Delta Neutral

Someone just mentioned in the comment section that the media was long volatility and hence the bus was pretty empty right now. Point taken, good sir, but even I, a notorious market megalomaniac, have a hard time justifying a positive delta portfolio if I see Mr. VIX scrape the bottom of the barrel again:

There are times to be a contrarian and then there are times when it’s best to be running with the crowd. And then again there are times when you try to be as delta neutral as possible. And guess what, today is one of those times. In other words – just because the bus is empty means it’s taking off in the direction you think it will. But that’ doesn’t mean we can’t get positioned – let’s just make sure we keep it delta neutral.

In case you don’t know what that means – here it is right out of investopedia: A portfolio consisting of positions with offsetting positive and negative deltas. The deltas balance out to bring the net change of the position to zero. As a result, you neutralize the response to market movements for a certain range.

In English this means that your long exposure should match your short exposure. Got it? Good! So let’s look at some setups, shall we?

The Dollar – I love this setup! Long at the 25-hour/25-day SMA (both are in sync right now). Short on a breach. I hope it’s an SMA retest which would be extremely peachy.

Nice inside day setup developing over at the evil empire. Long/short triggers shown on the chart.

FSLR – only interested in a long IF it manages to hold the 25-day and pushes back above the 100-hour SMA.

I got quite a bit more, including some FX plays – please step into my lair:

More charts and non-biased commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero or Geronimo subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.

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Cheers,

This entry was posted on Monday, January 7th, 2013 at 2:25 pm. Both comments and pings are currently closed.



  • http://dartht.blogspot.com/ Evil_Gerb
  • http://twitter.com/NobodyTrader Nobody Trader

    As it happens, I took both a call butterfly and a put butterfly on a sector SPDR ETF today, very tight and it’ll probably blow out one way or the other, but it’s about as delta neutral as you can get. Hopefully it wasn’t motivated by boredom…

  • http://evilspeculator.com molecool

    Too many bodies in the trunk… dead give away. Either that or it was taken in L.A. or Miami.

  • http://evilspeculator.com molecool

    Not everyone’s cup o’ tea – but definitely nice if you know how to manage it.

  • bdoone

    The media is always long volatility: “if it bleeds, it leads”…but, for every ‘debt ceiling’ or weak earnings article I see there is a SPX 1500 or 1550 or 1600 article.  MM’s like it that way; its easier to pick pockets while your victim is being baffled by bullshit!

  • http://evilspeculator.com molecool

    Yeah, which is why I ignore the news. But that VIX chart worries me.

  • http://dartht.blogspot.com/ Evil_Gerb

    Mole worried?  only the Paranoid Survive (he he)

    13 was the number last week.
    I’m seeing 12.96 today. this week.

    http://stockcharts.com/h-sc/ui?s=$VIX&p=W&yr=2&mn=0&dy=0&id=p87570310046

  • BobbyLow

    Ooooh Baby!

    I am no longer an E-Mini Virgin.  

    It was only a 2 Point Scalp but very satisfying.

    If I still smoked it would be time to lean back on my pillow and smoke a cigarette.  :)

  • http://dartht.blogspot.com/ Evil_Gerb

    yeah, make sure you stay on your back ;-)

    err congrats.

  • captainboom

    I only smoke when I’m on fire.  :-)

    I hope you’re a Zero sub.  Pays for itself regularly with e-mini scalps.

  • http://dartht.blogspot.com/ Evil_Gerb

    you can make a fire for a man and he will stay warm for the night.

    you can set a man on fire and he will stay warm the rest of his life.

  • BobbyLow

    Funny thing is that I’ve been around a long time in the Trading Business (which doesn’t mean shit BTW).  Throughout this time, I had an undeserved fear of Trading Forex and Futures.  Now that I’m trading both of these, call me crazy but I’ve found them to be much safer than trading the S&P.

    That doesn’t mean I can’t get my balls cut off by being reckless.  But both the Forex and the Futures markets are IMO a much more straight forward and fairer deal. 

