NovWk5 - SPY: Bullish Signal?

Nothing says it better than the charts! Look at the ichimoku indicators. They are converging and if the market's performance tonight goes upwards, then we are in for something really interesting tonight. :)

I am not vested this week, yet, but nevertheless, I am still hopeful for an opportunity, maybe it might be the SPY, maybe it might be GLD, let's take a look and see what is in store for me. The kijun sen and the tenkan sen are about to meet, and once they cross over, then that would officially be a very bullish signal.

Interesting that it would actually be so bullish all of a sudden. Admittedly, I am surprised. Stay tuned people. Let's see what can we draw out from the market tonight.

NovWk5 - Sideways

Just a quick update on the SPY's performance last night. Interestingly, I was right about the strong gap down. But save the applause folks, because before mid-market, the SPY crept up and finally ended up in positive territory.

As if to add insult to injury, the SPY became bullish?! It's a large sideways market it seems. There doesn't seem to be a strong indication of a proper direction which makes retail investors like myself a little anxious and somewhat concerned.

I want to trade this week, but I should be a little more cautious because it doesn't seem like the market is offering any real indication of a proper safe trade.

Well let's see what the market has in store for gold tonight. Hopefully I can find something suitable to sell. That's all for now!

NovWk5 - Wednesday: SPY: Gap Down?!

Ironically just two trading days ago the ichimoku indicators say that when price crosses the kijun sen from below, it is a bullish signal, and now it says a different story. Now the price is seen to cross from above the kijun sen and it is a strong bearish signal. 

So the strategy for me this week is simple, tonight will be a strategic moment for all of us when the market opens. I am expecting a strong gap down simply because thanksgiving is over and the market is reflecting a true sentiment.

Happy trading folks! :)

Quote of the Day

If you lost money last week, don't worry, there is 51 weeks more to go.

NovWk4 - Analysis: The Bulls are Back!

The market makers (you know who you are) took opportunity to push the market higher than expected simply for the reason that most traders are away for the thanksgiving holidays. Good thing we Asians like to eye-ball the market. :)

I am sure many folks last Saturday morning woke up to the terrible news that their trades got assigned. If you don't know what "assignment" means, I would strongly suggest that you take some time to find out what that term means for sellers. I don't really care about buyers, but if you're selling options, this is an important piece of education that you need to familiarize yourself with before you get caught in a situation that could potentially result in losses.

Alright, perhaps for the benefit of everyone, and also a reminder of myself, I might write a post on being assigned. Okay, more of that later. :)

Someone pushed the SPY upwards, and thank goodness, I managed to cut loss. There is some benefit to eye-balling the market. As much as I would like to say this system is flawless, it is flawed. The flaw here being the fact that I have to eye-ball the market till 4am (usually).

This recent push up has made me think about my strategy and in a sense rethink how I am going to trade for NovWk5.

I am back to my usual trading philosophy. There is 51 weeks left. Trade carefully folks.

That's all for now!

NovWk4 - Post Market Update

All I can say is a big WOW. My geeky eyes have seen what a strange market can do. All the quotes that I have been sprouting so far have been true. Do not think that you are smarter than the stock market.

The SPY closed at 1pm US time and 2am SG time (my time zone). It closed at a high of $141.35, having moved upwards by +1.9 USD. Unprecedented since it looked as if it was going to expire worthless.

Good thing that I have a peculiar habit of eye-balling the market for even the slightest of movements. I decided that since it was a half day, I could probably watch the market a little more intently and see where this will all end.

The SPY was relentless and it shot upwards towards the strike price of $141 and that would definitely trigger the contingent order that I set for the Call Spread 141/142. My problem was, I wasn't sure if the price was strong enough to go over $142. Since the spike came around after 1.30am. Or 30 minutes before market closed.

Those 30 minutes were the longest 30 minutes of my life. LOL.

I quickly initiated a cut loss order and stomached the loss. I decided that I didn't want to see the contingent order triggered or see the results of what was lost the next morning. It was painful, but necessary.

