A place to learn and talk about trading options

This is a topic I've been thinking about for a while. I think it's something that, especially new, traders don't understand well. So I want to share my ideas around adjusting trades. What is it? Why do I do it? When do I do it? This is a journey every trader must have individually, but maybe this will help some traders out there along the way.

What is an Adjustment?

This sounds really basic, but I think it's important because this is the root of a lot of misunderstanding, in my opinion. What exactly is a trade adjustment? When a trade is being challenged, it's possible to make changes to that trade. Some people think they are “fixing” the trade, but I disagree with that view. I prefer to think about adjusting as buying time to give the trade a chance to work. Most adjustments fall into two major categories:

  • Adding capital to the trade
  • Realizing a loss to the overall position

In both of these cases, you are taking on some level of risk in exchange for the opportunity for the trade to be successful. The net result can be adding more room to one side, lowering price risk (delta) but in general an adjustment adds some form of risk to the trade, either explicitly in the case of adding capital, or implicitly by realizing some loss that must be overcome in order to make the profit goal or to be profitable at all.

When to Adjust?

This is probably the biggest and most difficult part of adjusting. As one of my mentors always says, “When you adjust is more important that how you adjust”. Early on, many traders use simple strict rules on when to adjust. For example, if the underlying reaches a certain price, or if the position deltas reach a certain level, or at a certain P/L. All of these things are good ideas but over the years I have developed a holistic approach to adjusting. This approach looks at multiple factors. It takes experience for each trader to figure out but hopefully this will help guide some traders out there. Here are the factors I look at together when figuring out when to adjust. Keep in mind that most of my trades are range-bound and non-directional. So my goal in these types of trades is to keep the underlying inside my structure and my price risk, especially delta under control. If you are trading more directionally, some of these concepts may not apply.


This one seems simple but took me a while to figure out. I have a hard and fast rule: if I'm at an adjustment point and I am up any amount of money, I do not adjust, I simply take it off. I'd rather just take off the trade and put something else on, perhaps even the same trade but re-positioned better based on the new market conditions. Some people might consider that an extreme version of an adjustment. But, in my opinion, if the entire trade is taken off and replaced, it's a new trade. It's really a matter of accounting at the end of the day, but that's how I see it.

Conversely, if I am at my max loss, I am very cautious around adjusting. I can't say I won't adjust at all, but I'm less likely, especially if the adjustment involves adding more risk. I can't say I 100% won't adjust as I did if I'm up money, but it's a strike against adjusting and I will consider other factors as well.


When adjusting or deciding to adjust, I always consider the greeks of the trades, both the current greeks as well as the greeks post-adjustment. This is especially true for the price risk greeks, delta and to a lesser extent gamma (although gamma comes into play later). My goal when adjusting is to lower my price risk (my position deltas) because the trade has moved against me and I want to lower the impact of price movement. I don't want to adjust into a trade that increases my price risk.

Looking at delta may also be a reason to not adjust when I might based on the underlying price. If my trade is approaching an adjustment point but my deltas are very low that could be a reason to not adjust and wait to see how the underlying moves. This would be in conjunction with other factors, of course, but it's an important one. For example, if I have a 4-lot on and my position deltas are < 1, I'm far less likely to adjust the trade because my price risk isn't particularly bad. It's safer to wait it out a bit because the price continuing to move doesn't hurt as much. However, if I have 9 deltas (long or short) on that same 4-lot, that's a reason to consider adjusting as on most of my trades I would want to lower the risk of a price movement.


We do not trade in a vacuum. While there are events we cannot predict, there are plenty of known events that effect when/if I adjust a position. As I primarily trade SPX, big events for me are FOMC meetings, some earnings for the larger components of the index and, in the past few years, CPI prints. Other underlyings may share these or may have others as well. But if one of these events is eminent, I may be less likely to adjust a trade and more likely to close it. This isn't a hard and fast rule, but definitely a factor to be taken into consideration with others to build the holistic view.

Another thing to consider is that as big events approach, the greeks don't act as expected. For example IV could nullify positive theta. So if my trade expects to recover based on theta decay, I may not want to hold that trade through a big event if it's already in a position where I am considering an adjustment.


Again, my trading style is typically non-directional so most of my trades have risk on both sides. These trades work really well when the market is calm and is staying in a range. But when the market really starts moving, especially in one direction, that may affect my decision with regards to the timing of my adjustments. This goes hand in hand with events above. Some trades look good when they go on, but not so good later on. Not every trade will work, and sometimes the best things you can do when the market conditions change is to just take off the trade rather than try to keep it going.

Time in Trade

This is a critical element to making a decision to adjust. How much time has the trade been on and, more importantly, how much time is left. When I adjust, the idea is to give a trade more time to win. But in order for that to happen, I need there to be time left in the trade. If you follow my content, you know that I avoid expiration week (tl; dr: due to the high gamma which drastically increases price risk) so that means that as that time approaches, I would like to have at least a few days for the trade to work before expiration week starts. This means by Weds of the week before expiration week is about the latest I would likely adjust, especially if that adjustment adds risk to the trade. If the adjustment lowers risk, I may consider it based on other factors but my goal would still be to get out before expiration week or Monday of that week at the latest.

Another aspect of time in trade is how quickly an adjustment comes. I am careful about adjusting very early in the trade and especially careful about adjusting very shortly after making an adjustment. The former is important because it's a sign that maybe this trade wasn't right for the current conditions, the latter because trades need time to recover after an adjustment and back to back adjustments are usually not good in my experience. The most extreme case of that is needing multiple adjustments in a single day. If that is needed, I will likely just take the trade off for a loss instead.

An Example

Here's a trade I did last year where I did both types of adjustments on the same trade. I don't do multiple adjustments on the same trade very often but, in this case, I did and I think it demonstrates the two categories of adjustments.

I started out with a 2-lot SPX butterfly centered near the money. This is a common trade of mine when IV is on the higher side as it's short vega. In this case, the very next day SPX goes up quickly and the trade gets into trouble as shown here

So let's run it through my tests:

  • Price of the underlying is near my adjustment point: YES
  • I am down money: YES
  • Position deltas are -9.75 on a 2-lot: YES
  • Speed/Direction: Underlying moved here 1 day after the trade went on (1.67 SD move): YES
  • Time in the trade: Plenty of time left, only 1 day into the trade [WARNING]
  • Major Event: NO

That is enough checked boxes to adjust this trade. The only over-riding factor is sometimes when a trade gets in trouble on day 1, I consider taking it off. The process to determine whether to adjust is a bit more subjective and involves me looking at the graph after and seeing if I like it. In this case, I chose to adjust (if I didn't it wouldn't be a good example). The adjustment I chose was to open up a 6-lot calendar about 45 points above the current price. I opened my short leg in the same expiration as the flies and opened my long leg 5 days later (SPX has daily expirations). Why I chose this is likely a topic for another day reach out if you would like me to cover that, but for this blog, the point is to show the process of deciding to adjust. So post-adjustment, the trade looks like this:

This is an example of adding risk to a trade. I didn't touch the butterflies but I added the calendars to the trade creating this double complex. Advantages of this adjustment are:

  • Much lower deltas -9.75 to -0.75
  • Room to the upside if we keep going. I'd let this trade go all the way to the center of the calendar, about 45 points higher while still having downside room from the fly.
  • Increased theta 58.40 to 131.77

The biggest downside of this adjustment is the increased risk: $3,100 to $5,575 so not quite double but still more risk.