    I sincerely doubt that I would have ever come to realize this if it wasn’t for Mole and the Traders here at The Evil Speculator.  

    Thank you all.

  • newbfxtrader

    Welcome to the club. 

  • http://evilspeculator.com molecool

    Everyone MIA? Vacation is over steel rats!

  • captainboom

    Found myself wondering this morning what Volar is up to.  I’m reading ‘Bollinger on Bollinger Bands’, and the discussion of statistics set me to wondering about him and the convict.

  • Ronebadger

    & Fearless – MIA

  • Th3_Acist

    Present and accounted for.

  • http://dartht.blogspot.com/ Evil_Gerb

    hibernation.

    but Volar, now that’s the real gap.

  • badflightrisk

    Some great shots if your bored:

    http://www.youtube.com/watch_popup?v=EEu42L0ufBY

  • AMCabrera

    Lol I love it too! Forex is awesome.

  • Skynard

    That Bottom Mole signal earned it’s keep today:)

  • captainboom

    Fearless had said he would be gone for a month.  That was right around turkey day.

  • newbfxtrader

    Mole says the signals are same on the zerofx but seems to work much better on es.

  • Skynard

    Yes, they have been very accurate. Have used them for exits mostly.

  • Skynard

     /DX with support on both hourly and daily 100 sma’s, long:)

  • AmazingLarry

    Is it May of 2012 all over again? Similarly eery set up on the daily and weekly. 

    How does a cat that doesn’t play directly in Forex take advantage of a Bucky on the run besides long UUP :barf:??

  • BobbyLow

    That’s a tough one.

    As you probably have already found out, about the only way you might make some money on UUP is to trade in 10,000 Share Blocks.  LOL The price action in that thing sucks.

    I think most of the other Currency related ETFs are thinly traded and subject to overnight risk as well.

    /DX is a Futures Instrument. 

    Forex is for trading currency pairs and is probably the least risky of them all.

  • http://www.facebook.com/profile.php?id=100001131611045 Exar Kun

     Hi mole, is the 0fx down?

  • Skynard

    Ya, as Bobby covered. That is a tuffy.

  • AMCabrera

    http://content.screencast.com/users/AMCabrera/folders/Jing/media/885a4f77-fa51-44eb-95c6-09317694235b/2013-01-08_0738.png

    just waiting on this one and I still have my usd/cad aud/usd long and shorts see you guys later.

  • http://evilspeculator.com molecool

    Everyone asleep?

  • http://ibergamot.blogspot.com/ i Bergamot

    Are you still short Silver?
    This thing is surely stubborn

  • bdoone

    Looking at hourly ES charts: 100hr sma flattened its steep rise (it was 1430′s yest. afternoon) and has gone horizontal with 25hr sma (and slightly below) at 1454.  
    25 & 100 period BB’s also compressing.  Big move coming?

  • Ronebadger

    present

  • captainboom

    Zero is stuck boss.

  • Skynard

    Enjoy the ride, Yen on fire:)

  • Joe_Jones

    Same here

  • Joe_Jones

    Perhaps. We could also churn sideways forever. I hate delta neutral positions. I’d rather go fishing. 

  • Skynard

    Reduced my Yen position and taking profits now.

  • BobbyLow

    Me too.  

    I probably sucked at position management when I did it.  But whenever I went Delta Neutral it was like running in place on a destination to nowhere. 

  • Joe_Jones

    The only thing I am playing today is short HL. Price is below the 25 and 100 d sma. My target is the lower 100 d BB at 4.87
    http://stockcharts.com/h-sc/ui?s=HL&p=D&b=5&g=0&id=p86166610379

  • http://evilspeculator.com molecool

    Sorry – I am experiencing technical problems with the Zero right now.

  • http://ibergamot.blogspot.com/ i Bergamot

    May be grains bottoming. Soybeans rolled into March contract and 1395ish is the level to watch.
    Trying JJG again

  • Joe_Jones

    We are at the volume hole now on ES. A failure below it should be interesting.

