The M3 Options Trading System

[barn32]

Originally Posted by PaceAdvantage

Email tom@thinkorswim.com

He's the founder...Tom Sosnoff...the guy from tastytrade...not sure if that email address is still active for him, since TOS was taken over by TD...but it might work.

Someone on here recently told me he still has a lot of pull at TOS and if you tell him your story, you might still get your 60 days free...

If anyone else has an email address for Tom, please PM it to barn32...the above email I was able to find via a google search...

Thanks, sent him an e-mail, we'll see what happens.

[PaceAdvantage]

Opened my June M3 just now:

Date	Time		Trade Description						Fees	Comm	Amount
4/29/15	14:29:51	BOT +3 BUTTERFLY RUT 100 JUN 15 1280/1230/1180 PUT @10.62 CBOE	-0.35	-18.99	-3,186.00
	14:31:25	BOT +5 IWM 100 JUN 15 124 CALL @3.16 CBOE			-0.15	-13.74	-1,580.00

[PaceAdvantage]

And just like that, I had to shed 1 IWM contract to get my delta back under 10. I actually think I bought 1 too many yesterday...

I was actually looking to roll the entire position down and snag a couple hundred dollars profit by doing so, but I could never seemed to get filled at the price I wanted for the butterfly, so I kept it...would have been nice to book a profit and roll down though...instead I booked about a $150 loss...lol

So, subtract $150 from the P/L Open number you see on the chart below, circled in yellow.

And yes, I'm only 10 points away from having to roll down...nice down move today, eh folks?

Updated boxscore:

Date	Time		Trade Description						Fees	Comm	Amount
4/29/15	14:29:51	BOT +3 BUTTERFLY RUT 100 JUN 15 1280/1230/1180 PUT @10.62 CBOE	-0.35	-18.99	-3,186.00
	14:31:25	BOT +5 IWM 100 JUN 15 124 CALL @3.16 CBOE			-0.15	-13.74	-1,580.00
4/30/15	15:58:53	SOLD -1 IWM 100 JUN 15 124 CALL @1.75				-0.04	-10.74	175.00

[PaceAdvantage]

Tried to roll down my M3 yet again (although it technically has not violated the 20 points below short strike rule), and couldn't get filled at my minimum price. So, I jettisoned another IWM call since my delta was sitting at over 13.

I've booked a $300 loss now with these two IWM sales (plus some added commission). However, I'm up over $600 on the position that remains, which means I am net positive about $300 currently. Sure wish I could have gotten out of the butterfly at a decent price and rolled the whole thing down 20 pts...that would have been the best of all worlds.

Updated boxscore:

Date	Time		Trade Description						Fees	Comm	Amount
4/29/15	14:29:51	BOT +3 BUTTERFLY RUT 100 JUN 15 1280/1230/1180 PUT @10.62 CBOE	-0.35	-18.99	-3,186.00
	14:31:25	BOT +5 IWM 100 JUN 15 124 CALL @3.16 CBOE			-0.15	-13.74	-1,580.00
4/30/15	15:58:53	SOLD -1 IWM 100 JUN 15 124 CALL @1.75				-0.04	-10.74	175.00
5/5/15	15:59:42	SOLD -1 IWM 100 JUN 15 124 CALL @1.40 CBOE			-0.04	-10.74	140.00

[barn32]

May M3 was +$851.

I entered my June M3 today in two stages. I could only get filled for one lot yesterday, so I waited till today and entered the rest for about the same price.

The first two weeks of these things are pretty much a waste in my experience, so I don't see entering now as any problem. Besides I missed out on a lot of the shenanigans.

(As I write this I'm already outside of the tent to the right, so we'll just have to see what happens.)

[PaceAdvantage]

So, I obviously screwed up by selling those two IWM calls...now I'm left with less protection to the upside.

I don't have much experience trading these M3s in a downward market, and I think this was probably only the second or third time in the last 16 months that I had to worry about my a delta going over +10...usually I'm fighting a negative delta dropping past -10...lol

Instead of selling my IWM calls to get my delta back in line, I should have purchased some put verticals I suppose...the opposite of what I had done in the past when the market was going up and pushing my delta down past -10...I purchased call verticals spreads...not sure why I thought selling some of my IWM calls, especially this early in the trade, was the way to go...DOH!

[barn32]

June M3 currently + $110.00.

Outside of the tent to the right. Seven points away from a roll point, but I'll probably hold on for a while even if it goes up ten to fifteen points as long as I can keep my Greeks in line. I'll just keep buying verticals.

Once it becomes unmanageable, I'll roll.

Greeks are fine.

[FiveWide]

Originally Posted by barn32

June M3 currently + $110.00.

Outside of the tent to the right. Seven points away from a roll point, but I'll probably hold on for a while even if it goes up ten to fifteen points as long as I can keep my Greeks in line. I'll just keep buying verticals.

Once it becomes unmanageable, I'll roll.

Greeks are fine.

Nice Theta!!


-Five

[PaceAdvantage]

I bought one call vertical spread in the RUT near the end of the day today, simply because my delta was pushing -20. This brought it back to just under -10. I could have bought two verticals and really gotten my delta back to near zero, but I have doubts this market is going to push much higher given its proclivity to head back down after reaching this area in recent months...plus today's volume was nothing to write home about despite the sizable move.

