Performance Report Week 34/2015

The last week was a killer. EuroStoxx 50 dropped down to 3250 points closing and 3,200 points after hours. Volatility rised up to 30 again. All my profits are wiped out within a week. Now I am facing a paper loss of roughly 1,200 EUR.

So what's the plan for next week?

At first let's have a look at the current options positions (click to zoom in):

The first group contains all insurace-related positions and the second group contains the option straddle positions. SC means short call option, SP means short put option, LP means long put option and so on. Negative numbers show income, positive numbers are expenses.

As expected the short calls do have lost almost all of their intrinsic value leaving us with a paper profit of round about 3,000 EUR. On the other side, the short put options are heavy under water with a current loss of almost 5,000 EUR.

The long insurance options do reduce the loss with a profit of 1,000 EUR.

Having a look at the payoff diagram we can see that the index is currently trading quite below our profit range. That means, further falling prices down to 3,100 points result in higher losses around 3,000 EUR. After that risk increases even higher.

So whats the strategy for next week? At first we will sell the next short call at 3,150 points strike level. That should bring a premium of round about 1,600 EUR. Additionally, we will open another bear put spread 3,000/2,850 points for protection that should cost us around 170 EUR.

If we drop below 3,200 points in ESTX50 index, I will also sell the short put at the same strike level with an expected premium of around 800 EUR. At the same time I might close the short put option at 3,750 points as it is deep in the money.

The new payoff diagram looks kind of ugly after those adjustments. The reason for that is the focus on limiting losses. I will post some updates later this week.

My lesson learned so far is to close the position after 50 percent of the max profit to avoid situations like this.