Performance Report Week 36/2015

After the horrible week that crushed my depot by almost 50 % the last trading week has been less volatile. The reason is that markets came back a bit and traded in a narrow range between 3,150 points and 3,300 points. Friday closing was at 3,180 points for EuroStoxx 50 and a volatility of 35 points for VStoxx.

I took the chance to further reduce my September positions and closed out the short put option at 3,350 points. At the same time I also closed the corresponding long put option at 3,200 points.

At the end, I am left with a total premium received of 381 points for short options and 50 points of value in long put positions. The short future FESX is negative 85 points. Book value is 741 points to close the short side. The long puts will pay down for 41 points. In real money terms we are talking about a loss of 381 - 741 - 85 - 50 + 41 = 454 points multiplied by 10 equals - 4,540 EUR.

Looking at the payoff diagram, we can see that round about 4,500 EUR is also the maximum loss that I will be facing. That's going to happen if the index moves far away from 3,150 points. That is the strike of the remaining short straddle that carries time value of almost 1,700 EUR.

Ideally I would close the long options now to lock in the their decreasing value and wait until the short options expire. But in that case I will open the position again to the risk of volatility that I want to avoid by all means. So I will hold the long options and lose 50 points to hopefully earn 170 points from the straddle.

The short future will be hold to neutralize the short put at 3,750 points leaving me with a calculated loss of 3,750 - 3,115 = 635 points. Of course, if I just knew that the market would rise further I could close the future early and earn back some points from the short put, but who does really know?

So the strategy for September will be to survive the last 2 weeks and close that dark chapter before I can finally focus completely on my December positions.

1 comment:

  1. We've been sitting on 100% cash since March in anticipation of this stock market correction. We think the S&P 500 will probably fall a little more before this corrections ends (ie. to 1800)