The premium spiked to $0.14 USD and based on that, it went up 2.8 times my original premium of $0.05. Even though it did not contravene my buffer of a 4x premium, the very fact that it expired In The Money is not a good thing as it is. The worst case scenario here is that the trade might be assigned, and I didn't want to take that risk.

Here's the trade summary:

Call Spread SPY NovWk4 141/142 $0.05
Cut Loss initiated at 2.8x premium because current price reached strike price of $141.
ROI -13.08%

Analysis:

The loss brought me back to where I was at OctWk2, in other words, all that I had gained in my trades was lost in this one losing trade.

There are some observations coming out of this episode.

I had thought that the "easy way out" trade would have been safe, but in an uncertain market, anything goes. I should have opted for the safest trade, but in which case, there wasn't a premium to sell. Or perhaps I should not have sold on Monday since I already decided that I would only sell a trade from Tuesday onwards.

These are good questions to ask myself so that I can prepare for the recovery trade next week. There are still 51 weeks to sell a trade, I can still recover from this lost. See you next week.

That's all for now!

NovWk4 - Friday

The price now is $140.75, SPY up +1.30 USD.

WOW.

And this is supposed to be a half day of trading. Imagine if it was a full day trading, we will be in for some trouble. As it is, it is already a iffy situation of it crossing over the $141 strike price, and if that happens, it is going to be a tough situation.

For one thing, the contingent order that I placed on the trade will execute, and only the $142 leg remaining. Hopefully the price will cross over that leg as well, and so the premiums are more depressed.

But for me now all that is just theory.

The reality is happening now and it is scary. ;) Of course, I am keeping my cool and just waiting for premiums to disappear. 2 more hours to go, and soon that will become a reality and my trade will be safe.

Can't wait. ;)

NovWk4 - SPY Spikes!

It's Friday, and while everyone is out celebrating, I am sitting at home, watching the market, eye-balling to be precise, and hoping against hope that the SPY will not contravene the strike price of my call spread of 141/142.

If it does, then the contingent order is likely to kick in, and I am likely to lose my trade. At the moment, the trade is worthless, but if the SPY continues it insatiable onwards ascent to $141, then I will be faced with a very unique position.

I am kind of worried now just looking at it. It is trending very close to my Call Spread of 141/142. The SPY is now $140.43, up +0.98 USD.

Thankfully the premiums are still very depressed, so it still looks safe for now. Time decay, please work your magic for me! Let the trade expire worthless! :)

Happy Easter - no trade!

Happy East - markets are close for the holidays!

NovWk4 - Market Update

So the SPY gave us a conflicted message last night. On the one hand I looked as if ready to burst into an upward trend and then the next, it shuts off quiet into slight negative territory.

Finally it decided to end it at $139.45, up USD 0.26. The high was at $139.57, commendable effort. But it still is not enough. The premiums are mostly competed away by now and even if the price were to go up on Friday, I think it will naturally run out of steam quickly.

One more day to go! That's all for now.

NovWk4 - Happy Thanksgiving!

It's a public holiday in the US, thank goodness for that. I hate selling a trade on Monday because that just means I am more exposed for the trade.

The closer I sell to expiry, the easier for me to win the trade. But the more time in the market there is, the more exposed my trade; the risk increases. As a rule, I don't sell on Monday. But this is an exception.

So here I am faced with half a day of meaningful trading left. When markets reopen on Friday, it will be a hurried half day and it will all be over. The good thing with that is, if there are any attempts at trying to hit the strike price, the markets better get their act together.

Otherwise, forever hold your peace and expire worthless. And hopefully come back again next week for another opportunity. At the moment, premiums are gone. And my trade is safe, for now. There could be a surge on Friday, but unlikely as time decay accelerate by two times on Friday since it is a shorter trading day.

I am still hoping and at the same time vigilant. Prepared for anything. Likewise if you're also vested like me. I wish you all the best as well. Happy Thanksgivings.