But this isn't over, the very next day SPX kept rising. In fact, it rose past the center of the new calendars I put on the day before. It took all day to do it, but it did, and near the end of the trading day, the trade looked like this:

So let's run this trade through my tests again:

  • Price of the underlying is near my adjustment point: YES
  • I am down money: YES
  • Position deltas are -9.72: YES
  • Speed/Direction: Underlying moved here 1 day after the last adjustment: (1.06 SD move): [WARNING]
  • Time in the trade: NO (only 1 day from last adjustment)
  • Major Event: NO

The only real objection I would have to adjusting here is the fact that I just made an adjustment yesterday. I show this to demonstrate that all the factors may not agree and, in those cases, it's up to the judgment of the trader. In this case, I do decide to adjust with the caveat that this trade is on a tighter leash, meaning if I want at least a 2 or 3 days before I would consider adjusting again, especially an adjustment that would involve adding risk to the trade. So I did adjust and now the trade looks like this:

This is an example of realizing a loss on the overall position. I closed the butterflies, leaving only the calendars. So the trade has changed quite a bit, but I still consider this the same trade because the combined trade was one trade. I will note this is really a matter of accounting. Either way I took a loss on the butterflies. It would be fair to just consider the flies a total loss and the calendars a new trade. But the way I trade this, it's still the same trade. Now I am asking the calendars to make up for the loss I took on the butterflies in order for this trade to be successful.

This is an important concept in adjusting. I didn't really fix the trade, I simply bought more time for it to succeed but I am making it tougher for the overall trade to succeed as I realized a loss on the butterflies. This is where traders can over-adjust and keep digging a deeper hole from which the trade will likely never recover. This is why the adjustment decision is so important. It can be the difference between a small loss and a huge loss. That being said, let's review the results of the adjustment:

  • Much lower deltas: -9.72 to 1.16
  • More room to the upside: the flies are no longer pulling on the upside
  • Less overall risk $5,575 to $3,280.

The lowering of the risk was a big reason why I was willing to do this adjustment. The trade is struggling and I'm taking risk off the table. The main downsides to this trade are the theta reduction (115 to 82) and the less downside room as the flies are gone.

I don't want to take this trade all the way to the end because this post is likely long enough. But at a high level I did do one more adjustment, but it was 4 days later, had it been sooner I wouldn't have done it. But 4 days gave the trade sometime to recover. But SPX did come back down and I re-added flies on the downside. Then SPX really calmed down and I was able to close the trade for a profit 6 days later. What made this trade work even with 3 adjustments was SPX slowed down and eventually became range bound. And that was the point of doing these adjustments: buying time to allow SPX to calm down. Sometimes that doesn't happen and the trade just needs to close for a loss. But this is why if you are going to adjust, you must be careful in how and when you do it and having a solid methodology is critical.

To Adjust or Not to Adjust?

I will close this post with a final idea. Do traders have to adjust? The answer is no. There is nothing wrong with having a “no touch” policy where a trade goes on and then is taken off under a set of conditions either positive or negative. There is a simplicity to that approach. But like everything in life, it all comes down to trade-offs. By not adjusting you will likely take losses that could have been avoided if the trade had more time, like in the example above. I could have taken off that trade after one day and just realized the loss and tried something else. The flip side is that adjusting can increase risk and cause bigger losses than originally intended. This means every trader has to decide if adjusting is a good idea or not. There isn't one perfect answer.

This content is free to use and copy with attribution under a creative commons license.

A Similar but Better Tale

I called 2022 “A Tale of Two Halves” and 2023 ended up similar. Once again, the first half of the year was very good and the second half was less consistent. However, I did better in 2023 than I did in 2022 in most ways. I only had 3 losing months, 2 months where I made money but didn't make my goal, and 7 months where I made or exceeded goal 3 of which I more than doubled my goal.

November was really the only bad month. I had a couple of bad trades one of which got caught in a big gap up. I was having a lot of success leaning bearish in October and the winds shifted. That's one lesson I'll take from 2H 2024.

However, last year I made an annualized return of 8%. This year I made 30%. Neither one met my goal of 42.5% (3% per month), but I can safely say that I traded better in 2023.

But back to 2H2023. I won 35/45 trades which is good. My main concern here is the average size of my wins vs the average size of my losses. While in 2H2023 it wasn't horrible, there is room for improvement and improving here will greatly help my overall earnings.

What Worked? What Didn't Work?

If I had to guess what worked the best in the 2H, I would have guessed calendars, but I was wrong, it was butterflies. This is why doing this kind of analysis is important. Ultimately I think I had a bit of recency bias as I did a ton of calendars near the end of the year, but in October especially my butterflies did really well as the market went down. That being said, my calendars did very well. I started experimenting with diagonals and double diagonals with very mixed results and both of them ended up being net losers. That's ok as I was really learning them this year. I would consider doing them again at some point, but if I do, I need to keep them small. (Note: The “custom” trade was actually a butterfly that I mis-labeled when I put it on).


Here are a couple more charts that show some interesting things. First, this is my P/L over the course of the 2H2024.

What stands out to me here is the ups and downs on a monthly basis with the biggest swings being from October to November. November knocked out most of my impressive gains in October. Had November been break even I would have made my goal for the year. The lesson here is that if I can better keep losses under control, my goal which appears ambitious is very achievable.

Next let's look at days to expiration. The sweet spot was clearly 11-16 days with the worst being 9 days which were likely my experiments with various diagonals. But this make sense as most of my trades fell in the 11-16 day range.

Finally, here is the days in trade. What I see here is that my best trades last 5 days or less. This is in line with other recent time periods. My good trades tend to work quickly. It's not that I can't stay in longer, but once they cross 5 days, I need to keep them on a tighter leash.

