Systematic Put Write - December 2018

Summary

Yesterday was December Option Expiration day and it is time to review the movements done following our strategy.

IBEX 35 on Dec 21st 2018. Source Investing

Sharp decline in the IBEX 35 December Future which closed at 8550 points, that is 506 points less (or -5,58%) than the previous month. This drop overwhelms the credit received for the short 9100 Put Option and results in a loss of 366,85€ this month.

Considering this, the Put Write Strategy is now at -5,8%.

New Position: ODAX January 2019 Call Spread

Summary

Complementing the Put Spread opened last week, I have opened a 11.400 - 11.800 Call Spread for the January expiration cycle. This effectively transforms the trade into an Iron Condor.
Also, in order to add some upside protection, I have bought a 11.350 - 11.400 Call Spread using February options. Ideally I would like to reuse this Spread again in February.

DAX 30 on December 17th 2018. Source Investing

Five trading weeks to go and an Implicit Volatility of around 21%. I should be able to hold longer before adjusting the trade given the fact that I have a debit Call Spread for February and the credit received from the Put Spread. The Put Spread, on the other hand, will be adjusted at 30 delta.

New Position: ODAX January 2019 Put Spread

Summary

Opened a new 9900 - 9500 Put Spread using the January 2019 ODAX options. DAX is now at 10740 (that is -6% since last week!).

DAX 30 on December 12 2018. Source Investing

Six trading weeks to go and an Implicit Volatility of around 22%. I will adjust the trade if the short option reaches 30 delta. Also I will close the trade if there is a bounce upwards and I am able to get a 60/70% of the maximum premium quickly.

Closed: ODAX December 2018 Put Spread

Summary

Today, I have closed the last trade involving 2018 options. With still three weeks remaining, taking 75% of the maximum premium is good enough for me.

DAX 30 on December 3rd 2018. Source Investing

In case there is a Volatility spike, I will be looking forward to January for deploying a new trade.

New Position: ODAX December 2018 Put Spread

Summary

Last Friday, with the DAX 30 index at 11.160 points, I opened a 10.500 - 10.100 Put Spread for the December expiration cycle (28 days to go).

DAX 30 on November 23rd 2018. Source Investing

Four trading weeks to go and an Implicit Volatility of around 19%. I will adjust the trade if the short option reaches 30 delta.

Systematic Put Write - November 2018

Summary

Today is November Option Expiration day and it is time to review the movements done following our strategy.

IBEX 35 on November 16th 2018. Source Investing

IBEX 35 November Future closed at 9056 points, that is 152 points more (or +1,7%) than the previous month. As this value is above the Strike Price of the sold option, it expires worthless and I get all the premium received initially (+176,35€ or +1,9%).

Considering this, the Put Write Strategy is now at -1,9%.

Closed: ODAX November 2018 Put Spread

Summary

Today,  I have closed the second Put Spread involved in this month of November. Although the trade was guaranteed to be a loser and I had to reduce the losses as much as possible, I have decided to close it and not risk two additional weeks of exposure.

DAX 30 on November 6th 2018. Source Investing

I might redeploy another Spread for December, if the conditions are good.

Position Adjusted: ODAX November 2018 Put Spead

Summary

Well, it seems that the timing was bad again and the drop in the DAX has forced me to adjust the trade when the short option reached 30 delta.

DAX 30 on October 26th 2018 Source Investing

I have redeployed the Spread to 10500 - 10100, however even if I get all the credit for this new spread, the trade will be a loser this month.

Systematic Put Write - October 2018

Summary

Yesterday was October Option Expiration day and it is time to review the movements done following our strategy.

Ibex 35 on October 19th 2018 Source Investing

IBEX 35 October Future closed at 8904 points, that is 587 points less (or -6,1%) than the previous month. This drop overwhelms the credit received for selling the 9500 October Put Option plus the credit received before and leaves the strategy at -3,8%.

New position: ODAX November 2018 Put Spread

Summary

After a nice drop from the level of the 12.400, and currently sitting in 11.650 points, I have decided to open a Put Spread for the November expiration cycle (31 days to go).

DAX 30 on October 16th 2018. Source Investing

Five trading weeks to go and an Implicit Volatility of around 19%. I will adjust the trade if the short option reaches 30 delta.

Closed: ODAX Oct - Dec PUT Calendar Spread

Summary

The first real Calendar Spread has not worked out and I have closed it today at a loss. The drop in the DAX index has been too strong in order to be compensated with an increment in the Volatility and the time decay of the sold option.

DAX 30 on October 9th 2018. Source Investing

Therefore, as it pretty much happened last year, I am back to square 0 with only three months remaining this year.

New Position: ODAX Oct - Dec PUT Calendar Spread

Summary

As the DAX 30 is climbing again back to the mid 12.400s while the Implicit Volatility has dropped all the way from 18% to 13% since the beginning of the month, I have decided to open a October - December 12450 Put Calendar Spread.

