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.

OctWk2 - SPY Market Summary

OctWk2 - SPY Market Summary

What a week! Take a look at the charts and see that wonderful reversal. Was there a US governmental shutdown? Or did the market retraced after hearing some good news? It just doesn't make sense, the bad news is still there, the deadlock is still there, but the markets seem to be buoyant, and for no good reason other than Dr B giving everyone more money.

Maybe that is a reason for rejoicing. Whatever. A look at the chart above, and you would see that price was a bearish marubozu and pierced the cloud. It is important that price closed into the cloud. This just means that price will be going sideways henceforth. But wait! The price movement for the next day was a doji formation, and once you correlate that to the candle the day before, it sounds like the sellers are running out of steam. The buyers are coming in and taking over? Maybe not.

And the next day, price shoots up to the sky. Looking back at the Chikou Span, and you will understand that the top of the cloud forms a significant resistance. And as such price didn't have the strength to push through it. Thus it naturally had to rebound. That rebound is so fantastic that it is now officially bullish.

This is where I come in and make history. :)

I sold a SPY Put Spread at $160/161 for a premium of $0.05 and pocketed an return on investment of 2.95%. I wish the markets was like this every week.

Education - My Psychology for Options Trading

My Psychology for Options Trading

It is always good to take stock of my trading psychology from the time I started options trading until now. I must say that I am grateful and thankful for the people that I have come across that have taught me how to trade options in the most efficient and practical way, and I must that it works.

The way I have been trading options is probably one of the most boring ways to do any form of investment. I usually go for very safe trades, and if I have taken your premium, I am unlikely to give it back to you.

I have been doing weekly options and I have gone through from greed to impatience to fear. The entire gamut of trading psychology that every newbie trader would go through. I won't dare to say that I have arrived at the ideological state of being a master, but I will say that I have a system in place that would make me a rich man - just as long as I stay within the rules of the system that I have created for myself.

Options trading at the very core of it, is a numbers game, and it is all about probabilities and there is some maths involved. If you're a novice trader without any pre-knowledge of how to invest, then my suggestion is that you get yourself trained for the basics of options trading before you start trading.

Once you have completed your basic training, it is time to demo trade and then finally when you're sure of your strategies, you can start putting in real money. I have invested quite a lot of money, and I have lost quite a lot as well. But I am slowly building my way back to where I left off.

I am leaner, more experienced, and I am ready to play the game according to the rules.

OctWk1 - SPY Market Summary

OctWk1 - SPY Market Summary

The market looks promising, and I thought that I would venture out another trade since I was still in the game. I was looking for another trade, and honestly the only way forward is to take a risk and hunt for a trade.

Most of my peers were unable to locate or find a possible entry, but for me, it was like a clockwork-orange. Not to brag, but, nothing was as simple as the trade for OctWk1 for SPY. The decision was as clear as day, and I took an opportunity to sell the trade on Thursday.

I applied the same strategy as I had always applied, and that was the contingent on spread price reaching the cut loss spread price. Thankfully it didn't and I managed to bag the premium earned for that trade.

I sold a Put Spread for the SPY for $164.5/$165.5 for a premium of $0.06 on Thursday and then applied the same contingent order if price was less than $165.70.

Of course price went nowhere near that, and the trade expired worthless. The real return on investment for that trade was 3.95%. Sweet.