DecWk3 - SPY Market Summary

DecWk3 - SPY Market Summary

After a brief hiatus, I am back. :) I have been losing money in forex these past couple of months, and have largely neglected losing money here. (just kidding) We all know that there is money to be made anywhere, you just need to have the financial discipline required to be successful.

The way I see it, losing money is like paying school fees. The more you lose, the more expensive your financial education, and hopefully you will learn from your mistakes and make better decisions in the near to long term future. Of course there are those that never learn. I am not talking about them. I am talking about having a consistent trade journal and knowing your trades and how to capitalise on your experiences.

I guess I can say that after 3 years of Options Experience, I know a thing or two about Options. Not much, but at the very least, I know how to make money and I also know when to cut loss and move on.

This week I sold a trade on the SPY, knowing that it is pretty volatile. Crazy volatile to be precise. I took that opportunity and landed a trade in the SPY.

I sold a Call Spread on the SPY for $183/184 and collected a premium of $0.06 on Wednesday when there was nothing, but I knew there was going to be some market volatility as a result of the "tapering". Well I was right!

My trade expired worthless, and the ROI on that trade was 3.95%. Not bad. Looking forward to making more hits in 2014.

DecWk1 - SPY Market Summary

DecWk1 - SPY Market Summary

Last night the SPY looks like it was on a roll. Need I say more? I was looking for an opportunity last night, perhaps one day too late. I should have entered the market on Thursday with a Put Spread. It was already on a downtrend for about 4 days already since last Friday.

Thursday would have been a good day for a Put Spread, never mind if there wasn't any good spreads to sell, a 4 cent premium would have been good as well. Oh well, these days it seems that it's not as easy as I would have thought it to be. The spreads available are a little tight, and the safety buffers don't seem to be there anymore.

So in short, I didn't take a trade last night. I sat out and basically watched the market expire worthless for what would have been a nice 9 cent premium had I had taken a risk and entered into the market. But that risk might not have been worth it because the SPY finally closed at 180.94 up 2 USD regaining all the losses that occurred over the past week.

NovWk2 - SPY Market Summary

NovWk2 - SPY Market Summary

From the chart above, you can see that trend is sideways for the daily chart. The large bearish candle on Thursday was reversed by the bullish candle on Friday. Looks like the high impact news on Thursday on currency didn't put much of a dent into the trend. Last night's result of better than expected performance from Non-Farm Payrolls boosted confidence in the markets.

My trade for the week entered on Thursday was for the following:

Sell SPY Put Spread $173/174 for a premium of $0.05. I placed a Contingent Order on Price less than $174.50 on Thursday and on Price less than $174.30 on Friday.

I was kind of worried when I saw that the price nearly shot up there. But it expired worthless, and that's all that matters. ROI 2.95%. Yay.

NovWk1 - SPY Market Summary

NovWk1 - SPY Market Summary

I got home really late last night. Had a meeting that ended pretty late. This coupled with the fact that I am also sick. And I have a rule that I will not trade when I am not feeling well. This is because trading is very much about psychology and if you're not feeling well, you generally don't make good decisions.

I tend to get a little emotional when I am not feeling well and that doesn't help when it comes to trading the markets. One has to be clear about the trade and the objectives to achieve. For options, it is naturally to see the entire trade expire worthless. that has always been my only goal when I trade options.

Last night I saw an opportunity and I decided to take it, albeit the fact that I was also feeling quite tired.

Learning from the experience of losing the trade two weeks in a row and setting my account balance by 5 weeks worth of ROI, I decided to be a little more prudent this week.

I sold a SPY Put Spread (as it was trending negative then) at $173.5/174.5 for a premium of $0.05 and immediately placed a contingent order on price less than $174.80 (learning from the last two weeks' losses) and then I dropped into bed.

Of course this morning, the SPY did a reversal from the drops on Wednesday and Thursday trading days and decided that a little recovery is needed. The SPY ended higher, much to my surprise and benefit. The trade expired worthless, and yes, I am back on track to my goal of achieving financial freedom, one baby step at a time.

A friend of mine said this, small gain, potential big loss. I tend to agree. But it is nice to win. ;)

OctWk4 - SPY Market Summary

OctWk4 - SPY Market Summary

If there was a time when I wished I didn't do anything foolish, it would have been OctWk4's trade. I had entered a trade thinking that I had it all covered and that I can't possibly lose two weeks in a row. Well, I guess I was wrong. I lost two weeks in a row.

I entered a trade for:

Call Spread (bad idea!) for the SPY for $176/177 for a premium of $0.04 and at the same time entered a contingent order to cut loss should price be greater than $175.90 (bad idea as well!)..

It was extremely difficult to cut loss because of low liquidity, and so they brokers manually cut loss for me.

Terrible week. I am set back about another week's ROI.

So I decided to write some articles on Helium.com just to pass time, and recover from my sadness.

I usually read this article on computers to alleviate my lack of discipline. I think going forward, I will include a link to an article that I wrote and so as to also share with my readers.

Imagine a World Without Computers

OctWk3 (Oct13) - SPY Market Summary

OctWk3 (Oct13) - SPY Market Summary

I had reminded myself not to trade this week. Twice if I recalled correctly. This week is the week where the US government comes to its breaking point. Either to give in (either party) or to cause widespread panic in financial markets.

I knew that they would cave in and that the markets would be normalize, I just didn't know how much the SPY would eventually recover. Ironically it did, and it was a ridiculous recovery. It was as if the market entered into God-mode and triggered a insane recovery.

I sold a SPY Call Spread $174.5/175.5 at a premium of $0.06 with a contingent order on price greater than $174.40.

Unfortunately price went as high as $174.43 and that triggered the contingent order and I made a loss. It was unnecessary upon hindsight as it didn't cross the strike price, but who knows what would have happened.

Effectively, I lost about 4 weeks worth of ROI in this one sad event.

Who would have thought that SPY would reach these levels. Of course a safer spread to sell would have been the Put Spreads, but that would have led to sudden death if I price were to drop due to the continued impasse in the US government shutdown.

Ah the foolishness of the naive trader. :(

Education - Money Management

Money Management

This is a topic that not many people like to discuss, and perhaps may have different understanding of what it really means. I believe it is different depending on the risk appetite of each investor. Money management at the heart of it really means managing your money, and where investments are concerned, you would want to manage your money properly so that you don't blow it all up on one trade.

But like it said, it is all about your appetite for risk. To some people, money management could be all the money in the bank down but place a suitable stop loss. For others, it could be a standard investment risked every trade, and a standard stop loss. This way you can effectively measure your risk and also your profit. The idea is to commoditize your trading to a level where it is just clockwork and a paper exercise.

Of course the profits are real. Likewise the losses are real as well, so it would be good to practice some prudence when you do invest your hard-earned money. The key principle in investing is not to lose your capital. Once that occurs, you're out of the game, and there is nothing else left to say or do.

Have a sensible stop loss mechanism in place, and have a sensible trading strategy. Always focus on the low-lying fruits as your near term targets, and if you have the gumption or the risk appetite to go for more, then take it.