Trajan's short gamma journal

Discussion in 'Journals' started by Trajan, Sep 25, 2003.

  1. Trajan


    I have done two other journal's, this will be the third. My first one was started the day I started trading full time again. It lasted for about a week or two and was focused on really getting my feet wet again(for those who may not know, I was a former MM who blew out twice). CSCO was the only stock I traded during that period and it ended up working out, culminating in their Feb earnings release. For that period, I was with OptionsXpress which was totally inadequate for that type of trading. I switched firms at the end of that journal, but it took a month to get everything set up to trade again. March, although I started out strong, and the beginning of April was blaugh for me, the option market sucked, vols were too high and I lost money trying to daytrade stocks. At that point, I took a few days off and went to Vegas for a refresher; I got my ass handed to me there too.

    It was so bad there that I just gave up on the last full day. No way in hell was I going to be able to win a hand. As I was being bitter about getting ass raped, I decided that was enough of that, gambling is pretty fuckin stupid. I leave Vegas without losing more money than I had allocated to lose there, which is pretty odd for me. The next morning back, I promptly fuck myself trading stock again. Of course, it wasn't trading really, but mearly gambling. I was down 5k at this point from my original 34k(8k from th account high). I immediately made the connection to the experience of the previous couple of days in Vegas. When many people lose money, they take time off to go relax and get away to come back refreshed. I picked the perfect place for me since it showed what an idiot I am. Why continously do things which cause yourself harm I asked myself?

    It was an epiphany for me, losing money is for jackass's. Why was I engaging in activities which I knew the risk/reward was definitely not in my favor. Everybody knows that Vegas odds are against you(there are ways to around that in blackjack but not when drinking), but why put myself in the same circumstance in trading I asked myself. It was at that point, I refocused on what I do best, trading options. It is a little more complex than this. One is that I can't trade the first hour and a half worth a shit, I lost money in this time frame or entered the trade here and let it go against me all day. Second, my strength with trading has always been in volatility. For whatever reason, I have always been able to recognize changes in this and relative levels of IV to actual. Another thing, I know the relationships and risks of these products up and down, backwards and foward. Basically, I can look at a chain and tell you the most expensive and cheapest option. Also, since I traded roughly the same stocks even as a MM, I have a memory of prices going back five years plus for prices.

    A couple of days later, with renewed focus and vigor, the second journal started. The main focus here was on a long vol, long gamma trade. I knew the stock was going up and put on a position to take advantage of this. It worked out well and ended up being the turning point, kind of like Midway. Over the next month or so, I posted some of my trade in a thread under the options category as some people were trading BPUR, DNA and OVER. I joined in and really made some nice trades here, doing some reversals for .20 to .35 of edge as the options went nuts in anticipation of news of their biotech product was expected. I will never forget as the puts which were trading for 1.10, 1.20 or so(I forget the exact price but it was over a buck) when the stock was at 6.00 one day, I bought the next for .10. DNA was cool except my position was only a 1 by 2 diagonal, literally consisting of three options total and I also sold out too soon but I was happy with the profit. I made some trades in OVER which didn't work out well. The first position ended poorly because I covered short calls rather than leave myself exposed. The second was a similar position to the first except that I sold out too quickly the week before the company was taken over. In a way my covering of short calls doesn't look too bad considering what eventually happened. I put on some positions in other stocks during this period. MSFT was mediocre. CSCO continued to work out awesome, although I made a few poor decisions that cost money. ORCL was profitable, but could have been better. IBM was awesome as well. There were a few othersin addition.

    What was great about this period is that the whole thing took little effort. I traded less, but was more profitable. I began to pick and choose my spots more carefully, there was virtually no gambling. It's not that every position made money nor was every decision good, but rather I limited any risk I had and kept exposure small. In fact, I didn't make more than couple trades since the July expiration till the end of August. The market was crap and I avoided it. I was so bored I ended up applying to graduate school for this fall, which is where I am now. Three and a half years after blowing out and moving back home with my mother, I finally moved out this weekend.

    I intended to start a journal when the move occured, but this has taken on renewed importance. I gambled the other night when I decided to trade a Dax future, in addition I gave some back today on the options front as well. I have given some back at times over the last five months(more than the last two days), but this is the first time in three and a half years I have taken any responsilbility. I have to pay rent and more importanly is that this year of graduate school is going to cost a shitload money. Performing poorly in trading means I won't be to sustain a certain lifestyle; performing poorly in school means I flushed money down the toilet. The two are related in that they both take a lot of discipline. So, while on the school front I have an awesome study group, Elite Trader is the equivelent in trading.

