Rick Van Burens Unicorn Trade

Chuck Moore

New member
Hi Rick,

I am very aligned with your concern about Gamma and aggressively reducing risk. That makes this trade very attractive for my risk tolerance, so thank you very much for sharing. I have a couple of questions if you don’t mind.
1. On the first trade example you showed, it looks like it started out as your initial Unicorn Trade and then added in the Risk Reversal. On other examples you just had the Risk Reversal with the butterfly and didn’t have the ATM put debit spread to start. What is your reasoning for whether or not to use the ATM put debit spread?
2. On the example that is 7 days old (OCT 11) you said you’d “flip it” if the market reverses. Not sure of whether the reversal you meant was up or down and what does flip it mean?
3. Do you have a trigger for reducing the put side credit spread when the market moves down?

Thanks for your time,

Chuck
 

Chuck Moore

New member
Rick, thank you for presenting in last weeks' Trade Group 1. I have a better understanding of the 11 day trade and started one this week as a test to see how it fits in my approach. I've also put on a couple of 30 day trades as well....no Risk Reversal, just the vanilla Unicorn. The first is a 27SEP put on 13 days ago. I've made a few adjustments to the upside since the market rocketed up within a couple of days after of my first trade entry. I now have it where I only have $60 risk from top to bottom until 2 SD's where it's $3K (which I'll continue to pare down) with 2 butterfly structures; one as a nice downside hedge and the other where I'm hoping it will pin and if not, I'll "milk the wings" to scratch out a little profit.
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On the others I'm letting some theta burn off before looking at any further adjustments. I'm not crazy about putting on a RR at the outset due to the strong directional bias so I'm going to see if after a week or two of time decay I can add some kind of RR without having to sacrifice to much risk to the downside.
For what it's worth, and with respect to Robert Chastain who probably has more options knowledge in his little finger than I do overall, I think your 11 day is a nice hedge versus the Rolling Thunder because you can put it on with an opportunity to still make money if the market stays in a tight range or rallies. My understanding of the RT (I have the Random Walk version called Black Ops book and video) is that it is a nice way to make money in a down market but you usually don't put them on proactively in a "normal" market whereas your trade can be put on at any time.

Thanks again and I look forward to any insight you gain as you move forward on the 30 day.

Chuck
 
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