Thoughts on 2023

Overall, I'm happy with how I traded in 2023 as it was a big improvement over 2022 and previous years. The key to making the next jump is controlling the size of losses. I win enough trades to make good money but the difference between making good money and great money is the size of the losses. I'd like to see the gap between the average win and the average loss to shrink. It's ok for the average loss to be a bit higher but in the 2H of 2023 my average loss was about 2.5x the size of my average win. I'd like to get that closer to 1.5x, even 2x would be an improvement. If I can do that, I can make my goal of 3% per month. From the data above, being cautious of trades going over 5 days is one way to get there, along with better overall risk management and, of course, Pets vs Cattle.

Until next time...Good Trading!

This content is free to use and copy with attribution under a creative commons license.

I firmly believe that understanding options greeks is an important element in risk management which is the heart of this business. The greeks give traders a way to quantify the different aspects of risk for a given position as well as an entire portfolio. For those unfamiliar with the greeks, I suggest watching my Options Fundamentals video series to being your process of understanding them.

But it is important to remember exactly what the greeks actually are: variables in a mathematical pricing model. This model is theoretical and therefore cannot always represent the real live markets. In the real world prices are set by buyers and sellers in an auction style market. The participants are real people (and algorithms written by real people) and these participants live in the real world and know about real events that happen in the world. While we can't predict all news and events, many events are known such as earnings, dividends, as well as important government reports that affect a given stock and Fed actions like FOMC meetings. As these events approach, some of the greeks can get skewed and looking at them alone may not reflect the real world. This is especially true of theta (time decay). I'm sure most of us have seen the standard theta charts that show as time approaches expiration, theta increases meaning that the time component of the extrinsic value of a contract decays faster. Traders (especially sellers) take advantage of this to make money. But when a major event is close by, contracts that expire shortly after the event will behave differently due to the uncertainly of the event. We don't know exactly what earnings will be or what the Fed will do with interest rates, etc. Because of this the time decay of these contracts will not accelerate as expected. Whether you want to think of this as theta slowing down or implied volatility muting the effects, it doesn't really matter. What matters is that if you are an options seller of a contract after a big event, you can't expect the same level of decay as if the event wasn't occurring. And this makes sense if you think about it: Why should you expect to get paid the same for an event about which everyone knows? The market makers aren't going to let you out of a contract close to an event for the same price. As I stated earlier, this is a risk management business. We traders get paid to take risks. And if an event is seen as a significant risk, we should not expect to be paid the same as if the event wasn't going to happen.

Real World Examples

It wouldn't be a Midway blog without real world examples. In the second week of December of 2023, there were 2 major events on consecutive days. On Tuesday the 12th there was a CPI (inflation) report and on Wednesday the 13th there was an FOMC announcement on interest rates. Both of these events can affect the prices of stocks. As I entered trades the week before these events, my goal was to see if I could get anything out of a couple of trades before the events occurred the following week. I was not expecting to get a full profit, but I was just trying to get something. On one trade, I did get a small profit, on another I took a small loss. Let's take a look at the trades and the greeks of the trades.

An SPX 11-day Double Calender

On Monday December 4th, I put on a small double calendar with the shorts 11 days out and the longs 5 days after the shorts. Obviously all of these contracts expire after the events of the following week. Here is how the trade looked when I entered it: Double Calendar Open

SPX 11-day Double Calendar: Delta: 3.56 Gamma: –.16 Theta: 190.92 Vega: 396.49

What's important here is the extrinsic greeks of these options, especially theta. This trade is only 11 days to expiration and as a 3-lot has $190.92 worth of daily theta. So, theoretically, I should make $190.92 per day on time decay. As long as we don't move a ton, this should be an relatively easy trade. And in this week, SPX doesn't move very much. But here is the same trade at market open on Friday, December 8 (4 days later): Double Calendar Day 4

SPX moves 17 points in 4 days

When I put this trade on Monday, SPX was trading at 4562.43. At market open on Friday, SPX was trading at 4580.14. That's a little over 17 points up in a week which is a very calm week for SPX. In theory I should be up at least a couple hundred dollars, right? Nope. The trade is down about $68. Well, that doesn't seem right! Theta at this point is 329. Surely I should get at least some of that over 4 days. Why am I down? The answer is the big events the following week have been priced into the options contract and the market makers aren't going to let me out of the trade that easily because my shorts expire 2 days after the big FOMC announcement. If I want to get paid on these contracts, I'm going to have to wait until the news is out and take the risk. I took the trade off that day for about a $90 loss. The experiment failed.

Strategies Around Events

So how do we, as traders, work around this problem? There are several strategies each with trade offs.

  • Avoid trading during these times.
    Sitting in cash through big events is one way to avoid the mess. Just don't risk anything. The downside of this is, of course, that you aren't making money either. But it's valid.
  • Only trade options that expire before the event. Contracts that expire before the event are, logically, not affected by the event since they will not exist when the event occurs. The risk here is that as the event gets close trading very short term has other risks, namely price movement risk which increases as the contracts get close to expiration. So while you are avoiding the risk of the event, you are taking on more delta and gamma risk.
  • Ride through the event. You do have the option of taking your trade through the event. After all, that extrinsic value has to come out eventually, right? Yes, but the reason this event is affecting the theta in the first place is it's an unknown risk. There are times when it's less risky than others to do this. It really depends on the trade and how much price movement room you have and, especially, how much money is at risk on the trade. Size is the first and most important part of risk management.
  • Trade contracts further away from the event.
    Contracts that expire after the event will still be affected by the event, but the further away they expire from the event, the less they will be affected and the more time you may have to adjust it if needed. I will show an example of that below. The risk here is the risk of more time. Longer term trades usually take longer to work which means there's more time for something to go wrong.

None of these are right or wrong. I've done all of them at one time or another. The idea here is to show that everything you do has a trade off. There is no one correct answer. The goal here is to understand the risks that are inherent in any strategy.

An SPX 16-day Calendar

So here's another trade I put on that same week. I put on a 3-lot Calendar on Weds December 6. but the shorts expired 16 days later (or 1 week later than the first example). The trade was definitely affected by the CPI/FOMC events, but not quite as much as we will see. This is trade as I put it on:

16-day Cal at open

Delta: 2.69 Gamma: –.06 Theta: 81.60 Vega: 162.38

This trade has a week longer than the first one and so the Theta is definitely less than the double calendar, but it's still pretty healthy. Now let's look at it on the open on Friday:

16-day Cal on Fri

2 days later

This is very interesting. This trade is barely 2 days old and look at the difference. The market hasn't really moved, but the trade is up about 6%. That is likely not as much as it would be in a similar market without the events, but it's something. Even one week later can lower the effects of the event a bit. For those who trade even further out, the effect will be even less. But, as I stated before, you are trading one set of risks for another.

The goal of this post isn't to give one answer. Rather it is to understand the risks of big events and how they can affect trades and getting you to first, be aware of big events because they matter and second, understand what you can do about them. No one will handle this perfectly, that's not how trading works. But if the goal is to manage risk, it's important to understand what risks you are actually taking. The greeks can help you quantify them, but they can't always tell you the whole story. Situational awareness matters. A mathematical pricing model can't know about an event. But you can and you can plan accordingly.

