Kudos to MMs

Delta on the Aug 1270 Calls, .70. Delta on the Aug 1 1300 Calls, .55. No hedges anywhere to be seen. Well in the green now. Recovered the 8 point loss, and many times that now (about +30.)

Nothing to do. Next stop 1342. Let it ride.


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I'd say the next stop is 1265.

 

Some minor resistance 1320 ish. I doubt it is of any consequence, but there will be some profit taking there.

 

thank you for your response.

 

Nothing to do from a strategical point of view (although see below). Today will probably be a very quiet day, with a slight gain or maybe just ending somewhere close to 1320.

I added a futures hedge (I needed to hedge about 200 deltas per unit since my deltas are 85x2 units for the 1270 calls, and 65x1 unit for the 1300 calls). I don't know why, but I don't want to go into this long weekend unhedged. I will remove the hedge very early Tuesday morning or late Monday night. There are substantial profits to defend here, and I don't want to worry and I want to enjoy my weekend.

"FV" says SPX is gigantically undervalued.

 

Which means it will go down and down

 

Making mistakes on the tail end of an option position as it goes from ATM to DIM costs more than early on. I just left on the table 14 * 2.5 units * 50 = $1750 per position total units. % wise, mistakes compound as your options go to 100 delta.

In fact, this is the asymetry you want in a trend trade, because once the trade is going your way, you know you are right, and that is when you want it to add to your position, which delta does naturally when long options. When you are wrong, you want to take away from your position, which delta does naturally again. On the other hand, I don't know how to fix the mistake I just made.

I didn't need to put on the hedge early in the morning. I could have done it sometime late morning. But that is just hindsight. Oh well. Live and learn.

 

The most important data point is the close, you should have just waited for the close to hedge.

 

1340 - the model does see something.

it still has this tendency to drift away from reality. it used to drift lower, now it drifts higher. i am guessing that if one were to use an adjusted FV that is periodically brought back to the current SPX value in some arbitrary way then the numbers would not be so confusing.

for example, today one would look at FV*, which is FV forced to be matched to SPX ~1 month ago.

 

I bet the "model" is a linear regression of some sort basically useless for a random walk!