    I have gotten more out of this board than contributed. MINIME(or was it NOMOREOPTIONS) did freak me out this past summer when he was getting ready to go postal at an options exchange, which is why I avoided the board for a while. There seems to be a renewed vigor with the arrival of Vega and others in the options forum. So, even if I insulted you the other day in that thread by saying I think less of you(or by telling you to go fuck yourself), please post any thoughts or insults you may have about me, my trading, ideas for a trade or questions. I promise anything posted or questioned here will be answered eventually(assuming it isn't asked 2 months after I stopped). In addition, I need to do a better job of posting greeks and the position so people can follow along and understand what I'm doing; I will try harder.
  2. Trajan


    Here is my current position:


    long 10 Oct 27c
    short 5 oct 30c
    short 800 msft


    short 10 oct20c
    short 20 oct20p
    long 80 nov22c
    short 2300 csco

    My position isn't short gamma right now, but probably will be over the next couple of days. Right now for csco it is:

    delta = -10
    gamma = 250
    vega = 180
    theta = -50

    For MSFT

    delta = -250
    gamma = 87
    vega = 20
    theta = 15
  3. Trajan


    I almost forgot the main reason for starting the journal. As a MM, Iwould always start off great. My P/L would look like a mountain range where it started off rising sharply with a peak followed by a slow bleed. Looking back, I had a definite case of self-sabotage, success was followed by actions which undermined my trading. The main thing was that depression was a huge factor in my entire trading career for all my trading jobs(not just the ones I blew out). My whole mental framework controlled too much of how i dealt with adversity or success. I was truely awfull at times and I fully admit to being the biggest egocentric fucking asshole, destroy anything in my path, borderline suicidal and would tell the pope to fuck himself; it was my way or the highway and I wasn't really thinking straight. I do not now have any depression as far as I can tell, but I want to use this journal to record thoughts along these lines and push through that self-sabotage barrier. In other words, trading is going well and I don't want to fuck it up.
  4. Trajan


    I just realized I told a bunch of people in the options forum to go fuck themselves. Doh!
  5. nitro



    I have never really been interested in journals - Don and Babak are the only other ones I read, but I am very interested in this one.

    I look forward to it and I wish you the best.

  6. def

    def Interactive Brokers

    best of luck. where are you going to school?

    I imagine if you're going to apply yourself to your studies, you won't be able to watch the markets all day. is short gamma really your plan? if so, how do you plan to manage the risk of a sharp move while you're not in front of a terminal?
  7. Trajan


    I agree, interest for me always comes and goes with these; normally I end up reading them all the way through in one sitting rather following day by day. It is also why I could never sustain one more than a week or two. This is all about me and the need to work through this period profitably. Unlike my previous jobs, I don't have a risk manager to keep an eye on me. What would I say anyways? "Hey boss, did I mention when I get to a comfortable profitable point, I subsequently crash and burn? You may think I am a great trader now, but in a couple of months you'll think much less of me, especially after I tell you to go fuck yourself a couple of times." That probably wouldn't work out too well and would most likely get my account closed and a check cut to me. Considering what happened, that would have been a great solution to the problem.
  8. Trajan


    I am going to Claremont Graduate University working towards a PHD in Econ. It really did end up just as I described; after the July expiration, I was bored. I had taken a bunch of math, going back to the previous summer, in preparation for it as well, but this also helped me, as I started trading, to be able to work out some the quant models for myself. If I finish the PHD, I'll have a put in case the scenario that this journal is attempting to avoid come to fruition. The job market for econ PHDs is pretty good, unlike the one for blown out MM which I learned three years ago.

    It does make it more difficult. I have two classes; both meet in the mornings. Monday and Tuesday, I am kind of screwed as I have class from roughly 9 to 12, but the rest of the week I only go from 9 to 10:30. I live right next to campus, so unlike my first three weeks of class where I commuted an hour each way, I can get to a computer quickly. In addition, I do have wifi access as well, but the firewall seems to prevent my trading software from connecting with the server(IB software does work though, it maybe a reason to switch). I'm going to have to work on this.
  9. Trajan


    Also, as far as classes go, one of them I can blow if needed; it is math for economics which I have mostly covered in the classes I took over the past year. The stuff I don't know doesn't come until the late in the second half.
  10. Trajan


    This morning I sold 40 of the msq 30c for .40 which I subsequently bid on as the stock took off and I didn't get a hedge. I just covered that for even plus a four lot which I'm going to offer back out for .05 higher. Also, I'm offering out the csco 20c for .85. I want to replace stock with options.

    Terminology note: whenever I talk about an option without the month, it is always refering to the front month.
    #10     Sep 25, 2003