Good trading.

This content is free to use and copy with attribution under a creative commons license.

This is a topic that I've wanted to do for a while now because I think it's something with which most traders struggle at some point, myself included. You start off learning how this market works, you find some trades you like, you start having some success and then things blow up and you are, at best, back where you started, at worst you obliterate your account. You start again, things go well, and it happens again. Becoming consistent is one of the tougher things in this business so I want to talk about the approach I have taken to get there. I say this as one who took several years to figure this out so if you're struggling today, please understand this is normal. What I will show is a (mostly) finished product, but it took time and lots of mistakes for me to get to this point. My hope is that this can accelerate someone else's journey.


One of the biggest hurdles I see with traders is a lack of a coherent plan. It's easy to try and chase what's working (or appears to be working) until it blows up but that's not a path to consistency. Ideally you will have this plan all laid out before you start trading, but that likely isn't reality as you will need to change it as you learn. This is because there is no one plan. There is not one way to make money in this business. I will discuss my plan methodology but that doesn't mean it's your plan. The idea here is to show you what a plan looks like so you can make your own, whether it's based on mine or not. Everyone is different: different tolerances, styles, emotions, time commitments, etc. Use this to compare what you have and see where you may need to do more work.

A Thesis

A good plan should have a thesis. That is, foundational ideas upon which the trading plan is based. Ideally this would come first but it's quite possible that you may develop your thesis as you develop your plan. The real world isn't ideal. So my thesis is based on two fundamental ideas about the market:

  • The market trades in a range far more than it channels. I believe that the market is primarily range-bound ... until it isn't. Then it channels and finds a new range, and the returns to being range-bound. This idea leads to two important concepts in how I trade:

    • I trade options on the broad market rather than individual stocks. This means most of the time I trade a big index like SPX, occasionally a volatility index based on the S&P 500 like VIX, and very rarely individual stocks.
    • My trades are range-bound. I trade non-directional and my trades do well when the market isn't channeling in one direction or another but rather moves back and forth in a range. This makes things more difficult during those times when the market is channeling but I work those trades and generally lower my capital at risk until a new range is found.
  • Volatility is mean-reverting. Because I believe this, I pick my trades in a contrarian manner to the current volatility. I typically use VIX as a guide to the volatility of SPX. Is this perfect? No, but it's been a pretty good and simple guide as to the current volatility of SPX. So I pay attention to the volatility range. When it's on the higher end, I go short vega and when it's on the lower end, I go long vega. In the middle, I either pick one or do a bit of both and hedge my bets. This affects which trades I do with SPX. I have long and short vega trades (mostly calendars/diagonals on the long side and butterflies on the short side).

As you can see, these two simple concepts form my trading thesis. And my trading thesis determines what I trade and how I trade it at any given time. Are there exceptions? Sure, but they are exceptions which means they are rare and much smaller than my usual trades. They can be because of highly unusual market conditions or just experiments. But the vast majority of my risk and the bulk of my earnings come from trades based on my trading plan. Trading is a business. Every business makes money by having something they can do over and over to make money. To be consistent, that something has to be repeatable and trading is no different.

Building a Trade Plan

I am a firm believer in a formal trade plan for every trade. I do not put any money into a trade that does not have a complete trade plan because doing so leads to sloppy execution. Time matters in trading and in order to execute properly and timely, you need to know what you are supposed to do. That's not to say that a plan can't change over time, but it shouldn't change mid-trade. If you feel it's best to tweak a trade plan that should be done in between trades. Changing a trade plan in trade is another way to have sloppy execution which can lead to ugly losses. The tricky part is that it will work sometimes which can lead to a false sense of security but, in my experience, when it fails, it fails badly and that leads to inconsistent trading.

So what's in a good, complete trade plan? Here is a summary of the components. For a longer discussion see my blog post on the topic.

  • The Setup. What is the trade? Where do I put my strikes? At what expirations? These needs to be formally defined but they can be defined in relative terms (e.g. sell shorts between X and Y points above the money, between A and B days to expiration). Also included in the setup are the conditions under which this trade should be put on. It's likely that there are certain market conditions that are better for one trade than another. If that's the case, those conditions should be formally defined.

  • Target Profit. This is a simple idea but one that I see newer traders miss frequently. Trades should be deliberate and that includes a profit goal. It should be specific, either a dollar amount, but more likely a percentage of the risk of the trade. This can be a range (e.g. 10-15%), but it should be specific enough that you will be able to have a limit order in to close at that profit at all times. I am a big believer in limit orders in general, but especially for closing for my profit target. Does this mean I may miss some possible profits? Yes. But it also has helped me capture a price that was only available for a few moments. Some of the biggest mistakes I see here are: “I'll just see what I can get” or “I want the maximum possible profit on this trade”. Remember, you are looking for repeatable processes to make consistent money, not chasing long shots. If you must try a long shot, let them be exceptions that follow the rules of exceptions that I put up above. Speculation is ok if you feel you want to try it, but it should be a very small part of your risk.

  • Maximum Loss. This is a tough one but also very important. Any trade can lose and you will take losses as they are a normal part of this business. It's important to have a maximum loss to know when to move on to the next trade. The biggest cause of inconsistency is not respecting a max loss. It's very easy to let a losing trade run because you think (hope?) it will come back. Whenever I've taken a bad loss, this is usually what I've done. Generally my max loss is a bit higher than my target profit on a percentage basis. This is to allow a trade to work over time. For example, if my goal is 8-10% profit, I will likely have a 12-15% max loss. In addition to a specific target, a max loss can also include a time limit. I rarely take trades all the way to expiration day and usually don't take them into expiration week.

  • Adjustments. This is an area to cover what else you may do when not closing the trade for a profit or loss. Some trades may not have adjustments, but some might. From the above we know the conditions when we will close the trade entirely, but what if it gets in trouble and it's worth tweaking it to buy more time for it to succeed. Again, I won't go into heavy detail here as my blog post covers this in detail and there's no need to repeat it all here.

So the combination of all of these parts of a trade plan will tell you what you should do regardless of what happens to the trade. Everything should be covered here. If it isn't, then you need to close the trade and re-work your plan until it does. Don't be the guy who is posting to an Internet forum asking what to do with a trade while it's still on. This is not a winning strategy. If you do want to discuss a trade on such a forum do it either before you put the trade on or after as a post-mortem review.


