/ZN trade wins, leading to more diversification ... and better profits, I think!

Your $200,000 virtual account made $5734.40 last week. (Watch this space for better results next week.)

I've just been (mostly) trading SPX for the past several months, and that's mostly worked. (The addition of the NDX a.m. settlement trade has been an excellent kicker, adding profit once per month since Nasdaq pulled the plug on the weekly version.)

The /ZN butterfly trade I put on last Sunday has already produced more than 1/4 of its full credit. Unfortunately Tastyworks doesn't yet have Good 'Til Cancelled orders available for futures options, so I'll have to get this done when the market opens tomorrow afternoon.

I just this evening ran the numbers on a range of futures options: gold, oil, the British Pound, the Euro, Soybeans, Wheat and bonds ... The futures margining system, SPAN, is so much more lenient than the standard options margining system that the profit potential is much greater:

Not only that, diversifying by sector like this removes the "terrorist attack" problem by just diversifying within equities. Most of the equities move together during stressful events (like 2008), where futures markets are more diverse.

I've been diversifying over time: putting on an SPX trade every couple of days ... and although that worked well enough, the 2-day-differing expirations are too highly correlated, especially after the weeks like we just had:

I'm short the 2950 calls in SPX, which have suffered on this up move with 10-12 days to go in the two expirations. (But fortunately the overnight NDX trade covered this loss and then some. Yay!)  I'm wide open to a down opening on Monday a.m. swinging these trades to a small profit. But I think I'm going to take them off in favor of this diverse futures setup anyway ...

More next week ...

Trades so far:

Expiration	Underlying	Long put	Short put	Short call	Long call	Credit Received	Result
07/16/2018/	SPX	2680	2730	2810	2860	$3.60	Won 100%
07/18/2018/	SPX	2700	2750	2820	2870	$3.95	Won 100%
07/20/2018/	SPX	2700	2750	2835	2885	$2.40	Won 100%
07/20/2018 (a.m.)/	NDX	7260	7310	7410	7460	$5.99	Won 100%
07/25/2018	SPX	2705	2755	2835	2885	$2.40	lost 16% of amount at risk
07/27/2018	SPX	2695	2745	2825	2875	$3.50	Won 100%
07/30/2018	SPX	2720	2770	2850	2900	$2.60	Won 100%
08/01/2018	SPX	2730	2780	2870	2920	$2.15	Won 100%
08/03/2018	CMG	430	450	490	510	$1.01	Won 100%
08/03/2018	AMZN	1692.5	1722.5	1887.5	1917.5	$2.60	Won 100%
08/06/2018	SPX	2720	2770	2860	2910	$2.05	Won 100%
08/08/2018	SPX	2740	2790	2860	2910	$2.05	Won 100%
08/10/2018	RUT	1610	1640	1710	1740	$1.53	Won 100%
08/10/2018	AMZN	1737.50	1767.50	1885	1915	$1.79	Lost about 30%
08/13/2018	SPX	2760	2810	2885	2935	$1.65	Won
08/15/2018	SPX	2760	2810	2860	2910	$3.80	Won
08/17/2018 (a.m.)	NDX	7310	7360	7460	7510	$4.42	Lost 7.07%
08/22/2018	SPX	2720	2770	2860	2910	$3.95	Won 70% of possible
08/24/2018	SPX	2745	2795	2880	2930	$3.30	Won 100%
08/24/2018	RUT	1600	1650	1715	1765	$2.16	Lost 17.7%
08/27/2018	SPX	2760	2810	2890	2940	$2.45	Lost 23%
08/29/2018	SPX	2770	2820	2890	2940	$2.95	Lost 47%
08/31/2018	SPX	2795	2845	2925	2975	$2.55	Won 100%%
09/21/2018	SPX	2750	2780	2980	3910	$2.45	Won 50%
09/24/2018	SPX	2750	2770	2970	2990	$1.85	Won 50%
09/26/2018	SPX	2725	2735	2955	2965	$1.15	Won 52.7%
09/28/2018	SPX	2700	2720	2955	2975	$2.05	(open)
10/01/2018	SPX	2705	2735	2950	2980	$2.60	(open)
10/03/2018	SPX	2710	2740	2950	2980	$2.60	(open)
10/05/2018	SPX	2765	2785	2965	2985	$2.10	(open)
10/26/2018	/ZN	117.5	119	119	121	0"56	Won 25% of credit -- all that we expected
09/22/2018	NDX	7475	7510	7650	7690	$3.11	Won 100%

The joy of theta! Your virtual $200000 account; a /ZN iron butterfly

Options trade characteristics are referred to by Greek letters. Delta is the ratio between the option's price movement and the underlying's price movement. Vega is the movement of an option price when volatility changes. But my favorite is theta:

Theta represents the amount by which an option (or option spread) decays over one day. So if your theta value is 400, then you make $400 a day in profits as your option positions expire. (In contrast, you could have a theta value of -400, where you lose $400 per day ...)

