TRADES 14 & 15

“Oh when I was a kid oh how magic it seemed
Oh please let me sleep it’s Christmas time” – Pearl Jam

I exited trade 13 which was my first butterfly in crude oil.  This was closed for a 15.4% gain in 13 days.  This is net of commissions, which unfortunately are waaaay higher than they are on an index like SPX.  Without commissions this would have been closer to 18%.  I definitely need to re-negotiate with TD Ameritrade on futures commissions.  I’ve had success getting them to lower commissions on futures options once and equity/index options twice, so they are definitely open to negotiation if you can show them some volume.  After I have a few crude oil trades completed, I should be able to get them to lower it again for futures options.  Just need to tell them that a move to Interactive Brokers might be in the future if they can’t compete.

Regardless, even with the high commissions on futures, this worked out to be a great trade.  It has solid positive expectancy and much better volatility premium than the SPX.  I’ll gradually be increasing the size of this trade as I get more comfortable.

Trade 14 is another broken wing butterfly on /CL.  Strikes are 60-57.5-54 on the April contracts.

Trade 15 is a broken wing butterfly on SPX.  Strikes are 2700-2655-2600 and the expiration is February 9th.  Slight bullish bias, but still a flat t+0 line.

Volatility trade on the XIV is now at $135.28 which is up 26% in 37 days.  I’m continuing to watch this closely for an exit if it looks like the VIX is moving out of contango.

I’m not sure what to expect in the market when the new year hits.  Typically, the last few weeks in December and the first few weeks in January are bullish.  However, with the large gains that fund managers are sitting on, we could see some early selling in 2018 to capture those gains which will avoid taxes in 2017.  However, I still think that money has to go somewhere and it’s not going into fixed income at these low rates.  So I’m guessing it’s right back into the market at some point.  I think we see some rotation into under-performers, but people may hold onto some cash for a while to be very prescriptive about those investments.  We’ll see what 2018 brings!

Merry Christmas!