My ES spreads have been on for 24 days. Here is the performance. Slightly on margin call if the account was full.

Do you have any information on how the 1/2 spread would have performed?

I'm probably going to download the files tomorrow or the day after and run a few scenarios. If you happen to have the information all the better. Thanks.

/Rsm005/

Watching the 77 point drop at 9pm ET, I see that my spread, (EW3j18p2250(2)p2000(3)) is only 1.00 to 2.00 higher net premium from the Feb 5 settlements. At 9:15 pm ET my spread is unchanged even though futures are down 37.00.

I use halfway between bid and ask for the current option price.

The 266.75 drop from Jan 26 to Feb 5 is almost the largest point drop since 2009 (268.50 for Mar 2016 contract). But the 9.3% drop is not near the highest percentage drop since 2009 (19.3% for Dec 2011 contract).

It looks like I need to go from 4xIM to at least 5xIM.

Here is how the ES spread would have done if entered on the worst day of Jan 26, 2018 using 4xIM. It hit margin call.



Here is same spread with 5xIM. No margin call. But lower possible ROI of course.



I wonder if the low premiums and low Volatility made these options not work now when they worked in the past.

Crazy what higher volatility does. ES futures are down 45 now but March ES calls are priced higher.

ron99 

Crazy what higher volatility does. ES futures are down 45 now but March ES calls are priced higher.

I'm not sure whats more amazing, how much vol explodes on the downside, or how quickly it evaporates the second the market pauses it's freefall. Thanks for the updates Ron.

Now, 11:41 pm ET, my spread is up 1.00 from Monday settlement even though futures are down 74.

Do you track your delta and vega? They'll be a sweet spot at which your long option is outperforming your shorts. Sounds like your in the middle of it.

I had 2 positions of -1+2 spread open over the day. Both these positions were traded via IB account which is not ideal, but although high (ca. 840) margin per spread, it never moved much during the day.

When the volatility went crazy after market when ES was down with over -5% and I saw that the long further out of the money options started to gain value faster, so I tweaked my exit LMT order in the hopes of closing out the trade in case of volatility surge, which happened. So as weird as it sounds, managed to get out with a small profit with the -1+2 spread.

I suppose this was one of the crazy examples of where purely having more longs vs shorts helped due to the nature of the move.

The spreads I was holding were:
ES May’18 Short(1) 2400 + Long(2) 2110: entry 29/1/18 @-3.2; exit 5/2/18 @-2.8
ES May’18 Short(1)2275 + Long(2)1980: entry 2/2/18 @-3.0; exit 5/2/18 @-2.0

I wonder how much of that move is due to the heavy positions in ETN space. XIV has hit its intraday over -80% threshold meaning that by prospectus they would have to unwind their 73,000 short contracts, all in all down -84.4%

FWIW

Here Is What Was Behind The "Largest VIX Buy Order In History

Quoting 

This odd finding - namely that the VIX ETPs had shifted their traditional vol bias from long to short - prompted the Goldman strategist to ask glibly "Should we worry?" Less than a month later we have the answer: Yes, Goldman, you should worry, because the historic short squeeze that took place overnight in VIX, which sent it over 100% higher - the biggest jump in history - was precisely a result of this Goldman observation, namely that ETPs were now aggressively shorting vol. Here is what happened - as Morgan Stanley explained overnight - following this first ever shift by ETPs to net short vega, a move that in retrospect will prove to be suicidal for the entire industry, which now faces one giant termination event. In short, "the VIX market saw the biggest net buying pressure on record." According to Morgan Stanley calculations, ETPs had to buy 282,000 VIX futures to rebalance their short gamma: "this was the largest VIX buy in history, dwarfing Friday’s previous record of 78,000." Dealers hedging their short gamma exposures likely contributed to VIX futures demand as well. And since most of the rally in VIX futures happened after the 4:00 pm cash close, there was no time for investors or the issuers of the VIX ETPs to react.

https://www.zerohedge.com/news/2018-02-06/here-what-was-behind-largest-vix-buy-order-history

Another reason to be even more careful in trading now and in the future.