NovWk4 - SPY's Flat Opening

I know I can probably say, I told you so, but that wouldn't be a nice thing to do I guess. All I can say though is thank God that my trade is safe. I have been in less than wonderful situations where my trade has gone south, and I had to cut loss. Not nice at all I assure you.

The SPY opens upwards by a little tonight and it reaches an intra-day high of $139.52 but came tumbling downwards to hover about $139.24. Hopefully this will be the continuous market action until the end of trading day and we can all smile our way to the bank.

Despite the seemingly strong opening on Monday, there is basically nothing being offered yesterday and perhaps today also, that we can rave about. I am definitely looking forward to expiry on Friday and hopefully be able to lock the trade with a put spread if possible.

That's all for now!

Quote of the Day

Strike while the iron is hot!

NovWk4 - Mid-Week Update

Last night I was too tired to eye-ball the market effectively. But to sum it up. It was iffy indeed!

There were no major movements except a downward movement, retraction, and then a upward movement, retraction back to almost the same as yesterday's closing.

In short, it looks exactly where I want the SPY to be. Happy. And from the looks of it, tonight is going to be another iffy session. Which just means it was worthwhile to break my routine to accommodate the short trading week.

To be fair, there was a short timeline for a $0.05 premium to be sold, but that wasn't for very long. It was just a small window of opportunity. So whoever got it last night needed to have been staring at the screen full-on.

Alright, I admit, old habits die hard. I was glued to the screen for a good couple of hours. But that's just because I wanted to test my theory that the market was just indecisive. However, this indecision may speak of something else. And that may pan itself out for all to see. So hang on tight folks, one more significant before we can rest our eyes.

That's all for now!

NovWk4 - Pre-Market Jitters

Well I would only say Pre-market jitters in a scenario where by the market is iffy is only natural. It looks like it is going to open flat. Not that I am complaining just that sometimes, the market can throw a curve ball at out from out of nowhere and that can be quite disconcerting.

Tonight seems like it might be that, of course I am hoping for a reversal from yesterday's mad buying frenzy. But even if that does not occur. I am quite certain that it will be a lacklustre opening coupled with a possibility that it might go down down down.

Ok, market's opening soon. That's all for now!

NovWk4 - Morning After Update

The SPY last night had a strong movement. It kept going upwards with a relentless thirst for more. Buyers who probably sold off in a hurry since last week's woes on the US facing a fiscal cliff and the European Crisis, seems to be a thing of the past.

Buying pressure was heated right up till closing. The SPY finally closed at $137.13, making gains of USD 2.76 and hitting a high of $137.15. Scary scary! Premiums interestingly was muted at $0.08 and it represented a 1.6 times increased in premiums.

That all sounds good, but what sounds better is that the SPY futures now is trending in negative territory. Which either means flat opening or a reversal. Of course it may be trending upwards, though quite unlikely after yesterday's showing.

Ok that's all for now! Short long week ahead!

NovWk4

Trade:
Sell: SPY NovWk4 CS 141/142 $0.05
Status: Filled on Monday 19 Nov
Expiry: 23 Nov
Contracts: 5
ROI: 2.95%

Analysis:

The SPY has gap up at the opening. A whopping USD 2+. As usual, I have been eye-balling the price movements and decided that tonight was going to be a make or break moment.

The reason is simple. This week is a short trading week. As it is with short trading weeks, there is a lot to do and not many opportunities to do it. Such is life.

Of course the reason is that markets would prepare for the holidays ahead. They might do all their buying and selling on Monday and remain quiet the whole week until expiry.

That may well be the case. It didn't take too long before my lightning fast mind decided to sell a call spread for a premium of $0.05. I decided that my strategy of queuing for a higher premium is not going to happen and I opted for an "easy way out" trade with a realistic premium, and I got it. Yay!

NoWk4 - Sharp Spike Upwards

The SPY is up, and in an unprecedented manner. I am not complaining honestly. The higher it goes, the better it is. Just 45 minutes into the opening, the SPY has literally in the classical sense of the word, gap up.