So now you have a plan, the next step is execution. This should be the easy part but I think you'll be surprised to discover how hard it can be. As the famous boxer Mike Tyson is famous for saying: “Everyone has a plan until he gets hit in the face” and this is true in trading as well. At first, I recommend being as mechanical as possible. At the end of the day, this is a craft and so you will eventually get a feel for the right time to act on a trade. Over time it will become natural to you, especially if you trade the same underlying for a long time. But before you do that, it's good to learn the discipline of executing your trade plan precisely. For a longer discussion of this see my blog post “Pets vs Cattle”. Learning to be dispassionate about an individual trade and see it as part of a bigger picture is really difficult but very valuable to consistent trading. I advise you to look at that post to see why I think it's so important.

The Aftermath

Ok, so the trade is done. Now what? As I've said before, this is a business and like any business it's important to do regular business reviews to learn from your successes as well as your failures, to learn what's working and what is not. It may seem silly but I review every trade on a weekly basis, and then do monthly and semi-annual higher level reviews on my trades here on this site. Making your reviews public certainly isn't mandatory, but it works for me as I will explain in the next section. But I believe that part of being consistent is to learn from what you've done: the good, the bad, and the ugly. If you want this to be a business, you must treat it like a business and any business has to know what they are doing in order to try to do things better. You are welcome to use my reviews as a blueprint for yours, but what's more important is that you formally review every trade and document that review. The act of doing so helps to cement the ideas. You should have lessons for at least some of the time periods. I come up with lessons at the monthly and bi-annual reviews as part of the higher level reviews while the weekly reviews are more down in the details of each trade. But you will need to find out what works for you.


Last, but certainly not least is accountability. This has been a game changer for my trading. I consider it second only to Pets vs Cattle in terms of impacting my trading. Trading can be a very solitary activity. It's just you and a screen. It's easy to talk yourself into all sorts of crazy things, many of which aren't good. This is where finding some external accountability comes into play. This can be a trading buddy, a trading group, a mentor, etc. I have had a few mentors over the years and meeting with them really helped me trade better because I knew I had to explain myself at some point. I'm still part of a weekly trade group that I join when my schedule allows. When I stopped regular mentoring sessions, I came up with posting my results online as a way to simulate that accountability. Even though I may never meet anyone who watches my reviews, every trade I do is out there and I record my review of every trade every week and put it out on the Internet. Even if no one actually watches it, I still forced myself to explain what I did, why I did it, and what I learned from it. This is why I do what I do here online. Yes, I enjoy sharing what I do, talking about trading and, sometimes, helping people but I get value out of the act of publishing my results. It helps keep me grounded and has made me a better trader. I've been doing this for over 4 years now and my trading has definitely improved more over that that time than before. Yes, some of that is experience but I firmly believe some of it comes from anonymous accountability. I can't tell you exactly how to do this, but I hope I have given you some ideas.

In conclusion, I hope this post helps some other traders out there who are learning this craft. Becoming consistent is not easy and, from what I've seen online, many others struggle with it as well. So I wanted to put out my thoughts on this in a longer form than would make sense on most online forums. As always, feel free to reach out with any questions, comments, ideas, etc. I enjoy talking about trading with people who “get” this stuff.

This content is free to use and copy with attribution under a creative commons license.

This year has the potential to be my best year of trading. I consistently outperformed by goals most months...until June. June was a tough month for me and I took a decent hit as the numbers show here:

1	$529.40	$529.40	     $994.80	 187.91%							
2	$545.29	$1,074.69    $134.40	 24.65%							
3	$561.64	$1,636.33    $1,536.09	 273.50%							
4	$578.49	$2,214.83    $1,038.38	 179.50%							
5	$595.85	$2,810.67    $1,446.63	 242.78%							
6	$613.72	$3,424.40   -$1,407.80  -230.00%
 1H2023         $3,424.40    $3742.50    110%

In the above chart, the first column is the month of the year 1=Jan, 6=Jun. The second column is the profit goal for that month, the third column is the accumulated profit from making the goal each month, the fourth column is what I actually made (or lost) and the fifth column is the % of goal. Then at the bottom there are the year to date totals: profit goal, profit attained, and the % of the goal.

The chart shows that I made money every month except June and vastly exceeded my goal every month except February and, of course, June. My biggest trading goal this year has been to get more consistent and I think so far this year, I have done that. In previous years, I would be up and down every month and usually squeak out a small profit at the end of the year. My current goal is to make 3% on my total capital every month and I was getting around that over the entire year prior to this year. What is encouraging here is that even with the bad month of June where I, essentially, wiped out all of May (my 2nd best month of the year) I'm still, essentially, on goal for the year at 110% of my 1H target.

What Worked? What Didn't Work?

For most of the year, my best trade was butterflies, mostly balanced butterflies. That is because for much of the early part of the year, the market trended down and balanced flies can do well in that environment due to the initial negative delta even though butterflies are negative vega. Delta would work fast enough that vol didn't really matter much. Many of these wins were quick wins coming off in 1-2 days with some going as long as a week.

Then starting in March, I started adding 9-day double diagonals into the mix as well. There were working pretty well and I did end up scaling them up a bit in the coming months. By April, my flies were becoming unbalanced as the market began to move up and by mid-May I stopped flies altogether as vol was getting really low. At this point I substituted calendars for the butterflies. Even though vol didn't pop much, they mostly worked well with only 1 losing trade.

Where I got into trouble was very short term long double diagonals. They worked really well at first, and I think I got a bit too large with them at which time they, subsequently, stopped working as well and I took my larger losses. These things are very volatility sensitive and the center can sag quite a bit as vol goes down and by going as low as 4 days to expiration on them, there wasn't time to get a correction. I still think 4 days can work, but I need to be pickier about when I deploy them and keep them smaller. Size is the first rule of risk management.


To highlight the above, let's look at some interesting visualizations. I'll start with P/L throughout the year.

Profit and Loss

1H2023 P/L

This chart shows the big rise in March-May with the drop in June so no big surprises here.

Next, let's take a look at the trading stats for this year:

Trade Stats

Trade Stats

What I find interesting here is that while the overwhelming number of my trades were wins, the losses were, on average, larger. This was overcome by the sheer number. This validates something I've been saying for years that W/L records don't matter by themselves, the size of the wins and losses matter. In my Weekly Trade Reviews I determined that there were opportunities on my bigger losses to take them off earlier and make those losses smaller. If I can go that in the 2H of this year, I would expect to perform better.

Next, here are the types of trades and how they peformed:

Trade Type Performance

Trade Types

This reflects what I stated earlier that the butterfly was the best performing trade type due to market conditions early in the year. I did some digging into the “custom” and those 2 mis-labeled trades: one was a calendar, the other was a double diagonal. This skews the double diagonal total which would have been slightly positive rather than negative which means all my trades were net positive.

Finally, here is the performance based on days in trade:

Days in Trade Performance

Days in Trade

This confirms that overall my best trades tend to work quickly. The 9 days in trade loss comes from a single trade that had a bad loss. The danger zone this year has been between 6 and 9 days.

