AN

OVERDUE
RHINO
UPDATE
Bruno Voisin
Rhinos & Flies
Recap

Reading the market

Dealers & Hedgers

Keeping nimble

Topic five

Wednesday, August 2, 2023 Rhinos & Flies 2

Introduction • The Rhino was originally designed by Brian Larson about
10 years ago to combine a BWB based strategy with un
upside hedge. It is quite versatile and adaptable to various
volatility environment.

Wednesday, August 2, 2023 Rhinos & Flies 3

Recap
Strategy evolution in an ever-changing
market

Wednesday, August 2, 2023 Rhinos & Flies 4

Recap
A C O N S E RVAT I V E B W B S T R AT E G Y RUN ON PROFESSIONAL METRICS

• A Put BWB foundation • Margin to Equity Ratio

• Near ATM Upper Longs (theoretically)
• Margin over Theta Ratio
• Flexible Wing Size
• Equity over Vega Ratio
• Relatively low maintenance.
• Controlled VaR
• Ruling principle: Flat Delta over a large
range (up to a 7-day projection • Limited PM leverage

Wednesday, August 2, 2023 Rhinos & Flies 5

A changing
market
environment
Same old same old: Adapt or die…

Wednesday, August 2, 2023 Rhinos & Flies 6

Rapid changes in volatility regimes
• The SPX-VIX correlation can be unstable and depart largely from its long-term average of ~75%
• The market is sometimes Over-Vixed or Under-Vixed.

• SPX can move unbridled in leaps and bounds for no obvious reasons, except maybe for a never
satisfied appetite for large techs.
• When interest rates were rock bottom, a number of banks and pension funds allocated into such investments as bond-like,
i.e., low risk.

• Higher volatility was a “comfort zone”

• Lower capital consumption

• Better pricing for combos… And adapting can be difficult (disbelief sometimes disarray…)

Wednesday, August 2, 2023 Rhinos & Flies 7

SPX versus VIX
Mean reversion means that either SPX or VIX has to give, sometimes abruptly.

Wednesday, August 2, 2023 Rhinos & Flies 8

Changes in Interest Rates
• Rates are still low: Rho has little to no impact
yet.

• Higher rates have limited impact on cash-flush

companies, besides a potential lower consumer
demand if higher rates slow the economy down.

• Possible correlation to EURUSD

• A weaker greenback is commonly bullish for
SPX

9
Reading the
market
Connecting the dots

10
MARKET ANALYSIS: CHARTING
• A so-called Delta neutral strategy is
not a market-neutral strategy
• Keep it simple though
• Only Support-Resistance levels
• Standard patterns, e.g. Fibs

• Look at market movers, such as the

Tech Titans.

• As well as similar levels on highly

correlated indices (NDX, DJI) or
synthetic mixes (GAMMA-T*)
One Hour SPX snapshot
taken over the weekend
* GOOG, AAPL, MSFT, META, AMZN – TSLA 11
MARKET READING: ROUTINE
• To each his or her own. Mine is followed strictly every day
• 2 reports a day: in the morning (before 2AM EST) and premarket (from 6:30AM to ~9AM)
• Prepare for adjustments if any, ahead of the session
• Calculate GEX & VEX
• Correlation between major equity indices are high: look for salient support/resistance on NDX and
DJI
• Monitor economic / earnings calendar

SPX snapshot taken over the weekend

12
GEX & VEX
• SPX, other indices and in fact all CBOE traded options are all part
of a Dealers / Hedgers Market.

• Dealers must always balance their books:

• They act on Gamma and Vanna by buying or selling futures

(ES for SPX)

• Their intervention often moves SPX more than actual

buying / selling on the spot market.

• The topic is complex, in particular VEX (Volatility Hedging)

• Calculations require Option Interest, which is provided once a day

by CBOE unless one has access to a premium data provider where
OI is updated from volume. If one only has access to standard
CBOE data, Gamma may be erroneous as the day passes by.

• Gamma is de facto a momentum indicator.

Tuesday, February 2, 20XX Sample Footer Text 13

0DTE ACTIVITY (1)
• 0DTE used to be limited to regular monthly and
month-end expirations
• Followed by Friday weeklies
• Now, it is about every single day

• 0DTE Trading activity sometimes reaches 50% of

CBOE volume

• Therefore, caution is recommended on OpEx days.