DAX 30 on September 21st 2018. Source Investing

If you remember, when Calendar Spreads were discussed, this trade involves selling a front-month option and buying another one at the same strike but further in the future.

The idea behind this trade, is to do it when Volatility drops and expect a return of the Volatility to its mean value. If that happens, the Option that we own far in the future will gain more value that the value lost by the Option being sold in the front month.

If by the end of the month, I have not achieved that increase in volatility, I will roll the short option into November in order to recover as much premium as possible, from the original debt paid.

Systematic Put Write - September 2018

Summary

This is the first follow-up entry for a new position that I have opened last month. Unlike the credit spreads (vertical call/put spreads, calendars, etc.) this is a long term position: I will perform a systematic Put Writing on the Spanish Ibex 35 index.

What is a Systematic Put Write? 

This strategy is very simple, it consists of two operations every month:

• Sell one (or any amount) of Put Options with Strike almost at the money for the next month.
• Invest the nominal (value of the underlying of the options sold) plus the premium received in a risk-free fixed rate product.

Note: We will omit the second step, tough, as fixed rates are negative now in Europe.

What are the characteristics of this strategy?

• Sold options are cash-covered (you have the cash to buy the underlying).
• No adjustments are done.
• When the underlying falls, the strategy losses money but less than the underlying.
• When the underlying goes sideways and slightly upwards, the strategy gains money and beats the underlying.
• When the underlying rises sharply, the strategy gains money but greatly under-performs the underlying.

Put Write returns compared to SP500 and others from 1986 to 2008. Source Bloomberg and CBOE

All these characteristics make the strategy less volatile than the market itself and has given better results over a long period of time. Take a look to the Ennis Kupp + Associates study from 2009 (published in CBOE) for deeper insights.

Closed: ODAX October 2018 Put Spread

Summary

One day short of two weeks after having opened the trade, the contraction in the Implicit Volatility and a tiny climb in the DAX allowed me to close the Put Spread for about 60% of the maximum profit.

DAX 30 Index on September 18th 2018. Source Investing

I´m happy that I closed this trade early too (September Option Expiration has not even arrived yet, four and a half weeks still to go for October OpEx) as being in the market during the shortest possible time reduces risks and allows entering new trades from better positions.

New position: ODAX October 2018 Put Spread

Summary

The DAX index is hitting again the lower 12.100 level so I decided to open a Put Spread for the October expiration cycle (44 days to go).

DAX 30 on September 5th. Source Investing 

Six and a half trading weeks to go and an Implicit Volatility of 18%. My bet is that the support will hold and the market will rebound again. If things go wrong, I will adjust the trade when the short option reaches 30 delta.

Closed: September 2018 Put Spread

Summary

Barely one week after opening the trade, out of a total of six, I reached 50% profit so I decided to close the trade and take the money from the table.

DAX 30 on August 21st. Source Investing

New position: ODAX September 2018 Put Spread

Summary

This morning, with the DAX 30 hitting 12350, I opened a 11500/11100 Put Spread aiming for the September expiration cycle (39 days until expiration).

DAX 30 on August 13th 2018. Source Investing

Six trading weeks to go and an Implicit Volatility of 19%. The DAX index has declined a bit during this month so my bet is for a slight rebound and a continuation of this sideways market for some weeks.

If things go wrong, I will adjust the trade when the short option reaches 30 delta.

How to import CSV files into Parquet with Kite SDK

Summary 

In order to perform some data studies, I need to import a CSV file, generated by Yahoo Finance and containing historical data from General Electric (GE) into Parquet files in HDFS so I can later run some Spark Jobs on it. 

The data is a time-series and that should be partitioned per year and month (just for the sake of the example).

In order to have a quick solution (I do not want to write a Spark Job or Java application), I will use Kite SDK.

Steps to follow

• Clean the data with a simple AWK script
• Define the schema of the Parquet file (column types, etc.)
• Define the partition strategy that is going to follow (for more optimal querying)
• Execute the import

Calendar Spreads using Put Options

Summary

As I am not too happy with the results, I have not deployed any Iron Condor lately. Nor I have had the chance of deploying a Put Spread, which is a trade that I am much happier with.

In the meantime I have been reading about Calendar Spreads and done a bit of paper trading with them. Today I would like to share my thoughts on them.

Note: This is not meant to be a proper study on Calendar Spreads, just some notes I have compiled on the way. Any serious study on a trading strategy requires a proper set of back tests.

Example Trade Setup: Positions opened, days until expiration (DTE) and debit invested

The calendar spread is composed of two positions (in this example PUT options for the German DAX30 - ODAX):

• Same strike price: 12500 points in this case.
• Different lifespan: A shorter one, using the front month (32 days) and longer in the other, some three or four months in the future (158 days).
• Short/long: You sell the front option and buy the option in the future.

As the option in the future has more time value, this results in an overall debit.

