“You give me miles and miles of mountains and I’ll ask for the sea” – Damien Rice

A quick update on the 3 trades I’m currently in right now.

I’ve had to roll up the strikes on trade 10 and net of those adjustments I’m up a whopping 1.1% over the course of 3 weeks.  We’ve had some whipsaw action the past few days with volatility and the market which isn’t great on these trades.  Before that the market was moving up fast which forced an adjustment.  Below is what the profile currently looks like.

Trade 11 was closed yesterday for a 1.3% loss after 12 days.  I probably could have held longer to break-even or make a small profit – however, in the event that the market makes another run to new highs over the next few days, I would have been in trouble.  Delta was too negative to justify hanging on.

I’ll probably look to put on another broken wing butterfly in the next few days.  I’m also looking at doing a similar structure with crude oil futures – ticker /CL.  Volatility is a little higher there, which creates a higher risk/reward profile.

My XIV position (trade A?) is currently at $119.86 which is up 11%.  I don’t see any reason to close at this time as we are still very much in contango.  I’ll continue to monitor closely since this product requires a quick exit if it looks like contango is going away.  I’m also looking at ways to incorporate options into volatility trading, but I haven’t found anything that looks worthwhile yet other than maybe some long-term puts on VXX.  Still a lot of work to be done in this area.

The main idea with the volatility trades is to help smooth out the overall equity curve of a portfolio.  When the market neutral trades are struggling, it’s generally due to big moves up in the market which have been common this year.  An instrument like XIV does very well when the market is moving up and volatility is low.

I’ve added a results page to this website to track both the broken wing butterfly and volatility trades.  I’ll be updating that monthly.