This plan expects option positions to expire by 1/2 the amount in half the time: 10.5 or so days for a 20-day trade. But this past week the trades were running ahead of schedule, getting to 50% on Monday, Tuesday and Thursday ... that's 10, 8, and 7 days per trade.

Your virtual $200000 account made only about $1400 this past week, as volatility's completely washed out of the S&P 500, what with its being right near its record high, again ...

Tastytrade had a segment on Friday that caught my attention on volatility in Treasury futures.  With the extra leverage available on futures, this gives a couple of attractive trades:

This is an Iron Butterfly:

... which I've traded successfully in the past. The /ZN trade shown isn't too big: $1231 max risk (and only 1/4 of that in initial margin) ... /ZB is similar but about twice as big.

These don't have weekly options so I would have to wait for about 3 weeks to get them on with the 21 days of expiration I'm using for everything else. But an Iron Fly (Tastytrade's name for this kind of trade) works best when you take only 1/4 of the credit you get, not 1/2. Thus the options should expire in 1/4 of the time: 10 days ... just like the 21 day SPX trade.

So I just now put it on Sunday 3:56pm PDT! We'll see ...

As for our friend Theta, it works over the weekend too! I put on a "good until cancelled" order just after I put the trade on ... the oldest trade I have on is 12 days until expiration (11 by tomorrow) and was $1.33 on Friday at the close trying to get to $1.00. I won't be surprised at all for it to be closed out at $1.00 early Monday!

Results so far:

Expiration	Underlying	Long put	Short put	Short call	Long call	Credit Received	Result
07/16/2018/	SPX	2680	2730	2810	2860	$3.60	Won 100%
07/18/2018/	SPX	2700	2750	2820	2870	$3.95	Won 100%
07/20/2018/	SPX	2700	2750	2835	2885	$2.40	Won 100%
07/20/2018 (a.m.)/	NDX	7260	7310	7410	7460	$5.99	Won 100%
07/25/2018	SPX	2705	2755	2835	2885	$2.40	lost 16% of amount at risk
07/27/2018	SPX	2695	2745	2825	2875	$3.50	Won 100%
07/30/2018	SPX	2720	2770	2850	2900	$2.60	Won 100%
08/01/2018	SPX	2730	2780	2870	2920	$2.15	Won 100%
08/03/2018	CMG	430	450	490	510	$1.01	Won 100%
08/03/2018	AMZN	1692.5	1722.5	1887.5	1917.5	$2.60	Won 100%
08/06/2018	SPX	2720	2770	2860	2910	$2.05	Won 100%
08/08/2018	SPX	2740	2790	2860	2910	$2.05	Won 100%
08/10/2018	RUT	1610	1640	1710	1740	$1.53	Won 100%
08/10/2018	AMZN	1737.50	1767.50	1885	1915	$1.79	Lost about 30%
08/13/2018	SPX	2760	2810	2885	2935	$1.65	Won
08/15/2018	SPX	2760	2810	2860	2910	$3.80	Won
08/17/2018 (a.m.)	NDX	7310	7360	7460	7510	$4.42	Lost 7.07%
08/22/2018	SPX	2720	2770	2860	2910	$3.95	Won 70% of possible
08/24/2018	SPX	2745	2795	2880	2930	$3.30	Won 100%
08/24/2018	RUT	1600	1650	1715	1765	$2.16	Lost 17.7%
08/27/2018	SPX	2760	2810	2890	2940	$2.45	Lost 23%
08/29/2018	SPX	2770	2820	2890	2940	$2.95	Lost 47%
08/31/2018	SPX	2795	2845	2925	2975	$2.55	Won 100%%
09/21/2018	SPX	2750	2780	2980	3910	$2.45	Won 50%
09/24/2018	SPX	2750	2770	2970	2990	$1.85	Won 50%
09/26/2018	SPX	2725	2735	2955	2965	$1.15	Won 52.7%
09/28/2018	SPX	2700	2720	2955	2975	$2.05	(open)
10/01/2018	SPX	2705	2735	2950	2980	$2.60	(open)
10/03/2018	SPX	2710	2740	2950	2980	$2.60	(open)
10/05/2018	SPX	2765	2785	2965	2985	$2.10	(open)
10/26/2018	/ZN	117.5	119	119	121	0"56	(open)

More next week!