USD 2+ to an intra-day high of USD 138.6. That is basically good news in my humble opinion.

I am looking for a Call Spread, and the safest spread at the moment is 142/143 at $0.01 premium. So instead of waiting for this safest spread to become reality, I am taking the "easy way out" spread at 141/142.. but instead of the $0.05 premium that is already available, I want to try to see if my theory is correct and go for $0.08.

Let's see how that works out. :)

SPY Ichimoku Charts

I managed to find some really cool Ichimoku Charts (incidentally my favourite type of trending indicator). Anyway, this is a long term view chart, and we can see that the SPY (S&P 500) has been on an uptrend since last year, but more importantly, it is trending below the clouds now. 

This is a bearish signal in Ichimoku terms, and that means there is more downside to be observed. Well, whether it will go up or down will depend on the daily price movements, but for now, it looks bleak to say the least. 

The good thing is, I am happier to know that it is bleak because it just means more selling opportunities! :)

That's all for now!

NovWk4 - Short Trading Week

With thanksgiving on Thursday and a half day trading on Friday itself. It would be good to try to get a trade in on Monday itself, which means tonight (SG time) would be a potentially good time to sell a trade.

That said, it would be prudent to look for a far enough premium just so that we can avoid any nasty surprises. My thinking is this, for Wednesday, trading might be slightly on the quiet side, which means premiums might not be high enough. So it might be good to think about hunting for a suitable premium on Monday itself just so that the range is there.

Otherwise, the best time to enter the market would be on Tuesday itself, and possibly a trade on Wednesday, although personally by Wednesday, I think it might be prudent to sit this one out because premiums might be very near to current price.

And I doubt there will be very much action on Friday since it is a half day, but I might consider GLD on friday since it tends to be more volatile. But with GLD, you will never really know what will happen.

Notice - NovWk4

NovWk4 - Thursday markets close for Thanksgiving, Friday early close at 1pm ET.

Sounds like a plan in my humble opinion.

Cut Loss Mechanisms

This is a topic that is very much undiscussed because in reality, nobody likes to lose money on their trades. So what becomes of the trade if you do lose money? You naturally would have to stomach the loss and cut loss.

This is where the psychology of the trader must be strong. Warren Buffett's number 1 rule must apply! Capital preservation. If you are losing money on your trades, you should quickly cut loss and stay off the markets. The rule I always tell myself is that there are 51 more weeks to make money. Holding on to a losing trade might mean a total departure from the trading desk because the entire capital is now gone.

Nobody wants that and therefore an exit strategy is just as important as a strategy to make money. Knowing when to cut loss requires a longer term perspective to investing. The trader must know and acknowledge that trading is not a one time hit and run, it's a long journey of a thousand miles. And it is a learning process of knowing your limits.

For me I stick to a 4 times the premium that I sold for as a cut loss rule. That will limit my losses and I won't be crying buckets over the loss.

Quote of the Day

At first you don't succeed, try, try again.

Entering Trades

Different investors have different strategies when it comes to entering trades. As a novice investor, I too have my own set of values and criterion that I adhere to. I tend to flaunt my own rules at times, and that's why I am writing down my rules so that I would remember it.

I only trade in the S&P 500 ETF (SPY) and in Gold (GLD). I find these two counters relatively predictable, relatively safe, and in terms of price fluctuations, it can be tamed and controlled somewhat. I am looking at a strategy that can give me a 90% rate of winning. Of course that said, a 10% rate of losing is terrible. In fact it can be quite damaging to my strategy of preservation of capital. Perhaps I might talk about that in another post.

Here are my 5 steps to entering a trade on my favourite two counters options market.

Step 1:

I don't enter the trade when the weekly option appears on Thursday the week before. Neither do I enter in on Friday, nor on the Monday of the following week. This is because I feel that to enter into the trade at these times would be pre-mature because the market needs to react to whatever that is happening in the week.