Gamma snapshot taken over the weekend

14
0DTE ACTIVITY (2)
• The 0DTE hedging picture can be volatile

• It gives an expected “attractor” in this

example: bullish congestion towards 4600.
• As well as the likely day range, roughly 3550-
4620, which is in line with a one SD
projection from the previous close. In this
example: ~31 points in either direction from
4582

G A M M A S N A P S H O T TA K E N M O N D AY 3 1 S T
Tuesday, February 2, 20XX Sample Footer Text 15
Adapting to
lower Volatility
Changes in the Rhino approach in recent
years

16
Lower Volatility = Higher Risk.
• Decay comes in later
• Trades mature more slowly

• The IV Skew is flatter

• Whipsaws can be harmful

• Caution with rolls

• Preferably use more conservative combos at least

initially
• Add-ons can be reduced wing size BWB

17
What hasn’t changed.
From the last “An Evolving Rhino” Presentation

• Same type of vol dependent BWB entry around • BWB Wing Sizes are now Volatility dependent. A
77DTE rule of thumb could be:
• High Vol (VIX above 3rd quartile, around 19.5): larger wing sizes
• Same flat to marginally negative Delta, flat Gamma e.g., 125/100

principle • Normal Vol: standard wing sizes, e.g., 100/75

• Low Vol (VIX below 1st quartile, around 12.5): reduced wing sizes,
• Flexibility along the life of the trade e.g., 75/50

• Use narrower BWB for later adjustments • PCS/PDS wing ratio: around 1.2

• Prefer 25-point strikes for higher liquidity • PCS Wing – PDS Wing: constant, same for capital
usage
• The classic Rhino guidelines are basically a “damage • This is not a prerequisite : just simpler this way.
control” in runaway markets. • Again, OTM PDS are weaker.
• The decision tree look incomplete.

Wednesday, August 2, 2023 Rhinos & Flies 18

What has changed.
MORE FLEXIBILITY SEP RHINO WITH A CALL DIAGONAL

• The typical BWB (on 25-point strikes in my book) can

sometimes be substituted for a split-strike BWB

• Sometimes substitute Call Calendars for Diagonals if

the approach was to “go with the flow” i.e., protect the
upside in a runaway market damage control.
• Still effective if SPX pulls back without going outright bearish (lower Vega
exposure)

• In case of a “totally lost” numbness about market

direction: keep a Delta/Vega ratio reasonable
• Roughly 1% in “cruising altitude”, then 2% in “descent / approach”.

Wednesday, August 2, 2023 Rhinos & Flies 19

A recent example: Sep 23 entry.
E N T RY J U N E 3 0 T H M O N D AY J U LY 3 1 S T

Wednesday, August 2, 2023 Rhinos & Flies 20

What to do when guidelines fail

• Go with the flow, i.e., the market momentum using GEX for instance.
• Monitor all 4 standard Greeks, instead of only Delta
• Don’t let Theta drop
• Don’t let your initial BWB turn Vega positive
• Look at Vomma, Vanna or Charm, particularly in the late stage of the trade.

• Be flexible with adjustments, while always following the prevailing principle: flat Delta over a
large range.

Wednesday, August 2, 2023 Rhinos & Flies 21

My own flaws

• Not only do the homework but stick with it.

• Dwell too long with a cycle that has little profit potential.
• Best is to reduce that cycle and move on to the next cycle.

• Allocate sufficient time for trading.

Wednesday, August 2, 2023 Rhinos & Flies 22

Always adapt the
Rhino guidelines to
your risk profile and
expectations.

Tuesday, February 2, 20XX Sample Footer Text 23

Timeline

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Tuesday, February 2, 20XX Sample Footer Text 24

Conclusion
A D A P T ME TRI CS TO
Y O U R T RA D I N G P RO F I L E B E MO R E F L E X I B L E SUBTITLE
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• Save to OneDrive, to get to your • Save to OneDrive, to get to your • Save to OneDrive, to get to your
presentations from your computer, presentations from your computer, presentations from your computer,
tablet, or phone. tablet, or phone. tablet, or phone.
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instant slide makeovers. slide makeovers. slide makeovers.
• When we have design ideas, we’ll
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show them to you right there.
show them to you right there. show them to you right there.

Tuesday, February 2, 20XX Sample Footer Text 25

Summary The Rhino is still versatile and adaptable, however maybe
less of a beginner’s trade. There have been many warnings
in past presentations.

Tuesday, February 2, 20XX Sample Footer Text 26

Thank You
Bruno Voisin

bruno@aeromir.com

Slack: Rhinos & Flies

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