Following the concern from Overnight, I have defined the following structure (the last 4 options in the FOPs list): The 3000 (short) and 3500 (long) have respectively ν = 3.44 and 7.06.
End of the week. It looks like some of the concerns about IV did not materialize. On the opposite the mkt popped up: About Wednesday's CPI there are a few discussions. For instance this one on ET. Anyway, it does not really matter in our approach, because it is not based on any prediction. The possible "protective structures" one can define have mainly the purpose to address the possible investor/trader concerns, while the automated scalping-hedging engine itself is already capable to provide an effective protection level, by buying the possible corrections. Current situation PNL 187K, commissions 16.1K, 195 days elapsed so far, current funds usage 39.84% : Clearly, the only instrument with the negative PNL (-6K, the red column in the picture) is the 5 long options of the "protective structure" we defined: ES FOP 20230131 3500 P GLOBEX 50 E-mini S&P 500 [EWF3 P3500, 577410041, mult: 50] Don't have the VIX IND in the folio currently, anyway this can provide a view on volatility: VIX OPT 20220920 10 C SMART CBOE Volatility Index [VIX 220921C00010000, 535687316, mult: 100]
Sunday update. We left ES at 4281 (ask) and last recorded value is 4228.5, a 1.2% decline: correspondingly, our PNL also declined a bit, to 181K: The DD of ES FOP 20230131 3500 P GLOBEX 50 E-mini S&P 500 [EWF3 P3500, 577410041, mult: 50] belonging to the "protective structure" we defined last week, just improved to -4.9K:
Weekly update. This week we have actually reached a new record PNL of 196K, but we suffered a significant DD on Friday evening, with the S&P going down quite sharply: https://www.wsj.com/livecoverage/stock-market-news-today-08-26-2022 ES FUT 20220617 GLOBEX 50 → ES FUT 20220916 GLOBEX 50 So we ended the week at a PNL of 148K: The "protective structure" we have defined in the previous weeks has contributed a bit to mitigating the DD, due to the 5 long options with greater vega that we have used. In fact, the previous DD of 7K of this layer has reversed into a small profit:
ES (ask) price at the end of the week is 3993.25. A bit lower than where we left it last week Friday (4043). The PNL, however, has improved, because in any case decay inesorably adds up. We end the week with a PNL of 167.4K after some roller coaster moves: When the ES price moves enough, we may want to add another of our "protective structures", which certainly help dampen the drawdown in case of a sudden rise in volatility. I have loaded on our monitor also a fee VIX CALLs, just to take a look. However, currently, I can't see really any algorithmic advantage over the ES PUTs.
Finally, Friday. The last few days have been characterized by a strong local move up of ES: ES FUT 20220916 GLOBEX 50 E-mini S&P 500 [ESU2, 495512566, mult: 50] today PNL has reached a new record PNL of 204K, thus exceeding 10% of the initial capital of 2M, while we end the day with 199.8K: The red column (-4K) of course is part of our "protective structure" that we put previously in place to mitigate DD in case of bursts of volatility (high-vega long options). We will be adding more of those as the price moves (or they expire). Total commission: 17K, time elapsed so far 221.3 solar days. Current fund usage: 77%: Obviously, the mkt is down since we started this session, but we are still making a profit because essentially we grab the decay and scalp the corrections, while recovering the stop loss orders.
Let's see what happened this week. ES went down (from 4066.25 we saw last time to 3849, -5.34%): Accordingly, we have some DD, but actually nothing worrying. PNL down to 189.8K: We can see here that the "protective structure" we introduced earlier is providing some smoothing and mitigation of the DD. I will be adding more of those, but I want to see some more serious price movement first. After all, they do cost anything, since I made sure it was "theta negative", but in the case of volatility swing, the larger vega (7.09) contributes to DD mitigation. ES FOP 20230131 3500 P GLOBEX 50 E-mini S&P 500 [EWF3 P3500, 577410041, mult: 50]
Ending the week with another significant drop: "Stock Market Today: Dow Falls, Touches New 2022 Low, as Indexes Drop Friday" https://www.wsj.com/livecoverage/stock-market-news-today-09-23-2022 "Stock market news live updates: Stocks crater, Dow hits 2022 low, and oil plunges as Fed and growth fears roil markets" https://finance.yahoo.com/news/stock-market-news-live-updates-september-23-2022-105526854.html From the chart we can see that ES reached almost the same level as June 16, where we experienced the lowest PNL: ES FUT 20220617 GLOBEX 50 → ES FUT 20220916 GLOBEX 50 → ES FUT 20221216 GLOBEX 50 At that time we peaked at -93K. This time the situation is better (+159K) as we have accumulated some gains: The "protective structure" we defined contributed to the protection (5 options with 7.83 vega): Next week I will be adding another one of these. Fund usage is a bit high, as obviously, the bot loads up in cases like these. In case of trouble, I have anyway about 50 options expiring in 27 days. So we should be fine.
Wednesday, mkt still pulling down https://www.reuters.com/markets/eur...t-has-not-reached-bottom-barclays-2022-09-27/ ES FUT 202212 GLOBEX 50 E-mini S&P 500 [ESZ2, 495512551, mult: 50] Very high margin usage: I will consider this layer (chosen because of both margin and large position): ES FOP 20221118 2880 P GLOBEX 50 E-mini S&P 500 [EW3X2 P2880, 567382931, mult: 50] and will transfer it to the following: ES FOP 20230120 2400 P GLOBEX 50 E-mini S&P 500 [EW3F3 P2400, 528313266, mult: 50] Impact on margins of this simple "transfer" (reduction to 88.59%): It also allows to "unlock" the 2 layers that were blocked by the bot due to multiple order rejections (due to margin): ES FOP 20221031 2750 P GLOBEX 50 E-mini S&P 500 [EWV2 P2750, 559670067, mult: 50] ES FOP 20221031 2850 P GLOBEX 50 E-mini S&P 500 [EWV2 P2850, 559670304, mult: 50] Trading relatively close dte options (60 days) has the advantage that we have room to transfer far away and be able to survive and ride a bear market. Have a plan when everyone else is clueless!