Monthly Review 4-10-15

The worst month of draw down so far is closed with a -$47.6K. I had the highest number of contracts (300) for this month since I was implementing the two sets of trades per week in August. It hit me the hardest.

Some lessons I have learned:

1. Keep the size small. Watching the levels of Net Liq value and available funds. I need to figure out what is the safe level for each naked put/call and spreads at 5X, 6X, etc.

2. Pay close attentions to the areas which I don't quite understand. For instance, I wasn't quit sure the meaning of 1.5 leverage before the down turn of late August. I had suspected it was too high. I didn't dig into it to get it clear, nor took actions to reduce it.

3. Spell out my suspicious or subconscious. There were several issues related to potential risk I was worried subconsciously before the crash, such as the VAR and ES numbers in Risk Navigator. I noticed it was indicating that my portfolio had over $100K risk exposure and even larger ES (Expected Shortfall). I didn't understand how IB calculated the figures and it seamed unrealistic. I thought I was safe since most of my positions were in CS which has limited risk. It's true that CS saved me from a total wipe out. It also shown the shortcoming of the setup. It's very difficult to roll over or defend when vol suddenly pops.

4. Take actions when suspecting dangers ahead or roll back to a safer positions when not clear with risk perimeters. If I had done part of that my S-5 account won't had been liquidated. I had the feeling of I had more positions on (8/10) for a while. I meant to ask S-5 to clear the margin requirement of each contract. But I never did. I wanted to reduce my size down to 5 out of 10, I waited too. I was hoping to implement it by letting them expire. Then I didn't get that chance. Now is 50% available funds a safe number to have? It's very hard to figure out a model when vol goes from 15 to 50 in a matter of 2 days.  

I have to work harder to the risk control measures with Greeks and volatility changes. Until I figure out a reliable safe ratio I won't be safe.