Week two was a hard lesson for the program as volatility continued to expand in the downward direction. The S&P 500 fell a whopping 5.71% last week as the VIX exploded from a low of 18.28 to at high at 29.30, a staggering 60.3% increase! As you may recall my program had written a ton of puts on solar stocks ahead of last week since these stocks have extremely expensive options and made big declines. Well the solar stocks fell pretty much the hardest of all sectors, causing these puts I was short to dramatically increase. I also realized there was a glitch with large market orders on options that take a long time to fill, as occurred with SOLF. As a result I didn't run the program much except for the beginning and end of the week. As a result, written options (puts) that were in the money expired and I got put shares on DSL, CSIQ and LDK.
Liquidation Value: $806,548.01 -$173,520 on the week
Positions:
Longs:
ABT
CSIQ (I was put 25,000 shares)
DSL (I was put 25,000 shares)
LDK (I was put 25,000 shares)
MCK
SDS
Shorts:
IWM
MRX
Naked option positions (options sold short):
LULU Feb 25p
Options that expired worthless:
CAL Jan 25c
CROX Jan 25p
UAUA Jan 25p
Of course I am not happy with the account's 17.7% decline but this week represented an extreme worst case scenario for the program. I have some good ideas about how to fix the problem, certainly the SOLF catastrophe cost me about $160k (16%). This doesn't seem so bad when you consider that my program was aggressively writing naked SOLF puts and the stock dropped more than 50% in two weeks. On the bright side, the program has the potential to swing very rapidly and averaged over long periods of time it should be market neutral. If the market had bottomed and rallied early last week then I'd be sitting over +20% on the week. I'll add more here later, check back.
For those of you who will be doing some coding this weekend try jamming out to this while you write. And if any readers are into the disco biscuits be sure to comment, I can recommend some good shows.
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3 comments:
At the moment it looks like I am going to get totally killed on the 75,000 shares I was put. Markets worldwide are plunging:
http://www.bloomberg.com/markets/stocks/futures.html
I haven't run the program since last week but I did check to see how the account was doing. The liquidation balance was about $980k so its almost back to break even. Another big up day tomorrow and my robot will be back in this thing. This is mostly the result of the 25k share positions in LDK and DSL which are still in position.
The program is now up 5% overall and I suspect it will be up roughly 15% at the open tomorrow. Would be sweet if I can make the rankings Monday.
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