Making money in a down market!
January 20th, 2010, 1:41 pm EST. Posted under Theta Articles by ThetaTrader.
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DOW -100 @ 10,270
01/22/2010 – ThetaOptions – Our options hedges are still holding up.
Two days ago we posted how our (2) portfolios increased in value while the market dropped. Today we would like to share with you some additional news as the market continues to fall. Basically the DOW has fallen from 107 to 103 within (3) days, that’s about 4%. Therefore you would expect to lose about 4% of your overall value; right? Nope that assumption would be wrong here, since we’re only using about 20% of the available cash within our Margin Portfolio, our overall value is only down $235 or 0.3%. Folks, we’re only down $235 within (3) days. However if you multiplied a 4% loss from our total liquidation value of 56K, then we would expect to be down $2,240. We think that’s a pretty good hedge against a softly falling market. Keep in mind, we’ve been beating the S&P from month to month as it has risen as well. However, the fun part is keeping your account value UP as the market falls 
And that’s the power of options.
The IRA portfolio on the other hand is doing much better, it’s actually increasing in value but that’s mainly in part to our (2) nicely timed CAT & X diagonals.
Current DOW Price: DOW – 104 @ 10,270 - 2:50 est
IRA Portfolio: The IRA Portfolio is DOWN $102 with SPY beta weight of +26.2 & Theta value of 13.3
Margin Portfolio: The (MP) is down $222 with a SPY beta weight of +82
Currently the (MP) is using $11,000 of margin or 20% of our total Portfolio size.
Delta Positive (SPY):
Overall both Portfolios are some what delta positive with regard to the SPY Beta Weight & our Theta decay is positive.