Updated box score:

Date	Time		Trade Description						Fees	Comm	Amount
4/29/15	14:29:51	BOT +3 BUTTERFLY RUT 100 JUN 15 1280/1230/1180 PUT @10.62 CBOE	-0.35	-18.99	-3,186.00
	14:31:25	BOT +5 IWM 100 JUN 15 124 CALL @3.16 CBOE			-0.15	-13.74	-1,580.00
4/30/15	15:58:53	SOLD -1 IWM 100 JUN 15 124 CALL @1.75				-0.04	-10.74	175.00
5/5/15	15:59:42	SOLD -1 IWM 100 JUN 15 124 CALL @1.40 CBOE			-0.04	-10.74	140.00
5/14/15	15:51:31	BOT +1 VERTICAL RUT 100 JUN 15 1230/1240 CALL @6.30 CBOE	-0.06	-11.49	-630.00

I'm up currently about net +$500 on my June M3, given my $300 loss from selling the IWM calls a little while ago and my current $830 profit in the position I now hold.

And chart:

[barn32]

Re: June M3

My position became untenable. No matter what combination of verticals I applied either my Delta was to high, or my Vega was positive. And, since I was 15 points outside of a roll point, I just rolled it down. I was waiting for the market to come back so I wouldn't have to roll, but I can't wait forever. It may still come back. If that happens, I'll have to deal with it later.

Before the roll, profit was +$250.

This is the position before the roll:




I had two choices to balance the positon and achieve a flat T+0 line (T+0 means today plus zero days). I could add 4 IWM calls or I could find some combination of verticals. I opted for a +1110/-1130 four lot put vertical spread. The position now looks like this:

Notice how the top of the tent flattens out, and that the tent also widens. The verticals have this effect. Adding verticals reduces maximum profit and also slightly increases downside risk. In this case from 1190 to ~1217.

[PaceAdvantage]

I added another vertical yesterday morning...boxscore:

Date	Time		Trade Description						Fees	Comm	Amount
4/29/15	14:29:51	BOT +3 BUTTERFLY RUT 100 JUN 15 1280/1230/1180 PUT @10.62 CBOE	-0.35	-18.99	-3,186.00
	14:31:25	BOT +5 IWM 100 JUN 15 124 CALL @3.16 CBOE			-0.15	-13.74	-1,580.00
4/30/15	15:58:53	SOLD -1 IWM 100 JUN 15 124 CALL @1.75				-0.04	-10.74	175.00
5/5/15	15:59:42	SOLD -1 IWM 100 JUN 15 124 CALL @1.40 CBOE			-0.04	-10.74	140.00
5/14/15	15:51:31	BOT +1 VERTICAL RUT 100 JUN 15 1230/1240 CALL @6.30 CBOE	-0.06	-11.49	-630.00
5/19/15	09:47:13	BOT +1 VERTICAL RUT 100 JUN 15 1230/1240 CALL @7.00 CBOE	-0.06	-11.49	-700.00

Total open position currently up $825 which means I am net positive about $500 when factoring in my IWM sales in late April and early May.

Really want this market to head back down a bit...as I am far away from rolling down and my delta is -17....ugh...

[PaceAdvantage]

I just might buy yet another vertical before EOD...I am entering the final week of my trade (a shortened week no less), so there is no time to roll...need to protect myself a bit more to the upside...it's probably a no-brainer move...my delta is at -21...but I'm up about $800-$850 net for the month and I kind of want to protect that pittance of a profit a bit more...

[PaceAdvantage]

Just decided NOT to purchase another vertical, with this downward market action at end of day...like to see that...couldn't even break yesterday's close...and an inside day on the daily charts too...

[PaceAdvantage]

Originally Posted by PaceAdvantage

Just decided NOT to purchase another vertical, with this downward market action at end of day...like to see that...couldn't even break yesterday's close...and an inside day on the daily charts too...

I actually made the correct decision...miracles never cease...

[barn32]

The M3 is becoming the bane of my existence. It's a wearisome trade.

1. Large capital outlays, which takes away capital from other trades that are, in many cases, more profitable than the M3.
2. Long time frames
3. Multiple adjustments that must be made if you want to keep on top of the position.
4. I've run out of margin on several occasions.
5. OptionVue can be buggy and frustrating at times, but it does have the most accurate Greek numbers.
6. The trade can get complicated, especially when rolling or even exiting.

I've actually had better success doing shorter time frame trades (one month or less) than the longer term trades. I've had more winning trades than losing ones, and I'm up slightly overall, but I have had several disasters, which shows you what can happen if you let things get away from you. (I was out of town during one such fiasco, away from my computer and trying to trade on my phone during a time when the RUT was down 40 points in one day...tsk, tsk, tsk.) [In the interest of full disclosure, as painful as it might be, I've included a screenshot of all of my M3 trades since I started and the running totals.]

All that said I opened a small (2-lot) July 17 M3 today in my IRA account.

Here is a screenshot of my June M3. OptionVue says I'm down $344, but I'm actually down about $50. (A few days ago I was up $700 if you can believe OptionVue.) I've made multiple adjustments. My Delta was minus 700 at one point, but I just didn't feel like adjusting. I went ahead and fixed everything today.

As you can see by the graph the trade has good potential. Whether or not I will realize that potential remains to be seen.