After opening the two put spreads and adjusting the AAPL double calendar, I had two more delta adjustments to do. Our short IC’s in IWM and BABA (remember we adjusted one of the wings here to limit downside exposure) were coming in decently from a vol perspective but position deltas in both were beginning to get out of control. Early in the afternoon the delta on the BABA IC was more than triple the vega, and 10x for IWM, indicating we had much more directional exposure as volatility exposure. Since both spreads were put on as volatility plays, I want to minimize directional exposure before it begins to completely engulf the position.

For BABA, I rolled the short call leg of the IC from the 97.5 strike to the 94.5 strike for a $0.36 credit, cutting down our position delta from around 12 to closer to 3 and getting us short some more IV (recall that the closer to ATM you get, the higher the volatility exposure). This leaves us with 13Jan16 80/85/94.5/99.5 IC for a total credit of $1.36 less commissions.

BABA Position Greeks: 3.37Δ, -5.88γ, -7.83ν, 3.49θ

IWM was a little more tricky because the underlying has had such a rally — and accompanying IV depression — since we put the spread on initially. I waited perhaps a bit longer to adjust than I should have because of how much time remained on the spread, but with the position delta nearly 30 with vega closer to 3, I felt the need to pull the trigger today. I ended up rolling the put half of the IC up to the 129/132 for $0.45 credit, cutting the position delta by around 66% and adding some more short vega in the process. Remembering that the IC was put on initially for $1.02, our new cost basis is $1.47 less commissions.

IWM Position Greeks: -11.68Δ, -1.51γ, -4.37ν, 1.05θ

Finally, the index ETF put spreads (SPY/QQQ). I don’t normally like to make directional bets, but with the VIX tapping the mid-11’s today and both near all time highs, I wanted to put on trades that would benefit from a move down or an increase in IV. The calendars were trading a little more rich than I cared for and any backspread for a credit would have been way too wide for me to be comfortable with, so I settled on put debit spreads. With debit spreads I like to buy a strike or two in the money so I’m buying more intrinsic than extrinsic (volatility/time premium), and sell at least $2-3 dollars OTM. For a put spread, this gives us the opportunity to not only sell some skew but also be able to adjust the short strike up should price run away from us. Again, not a pure vol play, but definitely gets some help.

• BTO 1 SPY 27Jan17 223/228 put spread @ $2.00
• BTO 1 QQQ 27Jan17 118/122 put spread @ $1.59

Porfolio Greeks (AH, unweighted): -78.66Δ, -32.54γ, -24.00ν, 6.28θ

Almost all of the spike in portfolio delta comes from the SPY and QQQ debit spreads, which contribute -30 and -31 delta, respectively.