For instance, this is the current status of a "paper trade" that I have simulated for a couple of weeks:

Type	Name	DTE	Delta	Theta	Vega	Debit/Credit
Long Put	December 12500	158	-43,58	1,62	31,82€	-390€
Short Put	August 12500	32	35	-3,68	11,83	90€

Results in this profit/loss graph:

The orange line is the profit/loss at the expiration date of the short option, while the blue line is displaying the profit/loss 9 days after opening the trade. Note that the amounts are all multiplied by 5 here as each ODAX option represents 5 contracts (or 5€ per point).

Closed: ODAX May 2018 Put Spread

Summary

Yesterday was the unusual case when, right after opening a position, the market makes a sharp movement in my favor. So sharp that I was able to collect 60% of the maximum profit in just one day. Therefore, it did not make sense risking the exposure for one month and a half, only to get the 40% remaining.

DAX 30 on April 6th 2018. Source Investing

Trade Status

After closing the spread, I booked a gain of 81€. With that, the current gain since the beginning of the year is 0,49%. DAX 30 index is down 4,9% in the same period of time.

Type	Name	Open Date	DTE	P/L
Put Spread	ODAX May 2018 10700/10300	4/4/2018	44	81,00€

All the trade details can be found here.

Portfolio

No open position in the portfolio right now. I might reopen the Put Spread if we test again the lows made last week.

See also

• Opened: ODAX May 2018 Put Spread
• 2018 trades (so far)
• 2017 track record

New position: ODAX May 2018 Put Spread

Summary

This morning, with the DAX 30 hitting 11800, I opened a 10700/10300 Put Spread aiming for the May expiration cycle (44 days until expiration).

DAX 30 on April 4th 2018. Source Investing

It does not have much time value compared with other trades and the short delta was smaller than usual (closer to 10 than to the usual 16), but the German index has been breaking some supports and we might be entering a bear market. I did not go for a full Iron Condor as I fear the index tendency for bouncing upwards.

Closed: ODAX April 2018 Iron Condor

Summary

Last Friday, I closed the remaining Put Spread at a small loss after seeing the DAX index breaking supports and making new year lows. As the time of this writing, five days later, I am still not sure whether that decision was precipitated.

DAX 30 on March 28. Source Investing

Too bad I did not close the spread when I was winning 70% of the premium received. Anyway, I wanted to close the spread as I do not plan to pay attention to the stock market during this Easter week.

Closed: ODAX March 2018 Put Spread

Summary

Today expires at max profit the Put Spread I opened after rolling the failed February 12100-11700 Put Spread.

DAX 30 on March 16th 2018. Source Investing

Given the very high IV when I opened it, and the sideways market since then, this was an easy ride and I chose to get all the premium for it. Moreover, this spread was only half the usual width, so the money at risk was half as well.

ODAX April 2018 Iron Condor: Closed Call Spread

Summary

Last Wednesday, after almost 30 days, no movement in the DAX index and a nice volatility contraction, I was able to close the Call side of the Iron Condor locking around 77% of the premium initially received.

DAX 30 on March 16th. Source Investing

There were still more than 5 weeks to go, so I preferred to take the money from the table, giving the index tendency for rallying (although it is taking a more bearish profile lately).

New position: ODAX April 2018 Iron Condor

Summary

After deploying the small Put Spread in March, I finally decided to go for an April 13100/13500 - 11100/10700 Iron Condor.

DAX 30 on February 14th 2018. Source Investing

This time I´m betting on a sideways market for some time after the recent selloff. With the relatively high IV I got some good distance for the short options, especially in the short Put. In the Call side is tighter but I hope that a further IV drop will make any adjustment cheaper.

Closed: February 2018 Put Spread - Rolled to March

Summary

Big drop this week and bad timing anticipating a bounce upwards. I tried to close the trade on Thursday but the spreads were crazy wide, luckily on Friday morning a little bounce in the opening allowed me to close the spread at 35 delta.

DAX 30 on Feb 9th, at close. Source Investing

After that, I deployed another Put Spread in March, another 1000 points down (11.100-10.900) with only half the width (200 as opposed to 400 points).

New Position: ODAX February 2018 Put Spread

Summary

I have been in the sidelines during this month waiting for the rally to weaken and IV to increase, as I have had a couple of bad experiences selling Credit Call Spreads in that environment and selling Put Spreads seemed to be a bit suicidal too.

Now the correction is here, but it has arrived stronger that expected, both in Europe and USA, so I decided to go for a 12100 - 11700 Put Spread for February and not March.

DAX 30 on Feb 5th 2018. Source Investing

Next week, we should have better visibility on the size of the correction and I might dare opening another Put Spread in March.

Closed: ODAX February 2018 Iron Condor

Summary

Bad timing again. A few days after opening the position a sudden rise in the index made me adjust the trade on the call side when it reached 30 delta. As there still were six weeks to go before expiration, I also closed the put spread as it had already reached 70% of the maximum possible profit.

DAX 30 on Jan 8th 2018. Source Investing

I did not want to roll the call spread higher with the current low volatility, as the 16 delta is merely 200 points above the current level. The same happens on the put side.