Well, school started here today so aside from the first few hours of the day my program did not run since I left my laptop at home. While it was running it entered a large number of new naked put positions and added slightly to its DXO position. Then Obama gave his oath of office and the nervous nelly market dropped another 2% and oil was crushed (DXO lost 11.4%, and thats a $300k position). The scenario unfolding before us now is almost identical to January 2008 when stocks first entered it's bear market. Stuff is getting wiped out. Take a look at the big banks (ie BAC, JPM, WFC, etc) can you say nationalization? Unfortunately, this is the worst conceivable market for my option writing strategy. When stocks make very large high volatility moves, then continue in the same direction thats bad news for me (see BAC below, my program sold feb5p on Friday). I need to work out a way for my program to hedge its self against situations of extreme volatility because the way things are written now my program will just keep selling puts all the way to zero, which is obviously going to be a loosing strategy. On the other hand, any bounce in the market will be very good for the current portfolio and will certainly lead to call selling. Naked calls would be a nice hedge to all the naked puts, but the market needs to bounce for the program to enter naked call positions.
In other news, IB announced the rankings after the first week (see below). From this I estimate that I was in 20-30th place at the end of last week. It looks like the competition is once again very tough this year. After only a week, the top ten places are up 14.6% or more with first place gaining 70%!! This is somewhat discouraging to me because there is no conceivable way for my program to profit that fast aside from if oil doubled over night (not gonna happen). The only way to make 70% on $1M in a week is with some extremely highly leveraged strategy. Since it was options expiration week I surmise that that first place contestant wagered very heavily on a few front month options. Way to go Ahmed Taha! It will be interesting to see how this list evolves over the next 7 weeks, are these rates of return going to be sustainable and will DT2009 make the cut? Anyways, congrats to all of these contestants, your hard work is paying off. Are any of the blog readers up there?
By the way, if you are curious about how this compares to last year, check out the first week's rank in 2008. As you will see, this year is slightly tougher which I assume is due to a significantly larger number of players. You also might find interesting info here.