  • http://evilspeculator.com molecool

    Unfortunately I’m experiencing a slew of technical problems with the Zero
    and am trying to get on top of things. No ETA as of when the service will
    be restored just yet but rest assured that I’m working hard to get things
    back up and running.

    My apologies for any inconvenience.

  • captainboom

    Wouldn’t surprise me to see /ES fill that daily gap down to around 1431.  Might take more than today to do it.

  • http://dartht.blogspot.com/ Evil_Gerb

    yep.  but beware the envelope line.
    Delta neutral, remember?

    http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=3&dy=0&id=p38623847782

  • http://evilspeculator.com molecool

    Incredibly LogMeIn just had a melt-down as well. Murphy’s Law…

  • http://dartht.blogspot.com/ Evil_Gerb
  • BobbyLow

    This has been a nice slow Bleed on the E-Mini.  No big deal, but I went for a couple point scalp short at 10 AM and 2 Points have turned into 6 Points and growing on a nice slow grind.  Going to keep adjusting stop and we’ll see where she ends up.

    BTW, as Sky mentioned earlier, the Yen is kicking ass.  And I have 2 Short Pairs against it.   :)

    Been on a Roll for the past Month and I don’t want to do anything to screw it up.   LOL

  • Joe_Jones

    We know you do.

  • Joe_Jones

    Let us see what happens after lunch time.

  • Joe_Jones

    No big play for me today until we fall below it

  • Joe_Jones

    Yeah! Zero’s back! Thanks Mole

  • http://evilspeculator.com molecool

    Okay, I got in and restored it. All good now. So sorry – not sure what caused it in the first place. LMI has a system wide outage and that may have affected it.

  • BobbyLow

    Stopped on ES +4

  • http://evilspeculator.com molecool

    Thanks for being so patient guys – didn’t get a single angry email.

  • Skynard

    Full short /ES on the retrace now:)

  • Joe_Jones

    Yup. Glad to see zero’s back. ;-)

  • Skynard

    Hourly stair stepping

  • AMCabrera

    http://content.screencast.com/users/AMCabrera/folders/Jing/media/3a7ca391-5531-4fda-a8ec-0f04192cb986/2013-01-08_1224.png

    Starting over again. I still hold a quarter lot where the yellow arrow is located. I have a quarter lot placed right below too. If it runs away higher it will be no big deal I will just sell up there too.

  • itslance

    Check out LVS for an RTV sell setting up on the high

  • Pervergence

    VWAP again

  • http://dartht.blogspot.com/ Evil_Gerb

    makes you wonder, if there is power in the Ring.

    http://s1.postimage.org/kod18d1zz/hobbit.png

  • badflightrisk

    ACI sweet spot if it can hold here

  • http://www.facebook.com/gerhard.maritz.5 Gerhard Maritz

     Green latern light…

  • BobbyLow

    Yep

  • Skynard

    Div 5 min.

  • Pervergence

    series of higher lows though too…….hard to get real excited

  • Skynard

    Really short now:)

  • Skynard

    Number of div’s set-up on the 5 min now. Looks like an ending diagonal to me.

  • Joe_Jones

    Really, really? ;-)

    Looks good.

  • Skynard

    Yep, full boat now:)

  • Pervergence

    Looks like the lower TL of 5 min ZL breaking down…..we shall see

  • Pervergence

    me too

  • captainboom

    Higher low on the middle panel of the hourly.  Might override the 5 min?

  • http://evilspeculator.com molecool

    ¤ø„¸¸„ø¤º°¨¤ø„¸¸„ø¤º°¨ 
    ¨°º¤  S H A K E   N ¤º°¨ 
    ¸„ø¤º° B A K E !“°º¤ø„¸
    ¸„ø¤º°¨¤ø„¸¸„ø¤º°º¤ø„¸

  • Skynard

    See that, we shall know with the next candle. Highly dought it.




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