It always gets out of sorts around the calendar year end. Maybe this year it won't. Maybe I will speculate and let it ride a bit, but I can bag theta on the balancing options when and if the S+P gains about 85 handles or so from ES 2015-16 where it sits, ironically. Interest rates may keep it flat, but the Fed may relax yet, and that will show up here.
Weds Dec 16, 2015: Finally a rate hike. Here is the initial reaction after the 2 PM Eastern statement.:
After the dust settles, the Close was here... I kept it hedged with an eye to expiration slightly bullish, but that may change to squeeze a bit more theta out, and roll some positions forward. I'll likely try a flat hedge through Christmas as that will be where the crowd seeks solace. Certainty has been somewhat restored in the Big Picture by removing another regular source of Uncertainty.
The Statement pointed out the risk of shocks to the system, so it's back to good old Yellow Journalism trying to swing it short. They didn't guarantee it intentionally, so still a bit of volatile Fed uncertainty left on the bones.
Mon, Dec 14, 2015: It is Expiration of the Dec VIX tomorrow, then quadruple witching Friday. The Federal Reserve meets tomorrow and Wednesday. We were walloped Friday and today when the short side couldn't keep up. Like Dennis Gartman, we tried to hedge flat, but a lot of people were caught flat footed.
Tues, Dec 1, 2015: Here is where the close was last night.
Thanksgiving week was nothing to really be thankful about. The options were cash settled with no option to take share delivery by the new software.
Later on, they pointed out it was a hard year for hedge funds. That must have been on paper in their back offices. I hedged for a flat S+P since July. If it varies plus or minus from that, I increase the monthly dollar allocation. It has mostly reverted after that August September downturn. I have to reload monthly. It was a 22.5 point up day, but I had it hedged, gaining mainly from a relax in volatility. Then I sell volatility when it rises back up. I'm bracing for a Fed meeting where they are expected to hike rates, but they may not, staying the course and deferring to 2016.
That might all get walloped if one way or the other due to the uncertainty hit. The numbers have become too big to steer like a supertanker with an undersized rudder. I'm back to the same wait and see mode I was in back in September, and no rate hike came from the Fed.
Sat, Nov 21, 2015: November Option Expiration:
There you have it. About $430M and change. High uncertainty with not as much volatility premium on time as there should be. Blame a Fed painted into a ZIRP corner, and Paris Terror. Still trying to keep the balance flat with minimal contango on the options to work with. The convexity of the futures curve is broken with a rate hike baked in before next month's Quad Witch.
Mon, Nov 2, 2015: The calendar month starts with an up day post FOMC, so I sold more hedge units against volatility increases. I sold both sides to bag some theta actually, but if the wheels fall off, hopefully we will still have some cash to buy the big dip by flat hedging the rip close today.
Option generally don't update after hours, while our exercised direct holds do. I play all options European and hold them to expiration when delta and gamma cut out to zero or one as the case may be. There's 18 days theta to go on them.
Later in the evening... it settled down over $17 B.
Fri, Oct 30, 2015: Our flat hedge ended up a bit.
The big picture on Mon, Nov 2 looks better by lunch time.
The strategy has been to reduce our overall short volatility strategy by hedging it with proxies. An example of short volatility would be long S+P Futures.
Fri, Oct 16, 2015: Hi. Your friendly VIXen whore here. I can deliver! The old Gal comes through in the end.
Things were slowin' down on the corner so I advertised. "Sexy broker needs good fzckin' - Options welcomed!" I'm considering Kijiji. I've a few irons in he fire.In the meantine, I'nm the only fzck in the world without worms stem to stern. Even did a sweep with Wormwood. Already did a weekend on the shztter with black walnut.. It's getting hard to find a good wormless fzck when they blow on average a pint o' spitters.
Monday, Oct 12, 2015: Columbus Day: Canadian Thanksgiving:
A lot to be thankful for. The hedges have reverted back to balance, and we forge on. There have been some fundmental futures inflection points passed, but we're on it. Don't you wish you could back up time? Well, this is the next best thing. Past performance is not a guarantee, but a pretty gawdam good good shot at future results now. Wace will be graduating from university shortly. I home school him <3 R. He runs this hedge now. I am merely his slave, picking up toys, correcting typos, and cooking. Teehehehe...
Friday, Oct 2, 2015: It has been a bumpy ride since the September expiration.
It finally broke back positive here, but it wasn't always that way. Volatility has crushed tracking of the ETF's through contango. You try to make that work for you, then they reverse split the ETF to adjust for losses, but the software will not track the split correctly, clinging to the presplit valuation. The S+P is back to 20th century numbers 1940 Era from 19th century Civil War numbers. The debt limit looms large, but it is all a part of the never ending inflation carrot and stick that has reduced growth to inflation itself. The bond limit where interest payments will topple the whole mess is nigh, trapping them into a "zirp." Everybody may be a millionaire yet. Re skinning the software isn't going to solve that pickle, and they didn't fix the split bug, but they did a re skin anyway. The "light" skin is far too eye burning from an LED monitor.
Sept 18th expiration tanked miserably. Immediately after, Monday 21st tanked even more miserably to record low valuation losses since the 80's. Volatility VIX is back to living in the 20's. The hedges broke or flattened there, recording a sustained loss until just today at the end. October has been a historically bad month, and the acceleration of shortening days adds to the overall malaise after October option expiration. It affects peoples' thinking. SAD Seasonal Affected Disorder. We know that market dollar weight sets the balance, but it is a tough call. The Bears have a lot invested in negative news for every rally. October Week Three will be interesting when all the stored up ghouls and goblins come out to play. Then there is the Calendar month change. The Federal Reserve can't decide when to put interest on money again. Now some are looking at 2016 to try and call the seasonal employment rise for an opportunity. Will Santa have lumps of coal or a new silly toy sensation? So much is baked in during October, and it has a past.
The Middle East now has Russia throwing its hat in the ring. Some say another Cold War. The news is it has never been cold there.
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