Final Thoughts

While June was definitely disappointing and a bit humbling (in a good way), I like how 2023 has worked out so far. I am going to be more careful with the long double diagonals and I may decide to re-introduce some flies at some point, although it's tough to do with vol so low right now. But it wouldn't surprise me if volatility returns at some point this year. We shall see.

As always, feel free to reach out if you have questions, comments, or just want to talk trading.

This content is free to use and copy with attribution under a creative commons license.

Just a quick note to say that I have converted my blog from WordPress to WriteFreely. I'm doing this for a few reasons:

  • I have on-going projects to “de-cloud” much of what I do. The WordPress site was hosted in AWS, which is a fine service but I've been building my own cloud and have begun hosting services myself. It started with my Fediverse Instance, then a few others for personal stuff, and now my blog. It's been a fun project.
  • I like the simplicity of WriteFreely. While I'm quite technical and was ok with WordPress, I didn't need all of that and, at least so far, WriteFreely is simple and runs very lean.
  • Writefreely federates with the Fediverse very easily. There is a WordPress plugin for it, but I had issues getting it to work. If you want to follow this blog on the Fediverse, follow @midwaytrades@www.midwaytrades.com.

All of the content should be moved over. If I missed something, reach out and I'll investigate.


This content is free to use and copy with attribution under a creative commons license.

Originally posted on January 16. 2023

Now that the books have closed on 2022, it’s time to do a year end review, specifically of the 2nd half of the year but, also, the year as a whole. As I stated in my first half review, the format of this is a work in progress so it may differ here than in the first half review. Eventually I will settle on a format I like that will properly and clearly show the progress of my trading.

A Tale of Two Halves

At a high level, I can really see a difference in the two halves of the year. I was pleased with my first half performance and disappointed with my performance in the second half. Of course, market conditions are different all the time but my long term goal is getting more consistent. It’s ok to lose on trades, everyone does and if I didn’t ever lose I would wonder if I was being too risk averse but, in this case, I had too many bad trades which caused me to miss my targets as many times as I made them with September being a particularly bad month. So without further adieu, here are the numbers:

2H 2022 Summary

As you can see, I lost about $150 in the 2nd half, mostly due to September December. Thanks to a strong first half, I did end up making about 8% on the year, but that was far from my goal of 3% per month.

What Worked? What Didn’t Work?

Butterflies dominated my trades in the 2nd half with all but 4 of my 28 trades being some kind of butterfly. So they encompassed all of the losses, but a big chunk of the gains as well. Volatility was high most of the time so it wasn’t really a good time for calendars. Volatility was so high at one point that I did a put vertical on VIX which is not my usual trade. It, essentially broke even so VIX plays were not a big part of the 2nd half of the year like they were in the first half. SPX Calendars did ok, but there just were not enough good opportunities to do them.

My 2022 Trades

Two trades really stand out as bad ones, the 2 SPX flies where I lost $2200 between them. Without those two trades I wouldn’t have made my 2H goal but it would have been at least closer to my performance in 1H. Overall, the SPX balanced butterflies was my go to trade during this time which makes sense given the volatility levels during the year. Calendars did well when I could put them on but those opportunities were limited.

I also experimented with some tweaks on my trades due to high volatility that overall worked well. I started doing wider butterflies (as wide as 80 up/down) and, in some cases, went shorter on the duration to limit exposure. To balance that out, I went smaller on those shorter duration trades to limit my risk as price risk on those are more than my usual, 22-30 DTE flies.

During this time, it wasn’t that trades didn’t work as much as it was my poor execution on losing trades. This needs to be a major focus going into 2023. My mantra of “Pets vs Cattle” is just as important now as it’s always been and I need to remember it.

Some Interesting Visualizations

So that is the raw data, but my modeling software offers some basic visualizations that I found to be interesting so I thought I’d include some here. Note: these are for all of 2022.

P/L in 2022

First is a basic P/L graph which spells out pretty much what I said in the summary, things were on the right path until September and then I really struggled.

Trade Stats

This is shows why I don’t care about W/L ratios. I had 59 trades and had a 78% win ratio and my results weren’t that great. The key is the average loss size vs the average win size. My losses were about 2.8x my wins. So my W/L ratio saved me but if I can get the size ratio down, I’ll be far more successful.

2022 Underlyings

I traded 3 underlyings this year, mostly SPX, but from a dollar net dollar amount, I made a little more in VIX than SPX. This is mostly because I didn’t have any losses in VIX. Almost all of those VIX wins were from the first half of the year. I honestly did not expect this one, but I’m glad I did those VIX trades as they really did help my overall performance. The GLD calendars were a failed experiment, but that’s ok. Once I saw they weren’t working I moved on. The key was I figured out why they weren’t working. It’s possible I may go back to GLD at some point, but what I was doing here clearly didn’t work.

2022 Days In Trade

This one is quite interesting as it tracks P/L based on how long I stayed in the trade. This tells me that the vast majority of my profits came from quick wins (6 days or less). This was mostly due to quick drops on my balanced butterflies. But it also says that the longer I stayed in a trade, the worse I did. I did not lose any trade where I was in it for 6 days or less, but at 7 things change.

What this does tell me when I lose, I’m staying in too long. This matches up with my experience as my worst losses were because I was trying to fix bad trades. What this doesn’t tell me is that I should only be in trades for less than a week. My key takeaway here is to be willing to give up on a bad trade earlier but it’s ok if a trade takes a longer than a week to work. But that the longer I stay in, the worse my odds so once I cross the 1 week barrier, I should put that trade on a tighter leash and cut my losses sooner. It also shows my one day trade, which I find amusing because I really don’t day trade, but every once in a while it can make sense even for a boring trader like me. But it also shows that even though most of my trades start with 21-30 days to expiration, quick profits are very possible. You don’t necessarily have to do zero DTE to make money.

Final Thoughts on 2022

While I’m disappointed that I didn’t make my goal and especially disappointed in my 2nd half performance, I still made money in a very challenging year. If you use the S&P 500 as a benchmark I outperformed it (in this account anyway), by a mile as the S&P lost about 20% and I made 8%. So I’m not going to beat myself up over this year. But I do see it as a chance to learn and get better. And how many times can you get paid to learn?

So far, I think I like this format, but I may tweak it next year. Let me know what you think. Feel free to comment here or reach out directly at midway@midwaytrades.com. I always like talking options with people.

On to 2023…look for more blog posts here as well as follow my video series “This Week @Midway Trades” for weekly reviews of a real-world retail trader.

This content is free to use and copy with attribution under a creative commons license.