Step 2: 

I only consider entering the trade from Tuesday onwards. Which leaves me with a tight window of 4 days to the options expiring. I am guessing that all the stronger price movements would have been washed out on Monday, and so if there are any strong movements in the same direction as Monday on Tuesday, then it is a very suitable condition for me to enter into the trade.

Step 3:

A strong movement in my opinion is at least $2. But this also means Monday it must have already moved $2 in the same direction. If the movement on Tuesday is a knee-jerk reaction to Monday, then I will sit out the trade on Tuesday and look for Wednesday.

Step 4:

If the conditions for Tuesday is met, I will look for the safest trade which offers a bid premium of $0.01 or the return % to risk is 3233.33%. I will enter a trade with a fixed contract size, for a premium to sell a pair at $0.04 minimum.

Step 5:

If the trade is executed, I will monitor the premiums over the remaining days before expiry on Friday. The premiums must not exceed 4 times the premium that I sold the trade for, otherwise, I will initiate a cut loss. If it approaches Friday without incident, I will place a contingent order on the price of the leg that is nearest to the current price and keep my fingers cross. At this stage there is nothing more that can be done.

Step 6: (psychological)

I tend to eye-ball the market, and that's good and bad for someone without a strong psychology. I know I said 5 steps, technically it should be that, an unemotional 5 steps to entering the trade, but I am human, and I don't want to lose money. So my step 6 is a psychological one.

That's all for now!

NovWk4 - Options Strategy

I noticed over two week (two trades) that there seems to be a trend. I am not entirely sure if this trend is for real or not, but I am rearing to try out my theory. 

It seems that the best trade and probably the safest spread to trade is when the return % of risk is equals to 3233.33%. That in my observations is the safest trade. It is also usually the trade that offers no meaningful premium for the investor. Nevertheless, it is good to queue for that trade because you just might get it when the market is trending sideways or is in a directional mode.

So since that trade is usually not available, I am inclined to take the easy way out and trade the next pair that is closer to the current price. 

That strategy will ultimately have some implications.

Say for example:

If current price is now 136. Safest Trade for a put spread would be the pair 130/131 at bid $0.01 premium. The next best (not so safe) trade would be the pair that is nearer to the current price at 131/132 at bid $0.05 premium (my criterion for a trade is that it must be at least be at $0.04 premium). 

If I were to take the easy way out and sell that spread at $0.05 premium, I would get it for sure, but if the market is in a directional trending mode, which might mean the safest trade might eventually see a premium of at least $0.04. My easy way out trade would have appreciated in value to perhaps at least $0.08 or more.

If the market price drops drastically in a day by $2 to 134, this is definitely stressful conditions and investors might start to throw their trades. This concerted action might cause more downside and stress the price downwards to 133 with a depreciation of $3.

What this means for me is that my easy way out trade might see an increased in premium to 2 or 3 times the premium that I sold the trade for. In view of that, it might even trigger my cut loss mechanism of 4 times the initial premium sold. Now I don't want that to happen.

So for the easy way out trade to occur, I should have some signal or trigger that must happen, in order for me to enter into this easy way out trade.

1. There must be a strong upward/downward movement in current price. At least $2 would be ideal, but $1 would be a minimum. If the movement is $3, then I will take the safest trade, because that would automatically become available for me.

2. I will queue for the easy way out trade but not at the bid premium offered, but rather at a higher premium. This is because if the $1 movement is observed, there might be a chance that it might move to $2. In which case, premiums would increase, thus resulting in the safest trade becoming accessible.

3. This would also mean the easy way out trade would now have a spike in value, and a higher premium would be secured.

Conditions

I do have some conditions that must be fulfilled before I enter into that trade, so this is just strategy that is swimming around in my mind at the moment. I will talk about trade entering conditions in another blog post. That's all for now!

NovWk3 - Options Expiry

Saturday is my next most favourite day. Why is say this is because I get to wake up and upon checking my account, the options that I sold would have expired worthless. Indeed the trade on Wednesday has paid off, and ROI for this trade is 2.95%.

