The market still schools you + Alpha Pod free access
Hey,
So, I'll be honest...
I had a rough one yesterday. The tactical book is down 14.5% to start the week, about three and a half grand, which is way more than I’d normally let it swing in a week.
Worth walking through, because the thesis was fine and I still lost.
What went right. I had a put calendar on to lean short, and when the market ripped up through 7500 I stopped out for a $590 loss, exactly as planned. Then I read the zero DTE map, short strikes as acceleration zones, long strikes as gravity, and put a call fly on into 7550. Then tightened it, which took my max loss from about $300 down to about $100.
What went wrong. That 7550 strike kept growing, nearly 10,000 options, and gamma had flipped positive. It was behaving so nicely into the strike that I decided to lean in hard with an iron condor on top. Then a headline dropped, the market gapped, and I stopped out for around $1,800. It came all the way back afterwards and I’d have lost nothing.
The lesson. The thesis was okay. The size was the problem. Unless you size these small enough that the max loss is something you are willing to take, you’re exposed to the path and not just the outcome, and in a headline-driven market the path can be violent and stop you out.
What annoys me most is that I built the Theta Framework to stop exactly this. When VIX is 25+ and skew is in the 75th percentile or worse, you probably don’t want to be doing theta trades. I looked at a calm intraday tape and leaned in anyway. VIX was heading back towards 20, the skew had also come down intraday but we hadn't been in that condition long enough to really anchor on any stability.
Over twenty years in and the market still schools you. I’ll take the lesson rather than spend the rest of the week trying to win it back, which is usually how a year-to-date return goes to zero.
Imran
PS. The Alpha Pod is FREE for everyone until the live session on 23 November. If you haven’t picked that up yet, it’s [HERE].
Imran
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