Short Butterfly Dec 2015 - Performance Report Week 40/2015

The EuroStoxx 50 closed last week at 3,137 and the VSTOXX closed at 31 points. Compared to the week before we are up more than 100 points. Related to the range for my options we are doing great at the moment. Break even points in December are between 2,900 and 3,400 points with maximum profit at 3,150 points at the strike of the middle short option straddle.

The put spread at 2,750/ 2,950 will expire in two weeks. So does the long call option at 3,400 points. At the moment, volatility is high and a direction is far from obvious. I am still afraid of further drops down. That keeps me holding my put spreads that extend the range at least for 2 weeks down to 2,750 points before I will have pressure for adjustments. The long call is meant to reduce margin requirements, because I hold 1 short call at 2,950 more than short puts (the 2,950 short put option is still missing).

The current positions hold are described as follows (click to zoom):

At the levels of 3,150 points and 3,350 points the straddles are still open and doing just fine. At the time when I have to sell my next short put at 2,950 points, I will close the highest strike straddle -- or put a short future against it to cut losses.

The payoff diagram can show quite clear what is the range of profit at the moment (click to zoom):

Based on that, I feel with my current holdings quite comfortable. As long as we do not see chances of more than 10 percent in any direction that short butterfly should ba nice holding to earn time premium.

Next steps have to be taken in following situations:

ESTX50 falling below 2,950 points: Sell missing short put option, sell future to over 3,350 put option.
ESTX50 rising above 3,400 points: Sell short call option at 3,550 points.
Expiration of October Put-Spread: Buy of November or December positions based on volatility.

Based on both scenarios we can move 6 percent down or 8 percent up. We are in the middle of my current range and I will do my best to keep that sitation going.

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