Discretionary Update

It’s been awhile since I made any updates to my discretionary updates, not because I’m hiding anything, it’s work combined with vacations and a lot of laziness. So here are the handfull of trades I have put on:

HPQ Aug 35/40/45 Call Butterfly -56%

TGT Aug 40/44/48 Call Butterfly = +24.9%

Let me put that -56% in a context before people jump to any conclusions. Properly portfolio construction is important in options trading along with the statistical properties of the trade itself. A butterfly such as this has some long gamma and short vega exposure, overall if you had a number of these positions, you may want to manage your vega exposure by going long some vol in either an index or more hopefully, names in which you have some long vega edge. Additionally each position size should be appropriate for your portfolio so lets assume we utilize a static 3% allocation in a $100k account, $3,000 * 56% = -$1,680 loss. So from an absolute value this isn’t too bad,~1.68% of your overall portfolio.

And to add insult to injury, I was on vacation and away from the computer for a number of days this position was on. 🙂

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~ by largecaptrader on August 21, 2009.

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