midway on Nostr: Hmm… ok let’s look at this particular trade and why I chose it. Recall when I ...
Hmm… ok let’s look at this particular trade and why I chose it.
Recall when I opened this trade. It was the dat after the FOMC which caused the market to drop over 4 standard deviations in a couple hours. VIX jumped from around 13 to just under 30 that day. By the time I put this trade on it was in the mid 20s. Still high but on the way down.
So as I believe that volatility is mean reverting I wanted to be net short IV (negative Vega). So I chose a butterfly spread as it’s a go to short Vega trade for me. Since these big moves were quite recent I want to give myself a bit more room than usual as well as keep my price risk low (delta/gamma). So I went out a week longer than usual (29 days) and went a bit wider of a spread than normal. I bought my longs 100 points down and 90 points up. This means the spread will cost a bit more but I countered that by only doing a 1-lot. That made my risk about $1800 which is smaller than my typical trade of $2500-$3000. But we just had a crazy move so I’m being a little more cautious. Size is my first and most important risk management tool.
So these are the factors that lead me to put on this particular trade. I post weekly review videos of all my trades on Bichute, Rumble, and my blog. See my weekly posts for these…I just released the video on this trade tonight.
Hope this gives some insight into how I pick a strategy. Glad to have further discussions if you like.
Recall when I opened this trade. It was the dat after the FOMC which caused the market to drop over 4 standard deviations in a couple hours. VIX jumped from around 13 to just under 30 that day. By the time I put this trade on it was in the mid 20s. Still high but on the way down.
So as I believe that volatility is mean reverting I wanted to be net short IV (negative Vega). So I chose a butterfly spread as it’s a go to short Vega trade for me. Since these big moves were quite recent I want to give myself a bit more room than usual as well as keep my price risk low (delta/gamma). So I went out a week longer than usual (29 days) and went a bit wider of a spread than normal. I bought my longs 100 points down and 90 points up. This means the spread will cost a bit more but I countered that by only doing a 1-lot. That made my risk about $1800 which is smaller than my typical trade of $2500-$3000. But we just had a crazy move so I’m being a little more cautious. Size is my first and most important risk management tool.
So these are the factors that lead me to put on this particular trade. I post weekly review videos of all my trades on Bichute, Rumble, and my blog. See my weekly posts for these…I just released the video on this trade tonight.
Hope this gives some insight into how I pick a strategy. Glad to have further discussions if you like.