The trade summary again:

Trade: Sell SPY NovWk3 PS 133/134 $0.05
Entered: Wednesday 14 Nov
Expired: Friday 16 Nov
Contracts size: 5
ROI: 2.95%

Analysis:

Last night the market was turbulent. At opening, it dipped, and then went on a roller coaster that could have popped the heart out of any senior citizen just watching the market price fluctuations. Interestingly, it went down pretty near to the strike price of $134 with only about USD 0.70 cents as a buffer.

And then almost like clockwise, or a stretched rubber band, the SPY bounced all the way upwards to $135.60 and started trending into positive territory. Perhaps this was because of the massive drop of USD 1.86 on Wednesday itself, and that the market was in some kind of auto-recovery mode. Or it's that knee-jerk reaction that I was wondering about. It happened on Friday, not too late, much to my comfort of course.

I noticed something interesting and somewhat similar though, and I am eager to try this out in my strategy for next week. I will blog about this strategy in another post. Meanwhile, the trade's safe! And it's another win!

NovWk3 - Friday

Friday has got to be my most favourite day of the week. It is the day that I get to dress casual, hang out with friends and plan for the long lazy weekend.

It is also the day my weekly options expire as well, and frankly, I can't wait.

Thursday's trading was a roller coaster ride for all who got filled on their trades. The SPY went up and down and up and down and then up and down again. It finally closed at a respectable $135.70. Down a -0.23 cents from yesterday's closing.

I had initially hoped for a better closing price - like maybe $136.00 or higher. But this is expected and good enough for a market that seems to be trending sideways and downwards.

So what to expect for tonight? Well, the short answer to that is to place my contingent order and wait and see. Of course there is nothing more that can be done especially when it is expiry that I am really waiting for, but as they say, when you are vested, there is a natural anticipation that drives you.

I am hoping for a recovery, and that the SPY will actually increase and end off at $137.00. That would so make my Friday night a good and restful one. And who knows, if it goes up high enough, I might even find myself a Call Spread even.

Quote of the Day

Don't buy what you don't understand. Thank Goodness, I only sell!

NovWk3 - SPY Pre-Market Update

The SPY looks like it is on a knee jerk recovery. It looks good from where I am sitting.

Of course it would be fabulous if it can retain the momentum and continue to go upwards.

I have attached a snapshot of the Pre-market action for comfort. Hopefully that will indeed offer some semblance of peace of mind for those already vested.

NovWk3: Morning After Update

Just like a drunken night spent boozing away with friends, the morning after experience is always one of much regret. I too am suffering from the after effects of being too rash in my trades.

Against my better judgement last night, I saw the SPY falling, this reminds me of John Mayer's "Free Falling", but that's besides the point. The SPY had a free fall last night as well. From when I entered the market when it dropped 0.70 cents till the sobering 1.86 dollar drop at closing.

The lowest it dropped to was $135.62. And I bet this must have stressed premiums so much that you could even sell the 132/133 spread for 0.04 cents.

The premium for the 133/134 spread is still available and is at 0.08! How nice if I got this premium instead! That would have made all the difference. Alas, I didn't, and it all hinges upon the performance of the SPY tonight.

Let's hope that all goes well and we can have a smooth expiry come Friday.

Quote of the Day

Don't think you are smarter than the stock market.

NovWk3

Trade:
Sell: SPY NovWk3 PS 133/134 $0.05
Status: Filled on 15 Nov 1:24am SG
Expiry: 16 Nov
Contracts: 5
ROI: TBC

Analysis:

SPY looks like it is going downwards after an iffy opening. I kind of eye-balled the market a little, and time just flew by so quickly. And just as I was going to off the computer and go to bed, the SPY dips and I thought that this might be a good chance to sell some put spreads to catch the premium.

It's quite unlikely that I am going to find a better premium than this for this week since it is technically a sideways trading week. Interestingly, the trade got filled. :) And as they say, panic time.

It's still a risk, but I think it should pay off. Let's see how the market reacts tomorrow. I will be monitoring the premiums closely over the next two days.