Update Schwalbe trade

Chuck Moore

New member
Thanks for gettting back Igi. The trade is looking good. Looking forward to seeing what the new 15 wide V fly and SPX version looks like.
Chuck
 

Chuck Moore

New member
Hi Igi, A couple more questions: In one of your presentations you talked about an alternative adjustment to the one above. Although the alternate doesn't raise up the right side as much and keeps some of the sea of death, it does create a very nice profit area below the sea of death and decreases fat tail risk. You could still address the SOD later on and/or even roll in the shorts on either side of the V to decrease the widths over time. With the volatility we have now, especially with the China deal, it would provide a broader profit zone. Just wanted to get some insight into your thought process. Thanks, Chuck
1573213031236.png
 

Chuck Moore

New member
Second question: You said you automatically close down the trade when you get a Schwalbe. I was wondering if you were late in the trade (less than 14 DTE say) and the T+0 line was starting to rise into the A fly, it would seem to be a nice opportunity to possibly harvest some of the potential theta in A and get a much higher profit. I expect this situation will probably not happen very often, but wanted to see if under this condition you might stay in the trade after an alert? Thanks again, Chuck
 

Ignatz

New member
Second question: You said you automatically close down the trade when you get a Schwalbe. I was wondering if you were late in the trade (less than 14 DTE say) and the T+0 line was starting to rise into the A fly, it would seem to be a nice opportunity to possibly harvest some of the potential theta in A and get a much higher profit. I expect this situation will probably not happen very often, but wanted to see if under this condition you might stay in the trade after an alert? Thanks again, Chuck
hi Chuck i don´t close the trade when i get a Schwalbe, i make my t+0 as flat as possible to get PREPARED for an exit with minimal loss BUT the exit might not happen (only 3 exits but 8 Schwalbe !). I exit a trade when it´s below -5%. And i need to have the possibility to make adjustments, when the price is going up again which happened more often then an exit. There are not enough events (only3) to develop a system to stay in the trade. Too risky. It´s all about risk and reducing risk is the best you can do.
 

Ignatz

New member
Hi Igi, A couple more questions: In one of your presentations you talked about an alternative adjustment to the one above. Although the alternate doesn't raise up the right side as much and keeps some of the sea of death, it does create a very nice profit area below the sea of death and decreases fat tail risk. You could still address the SOD later on and/or even roll in the shorts on either side of the V to decrease the widths over time. With the volatility we have now, especially with the China deal, it would provide a broader profit zone. Just wanted to get some insight into your thought process. Thanks, Chuck
hi Chuck when i do this version, why should i stay in the trade ? then better closing it. And at the moment i think about it.
 

Ignatz

New member
trade runs 88 days. days till exp now 42. profit now about 900. UEL is about $240 higher. Every adjustment costs money. Flaten the line will not raise the UEL, it will lower it. Profit target at the beginning was $ 565, about 55 % profit now, possible profit nearly 100 % in 42 days, paying no commission at IB. Risk starts below 3025. When flatening then risk is below 2800 but no additional profit till expiration.
 

Ignatz

New member
the next thing i might do is lift up the last vertical by 5 or 10 points to reduce the difference between middle and upper expirationline as cheap as possible

Screenshot 2019-11-08 22.49.25.png
 

Chuck Moore

New member
Hi Igi. Thanks again for the updates. Do you have a price target in mind when rolling the vertical, like maybe 80%-90% of the spread? What would you do in the case where the market moves below the short of the current vertical before you can roll? What price did you get for the V you reduced and do you have a minimum price in mind?
Thanks. Chuck
 

Ignatz

New member
hi Chuck i got 25 cent for the BFs. when the price looks like going down (breaking support etc. i will make it flat. if not i will lift up step by step until i´m flat for may be 50 to 80 cents for 5 points. will have to look at it
 

Michael B

New member
Hi Igi,

I plan to subscribe to your Schwalbe service when it starts in December, but would like to use SPX. Meanwhile I have few questions please.
  • Will SPX work instead of /ES?
  • When a Schwalbe signal occurs you said you wait until next day to see whether the crossing below the -5% line indeed occurs or not. I live on the West coast and can only watch the market during the 1st hour after opening and then I need to go to work. If no crossing happens during the 1st hour, but happens later on it means I will miss acting upon it. Can this be a big problem? I guess it can. What can be done to solve it?
Thank you,
Michael B
 

Simon

Member
Hi Michael

I too was thinking SPX, but looks like commissions (at IB) would cost me double over the life of the trade. I have never traded ES options before, but having researched, not as difficult as I thought.

