Short Butterfly Dec 2015 - Performance Report Week 39/2015

Due to personal circumstances I have not been able to publish a report last weekend. Hower, the changes were only minimal. EuroStoxx 50 closed on Friday at 3,113 points and VStoxx closed at 30.5 points.

At the end, the two long put options at 3,000 points expired worthless leaving me with a loss of 458 EUR.

In the same week before expiration I bought already protection for October: 2 long puts at 2,950 points and 2 short put options at 2,750 points for a total debit of 576 EUR.

On the upside I have extended my long call option at 3700 with another contract for 123 EUR to reduce margin and leave room to move in case we do really move upwards again. But at the moment, I do not see that coming.

On September 22, the markets made another big move down below 3,100 points. During the trading hours we saw prices around 3,050 points so that I decided to build up the next leg of the straddle at 2,950 points. After my my last experience in August I prefer to have a bit more buffer on the downside.

I sold one contract short call option 2,950 points for December earning a premium of 2,345 EUR. So the total premium received goes up to 9,331 EUR. To cover the short call, I bought a long call option for october at 3,400 points for 35 dollars to reduce margin requirements by more than a thousand EUR.

The new payoff diagramm including insurance by October expiration looks as follows (click to zoom in):

The short put option will be sold after we close below 2,950 points. If that happens, I will have to close the straddle at 3,350 points to reduce possible losses.

My current positions:

At the moment, the whole short option straddles trade at a profit of 320 EUR. But the negative influence of the insurance leaves me with a loss of 753 EUR in the books. All in all we see a loss of -433 EUR.

But there are still 2 months to go.