Originally posted on November 15, 2022

As anyone who follows me knows, I’m a fan of alt-tech platforms vs the big tech sites. And I’ve decided to add another one to the mix. While all of my videos are available here on the blog site (check the links at the top of the page based on the series), I started putting my videos up on BitChute. Later, I added Gab TV. And starting with my videos in November, I have added Odysee to the mix. I like Odysee because they are not censorious like big tech but also the interface is good and, unlike the other sites, they have an app so I hope that will help make the videos more accessible in the alt-tech space. Just look for the channel “MidwayTrades” or https://odysee.com/@MidwayTrades:a.

As many of you know, I am also on the Fediverse. You can follow me there at @midway@soapbox.midwaytrades.com. I am in the process of testing putting this blog site up on the Fediverse as well using the ActivityPub plugin for WordPress. If you’d like to follow the blog on the Fediverse, you can find it at @midway@writefreely.midwaytrades.com. Keep in mind that this is still a work in progress so you may not see things there immediately as I’m still figuring out how the integration works.

I will try make some time for more trading blogs here. Feel free to reach out if you have something you’d like to cover. In the mean time, you can follow me in the usual places and I’ve added some more!

Talk with you soon!

This content is free to use and copy with attribution under a creative commons license.

Originally posted on September 5, 2022

This may be a topic more suited for newer traders but it is something I’ve seen come up from time to time so I think it’s worth writing about here. When putting in orders, especially on multi-legged spreads, how should traders enter orders to get a fair price?

The Market is an Auction

The first thing to remember when thinking about prices is that the options market is not like a store where you look at a price and decide if you want to buy or sell a contract. It’s an auction where prices can literally change by the second. As a market participant you will get to see what buyers want (the “bid”) and what sellers want (the “ask”). The theory is that buyers and selles will meet somewhere near the middle (the “mid”). For a single option leg (where you buy or sell some amount of exactly one contract), the distance between the bid and ask (the “spread”) gives some indication on how much liquidity exists in that particular contract. The less the difference, the more interest there is in that contract, and the easier it is to get a fill. For very liquid contracts, it’s common for the spread to be a penny or two.

But multi-legged spreads make this a bit more complicated. Even if all of the contracts have small spreads, when we combine the spreads of 2, 3, or even 4 legs, the spread of the entire trade gets larger even if the spread of each contract isn’t very wide. So the question becomes how do we, as traders, find the right or fair price?

Limit Orders

A quick side topic that I think is really important on the topic of orders: Always use limit orders. A limit order gives the most you will pay or the least you will accept for the order to be filled. This is critical to getting a decent price. The alternative is a market order which tells the broker to fill the order at literally any price. While it’s possible to get a good price with a market order, you are taking a big chance of getting a bad price, maybe a very bad price. Limit orders give you, the trader, a measure of control in whether a order is filled or not. This is especially true for opening orders, but it’s just as true for closing orders or adjustments. It’s ok to not get filled if the price is bad. And while it’s easy to get frustrated at an order not getting filled, do not get impatient and resort to a market order just to get it done. Just like in real life, you need to be able to walk away if the price is not right. This can be frustrating when trying to exit a trade when the market is moving against your position, but I still hold that limit orders are the right way to handle this.

Understanding What is the “Mid” Really?

So what is a “fair price”? Well, the simplest answer would be the mid (the midpoint between the bid and ask). But here’s the problem: offers from buyers and sellers are coming in all the time. This moves the bid and ask around which, in turn, moves the mid. So, in theory, there is a mid price but, in reality, there is really a mid range. You will see the mid range by watching the mid price change. In most market conditions it will bounce around. How much depends on the liquidity and volatility of the contracts but the vast majority of the time you will be able to see the range just by watching it move. This range becomes the basis of what I call “price fishing”.

Closing for a Profit

The simplest case is when I am trying to close a trade for my target profit. I simply have a GTC (Good ‘Til Cancelled) limit order at the price I want. By doing this if my exit price can be filled, it will whether I’m at my station or not. I don’t sit in front of my station all day. I have a life outside of trading that included a day job. So I always have a limit order in at the exit price I want to meet my profit target. The only exception to this is if the trade has more than 4 legs. Then I have to manually enter 2 separate trades to exit. In my trading, this only happens if I have a double butterfly (which has 6 legs). All of my other possible trade structures have 4 legs or less which allows me to always have a closing order at the broker. The market can

Opening, Adjusting, and Closing for a Loss

Closing at my profit target is the easiest case. For the rest, I am putting in orders myself and in these cases I deploy price fishing. The idea is that I don’t know the right price, but I can see a range of reasonable prices. So I start by placing a limit order a bit above the top or below the bottom of the mid range (depending on whether I am selling or buying). Then I move up or down until I either get filled or I walk away from the trade. Initially, I may put in new orders quickly, but as I get closer to the center of range, I tend to slow down and give it time to fill. I rarely get filled on my first order. In fact, if I do it’s a bit disappointing because that means I may have been able to do better with a bit more time. Or maybe I just got lucky with a really good price. But the key is to put out offers and see where the fish are biting.

A Real World Example

This wouldn’t be a MidwayTrades blog without at least one real world example. So on a recent trade I was opening, I captured the orders I put in to show how I fish for prices. Below is the order log of a trade I opened recently:

Price Fishing a Butterfly

This trade opens a 3-lot unbalanced (65 up / 70 down) butterfly in SPX. I started at the bottom by putting in an order for a $3.80 debit. This was likely $.10 under the range I was observing at the time. Then 20 seconds later, I upped my order to $3.85 ($.05 is the smallest I can do spreads in SPX). About 15 seconds later I put in a new order for $3.90. Those were pretty fast, but this is normal as I started about $.10 under the range I was observing. The goal here is just to see if I can get a deal. If not, I move forward. Now I waited a bit at $3.90, eventually putting in a new order at $3.95 which filled nearly a minute and half later which means I sat at $3.90 for a minute or so, waited some more and then got filled about 30 seconds later.

The point of doing this is that I can’t know what the “right” price is…and even if I did that price could change by the time I put in my order. So like a fisherman, I cast out a few times at different places, depths, etc. to see where the fish are biting.

So that’s what I do. What do you think? How do you find a good price? As always, I love to hear from folks out there. Feel free to comment here or send me an email at midway@midwaytrades.com.

This content is free to use and copy with attribution under a creative commons license.

Originally posted on August 3, 2022

Once again, I know it’s been a good while since I’ve done a real trading blog but this idea came to mind and I think it has potential. I create all of my trading content for a few reasons. Of course, I like to share ideas and talk about trading options but I also do it because I believe it makes me a better trader. Reviewing all of my trades publicly on a weekly basis forces me to look at what I’m doing in a critical manner and take lessons from it. I feel a certain amount of accountability by posting my results and my rationale every week. Trading can be a very solitary business and finding ways to hold myself accountable is important for me.