I would not mind trading this strategy ever two months, but as Igi has pointed out 5 point strikes is the problem, I will contact IB and try to find out why they are not available.

I am UK based as much as I would like to trade similar time to Igi, with work this might be tricky for me as well, but trading is a game of probability, so I will have to see. It will be tight for me to enter the Dec trade on the 23rd, so might be looking at market open on the 24th, hopefully MM's in the festive mood!

Good trading

Simon
 

Ignatz

New member
Hi Igi,

I plan to subscribe to your Schwalbe service when it starts in December, but would like to use SPX. Meanwhile I have few questions please.
  • Will SPX work instead of /ES?
  • When a Schwalbe signal occurs you said you wait until next day to see whether the crossing below the -5% line indeed occurs or not. I live on the West coast and can only watch the market during the 1st hour after opening and then I need to go to work. If no crossing happens during the 1st hour, but happens later on it means I will miss acting upon it. Can this be a big problem? I guess it can. What can be done to solve it?
Thank you,
Michael B
hi Michael
thank you for your interest.
subscribing now or in dec makes no difference because you get the time until the new trade starts quasi for free, but get useful infos before in the meetings.
Yes, SPX work instead of /ES. But there is something different: ES has cost of carry and 3 months before a /ES future expires it is about 10 points lower than SPX, but when it expires it is at the same price . So when i sell Butterflies at the money in /ES this is not at the money in SPX., it´s about 10 points lower. So always take the same strikes as in /ES.
When a Schwalbe signal occurs i make the t+0 line as flat as possible. This means it will normally be not a big difference if you close the trade a little bit later because t+0 is flat.
In the new version:
  • there are less adjustments because: V is already very tight and gets risky only the last 10 days before expiration IF the price is near or in the V.
  • risk of V is reduced to about 50 % because only 15 points wide
  • no adjustment of V for reducing is needed because it´s already done from the beginning
  • max 3 adjustments of A are possible (selling PCS) and will be bought back when price is 50 % or more lower.
there are not many adjustments in 3 months, sometimes even NO adjustment during 3 months.
signals are sometimes limitorders, sometimes end of day.
As /ES is trading around the clock it is possible to make changes after markets are closed.

Ignatz
 

Michael B

New member
Hi Igi,

OK, I tried to subscribe now, but could not find where I can do that. Could you please help?

Searching the web I read you can trade /ES anytime of day, not only when market is open. Is this true? I could not find that link again to post it here.

I will check with Interactive Brokers whether I can trade /ES or not.

Thanks,
Michael B
 

Ignatz

New member
Screenshot 2019-11-12 23.42.34.png
today i made an adjustment to save most of my profit. Reason: VIX is very low and it might explode again as very often after a while being so low.
But i am very bad in guessing.
As you see on the left side profit is now between 17 and 24 %, i think relative to the max margin, which is about 5.500. But SPAN margin is probably between 3 and 3.5 k.
 

Michael B

New member
I would not mind trading this strategy ever two months, but as Igi has pointed out 5 point strikes is the problem, I will contact IB and try to find out why they are not available.
Simon, I’m not sure what problem you or Igi are talking about. My SPX option chains at IB are spaced in 5 increments.
 

Michael B

New member
Hi Igi,
I just watched the last video from Nov 12. You mention that one reason (among others) you don't use SPX is because you need portfolio margin. I trade SPX butterflies in a cash account at Interactive Brokers.
 

Simon

Member
Hi Michael

re: 5 point increments, we are talking about ES options, I will back test some SPX trades this weekend to compare, I did originally think that ES commission was less than SPX, but I might have got that wrong. Tom trades or use to ES options on his RT's, he's the man to spill the beans.
 
Top