Postitions

As usual the inventory continues to roll around and as always the hope is that this rolling comes laden with fat P and tiny L.

Fly update:
Sold entire core position of Dec '12 - '13 -'14 butterflies at an average price of -29, locking in a little better than 6 ticks of profit. Since that time, we've started to reaccumulate a small position AS LONG AS we're able to sell the Dec '13 - '14 -'15 fly as a package {1:1} for the price of -14 or better {eg buying -31's to sell -17's}. As I write this, that double fly is trading around -11.

Front Spreads:
We've completely rolled out of the March contract and unless something crazy happens {eg I get antsy and buy front month gamma} we don't anticipate getting back in. We're working to buy the June/Sept/Dec '12 fly for -1 or better. From our charting, it seems to have been tracking in fairly tight channel and buying -1s with the goal to add more at -2 fits our risk parameters. We'll have a soft-stop at -3.5 with an anticipated exit of positive 2.

Straddles:
As always, we continue to flip gamma around the March '14 9912.5 straddle that we're long. We will be looking for an opportunity to roll this to Green June shortly. Currently, we're short 30% of our deltas vs. 9918.

Put Spreads:
We've continued to hold our unhedged 91-93 put spread in June '12. Though it is under levels where we initially put it on, we have added to the position and it continues to be our 'insurance policy' in the event that all hell breaks loose around the Mediterranean Sea.

Outright Puts in the Fed Funds:
Interesting to note that within the last few days, a couple of major players have resurfaced looking to purchase downside protection. I mention this for a couple of reasons.

1. The Fed has proclaimed that they will not be moving rates until 'the latter part of 2014'. This is intriguing because the protection they're buying is for Feb of 2012.
2. The two firms doing the majority of the buying are JPM and Fimat. I can't speak with any definite authority as to who is behind these mega-houses, however in the past, Brevan Howard has always come through Fimat in the Fed Funds. He's been right more times than not and has fleeced the locals in that option pit countless times. Maybe he's back?
3. In our opinion, this is the type of trade that blows out traders. We've all heard the rhetoric about when the Fed will finally be moving rates and under that assumption you can safely sell every 9975 put to lower and collect your daily decay. However, the Fed is dynamic, and it wasn't more that 7 weeks ago that we were all clamoring for QE3. Now that stimulus is a distant memory and the we're headed to a S&P 1400 print...what's to say that we the rates don't start to get froggy sooner? Like 18 months sooner? Just a thought.

Trading size is always more fun, but so is being able to sleep at night.

~LH