Week 2 Net Liquidating Value (After Hours): $2376.32 (-$123.68/-4.95%)

It’s been a fairly slow trading week so far, which is both good and bad. Our short vol positions are starting to come in, but our long vol positions (FB and AAPL) haven’t seen IV creep up yet and are sitting flat or slightly negative. AAPL IV in particular got so low earlier this week (2nd percentile) that I decided to buy some more vol and put on a -1/+2 113/109 put backratio on the 13Jan17 weeklies for a credit of $0.16, adding around 15 vega to our position. On top of the double calendar we put on earlier, we’ve now got a strange looking position that is about -17 delta, long ~2 gamma, long ~19 vega, and roughly -2 theta. A nice side effect of the backspread was that it eliminated our downside risk below $110ish, but the main idea was taking advantage of the severely depressed IV in AAPL. Time will tell if we put this trade on too early, but as it stands we have 36 days for vol to come in.

The Russell 2000 (IWM) has had a monster rally this week, already exceeding the 1 s.d. implied move for the January 17 monthly expiry, and volatility has dropped accordingly. IV for IWM is now about 2-3 points lower than it was when we put our iron condor on last week. IWM’s rally poked above the short strike of the call half of our IC and I decided it was time to make an adjustment. Typically I would roll the put spread up to bring our position delta back in line, but the put vol dropped so much this week that rolling the puts up almost $10 was only showing a credit of around $0.30. With so much time left on the spread, the huge reduction in our downside cushion for that small of a credit didn’t seem to make sense. I also explored rolling the puts up to the 133/136 to make the position into an iron fly, but with IV so low, getting short that much vega didn’t make sense either.

So instead, I did something a little different that I’ve actually never done before. The put skew on IWM was so steep today that I was able to roll the long leg of the put spread from 120 to 122 for $0.12 debit including commissions, nearly eliminating our downside risk below $137.5 with very little change to our position greeks. Essentially, we paid $12 to take $200 of downside risk off the table. What we ended up with was a position similar to the BABA IC from last week. With so much time left on this spread (43 days), I’ll probably let it ride for a while and let the numbers play out. If the rally continues and IV continues to fade, we’ll take this one off for a loser. In any other price/vol combination, we might have some options.

As far as the rest of our portfolio goes, we’re pretty near flat. For losers we’ve got the IWM spread down 17% and the PG fly which has been up and down near 0 but is marked at -2% right now. For winners, the BABA and TLT IC’s are both up about 10% and the GLD IC is up almost 30% (IV got smacked). For I’m getting weird marks AH with the FB and AAPL positions but both were about flat at close today.