.

We are currently in Mallorca for another 2 days and then off to Seville.  It’s been interesting adjusting to trading in this time zone.  We are usually out and about late morning and early afternoon.  Market opens at 3:30pm here so that means later in the afternoon we are back in our apartment so I can check on things before we head out for dinner.  This also works for some nap schedules around here.  Can’t say I like or dislike trading at this time – since we are on vacation, I definitely prefer it over the 6:30am market open I’m familiar with.

Time for another Estrella.