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!