So in that spirit, I am thinking about starting a new series of reviews that takes a higher level look to get a better idea of how I’m trading. The weekly reviews are important, but to really see how things are going at a higher level I want to do semi-annual reviews. And instead of just doing another video, I’m switching it to be a blog post. I’m going to start with the first half of 2022 and if I find it useful I’ll continue to do it twice a year. I can say that just doing the research on how I did was interesting and useful. I hope some folks out there find it helpful as well.

My Goals

So since this is the first post in this series, I think it’s a good idea to state what my goals are for this trading account. This account is a learning account for me. It is quite small compared to other investment accounts, retirement accounts, etc. but the purpose is to learn how to trade consistently. If I can get consistent returns, I’ll increase the size and go from there. The trading decisions I make in this account aren’t that different from a larger one outside of the dollar figures of the trades. So if I can consistently do well in this account, I believe I can handle something much larger and, possibly, make it a real income stream.

That being said, my goal is to make 3% of my account balance per month. Compounded monthly, by my calculations, that would be a 42.5% annualized return. Feel free to check my math on this as this isn’t my strong suit, but I put in my starting balance for the year of $16,705, and I ran it through a compound interest calculator at 3% per month and the expected balance at the end of the year was $23,817.34. So that’s a gain of $7,112 (I dropped the cents for simplicity). Taking 7112/16705*100 gets me to 42.5%. For most investments that would be fantastic but I think it’s possible to get at or near that with the options strategies I employ. The goal of this account is to see just how feasible that actually is for me.

My Results

So now that I’ve stated my goals, how did I actually do for the first 6 months of 2022? 2022 has been a year that, I think it’s fair to say, has been a challenging investment environment with all the major indices down for the year. I know I’ve seen my retirement accounts take a hit as I’m sure most of you have as well. Because my goal is monthly I took my monthly results based on closed trades. If a trade was still open at the end of month, it was not counted until it closed (usually by the next month). All that being said, this is my first draft of tracking my progress:

Monthly Results from 1H 2022

Note that the dates reflect the results of the previous month, so Feb 1 is the results for Jan, etc. The columns are as follows:

  • P/L: This my Profit/Loss for the month (again based on closed traded)
  • Goal: This is my goal for the month based on making 3% each month. The goal assumes that the goal was completed the previous month so it goes up regardless of how I actually do.
  • %Attained: This is the percentage of the goal that I attained.
  • Balance: This is my actual balance (not including open trades) on the first day of the month
  • Goal Balance: This is where my balance should be based on making my goal.
  • %Balance: This is where I am with respect to the goal balance on the first of the month.

I fully expect that I may change this format at some point and if I’ve messed up an idea here please reach out either via comment or email and let me know where I messed it up. Again, this is my first attempt at doing this level of tracking so it’s entirely possible I missed something or just messed it up.

As to the results themselves, you can see that I made money 4/6 month and made or exceeded goal 2/6 months. That’s not too bad given the market conditions of 2022. If my numbers are correct my balance at mid-year is 91% of where I should be based on making 3% per month.

What Worked?


The most common trade of this year was SPX butterflies and they worked most of the time quite well. I’ve been doing these when VIX is between 20 and 30. Because I primarily trade SPX, I use VIX as a guideline for SPX volatility. Butterflies are negative vega and 20-30 has been generally on the high side of the normal range really since the pandemic started around March 2020. I like butterflies here because they are negative Vega and so they will benefit from volatility falling. I have been doing them mostly balanced so that when I first put them on they have very little downside risk as the downside has been pretty strong this year. There have been 13 of these trades that have closed in 2 days or less for 6-8%.


When VIX has charged up into the 30s (usually above 33) I don’t like trading SPX as it’s too volatile. So when that happens I’ve been putting on longer term (45-60 days to expiration) put verticals to take advantage of the eventual drop in volatility. So far VIX has not stayed above 30 for more than a few weeks and so these have worked out pretty well. Not much to do with them except watch them move around a lot, but it gives me some way to try and make some money while volatility is too high for SPX trades

What Didn’t Work?


Another trade I was playing with while VIX was high was short term (1-2 weeks) GLD calendars. I had some success with them at first but, ultimately, concluded that they were too expensive to put on at any decent size (I usually had to put on 15-25 lots which are 30-50 contracts) and that was too much for these trades to make up to make decent money vs the risk. The idea wasn’t bad (GLD isn’t necessarily tied to SPX volatility) and I did win a few of them. But, I stopped doing them until the price or volatility of GLD gets high enough that I don’t need to put on as many contracts and get my expenses down.

What is Missing?


Since March 2020, I’ve been putting on SPX calendars when VIX is under or near 20. I like these because calendars are positive Vega and benefit when volatility rises. While I still like this trade, I was only able to put on 1 during this 6 month time frame as VIX stayed on the higher side when I was ready to put on a new trade. That’s not to say I won’t do them (or use them to adjust a butterfly on the upside when vol is low), rather, there were not as many opportunities to use them as there was, for example, last year.

How Could I Have Done Better?

So I think I did pretty well all things considered this year, but I still didn’t quite make my mid-year goal. I was $1,768 short. This shortfall came down to two bad trades. One is forgivable as I was experimenting with short-term GLD calendars. I ended up taking a loss of $607 (48%). It was around this time that I started questioning doing these trades. I ended up doing 2 more and then stopped after losing around $180 more. I say it’s forgivable because I was working on finding trades I wanted to do when SPX wasn’t in a good place with respect to volatility. I had some success with the trade, but ultimately lost more than I made as seen here:

GLD Calendars during 1H 2022

So that was ultimately a $390 lesson. Not too bad when it comes to trading, however not taking quite as much of a loss on that big one would have definitely helped.

I also let one SPX trade get out of hand. I over-adjusted a 21-day butterfly and took a bad loss of $1,153 (45%). This is not acceptable. To avoid doing that in the future, I am being more strict as to how many times I adjust my trades and I started going out further in time on my butterflies. After that trade I opened flies from 30-35 days instead of 21-25 days. Having time in a trade is helpful when you are trying to repair it. This trade led me back to my Mantra of “Pets vs Cattle“. Feel free to read the post for the details but, in short, it means that I can’t get too attached to a trade. Some losing trades are worth just letting go. This is something I have struggled with as I learn this craft, but I think many traders do as well.

So this is how I saw the first half of 2022. Overall, it was a good six months with some very good trades. I did some experiments with respect to trading when SPX isn’t a good underlying. The VIX verticals did well, the GLD calendars did not. I think it’s possible to make up ground in the second half, but I need to stay the course and better execute my trade plans.

As usual, let me know what you think. I always like hearing from readers and viewers.

This content is free to use and copy with attribution under a creative commons license.