It felt wrong, but I closed my vertical spread in silver because price reached X-ATR off a moving average. Silver reached about 10 ATR, a pretty rare event as far as shorter time frames go. I left more money on the table than I took. It is actually not that unusual for new trends in silver to perform this way. While the risk environment was favorable when I closed the position, I was still uncertain how the correlated equities market was going to end up and I knew I’d be too busy at work to frequently check prices. I could not offset some, say half, delta as a compromise, because my position was the equivalent of .19 delta with the micro silver contract representing .20 delta, while gamma was headed towards negative territory, meaning I could lose money if silver continued to rise. I could have offset some delta with another options position, without closing the original, long term structured position. However, due to spread costs, it was not a cheap option. As it turned out, it would have been a better option to what I actually did. So I had a granularity problem that I could look at as costing me $600 in profits that is related to me not allocating more exposure to my ideas. There was substantial a cost to being too conservative with this trade idea. Another issue with longer term ideas is, like it or not, shorter time frames are included and efficient trade management is not possible without accounting for those shorter time frames. In other words, I could have structured this trade idea much better from the beginning. It may be net beneficial to structure trades around my “Personal” probability curves, rather than GBM (Geometric brownian motion), or similar concepts, but that debate is for another day. Silver may consolidate for a day or two, with resolution afterwards seemingly likely to the upside. I will probably reenter a bullish position next week on silver and will make appropriate adjustments versus my last trade. On the daily chart, using a reversion methodology, there seems to be plenty of upside left. Will be taking a break from posting because my 80+ hour work weeks and personal obligations are competing for every free minute of my time.
I also keep trying out different things until I am satisfied with what I am looking for. I think we are all the same in one or the other way.
I like to think of myself as a person who collects trading edges. A person who moves from one idea, refines it, and then moves to another idea. Further, some of these edges compound each other. Working major overtime in a non financially related job interferes with trading continuity, but if I'm saving double digit percentages per week in relationship to trading capital, it is not a bad, short term way to go financially. I will be taking a break from my current job to prepare for my next career. This will also free up some additional time for trading, where I will validate my perceived edges in 8 different categories covering various time frames. Within most categories are multiple setups. I will post general information on these perceived edges and trade a different one each week. This process will take 8 weeks to complete, but it is likely due to time constraints, it will not be done over consecutive weeks.
My new career will be consulting and marketing in a mature industry that is currently experiencing severe structural deficiencies. Don’t want to be more specific than that right now, but it is not directly related to Wall Street. Thank you for your well wishes.
Today was my first trading day since my last performance update on May 7th. I withdrew $50k from my account to help me get approved for a business line of credit with the eventual goal of establishing various “Warehouse” lines of credit for short term funding of select commercial loans. Depending upon my earnings from work and trading, I may repeat the process of temporarily withdrawing money from my trading account for business credit with new financial institutions every three months until my business credit file reaches a reasonable “Thickness”. Had a good day trading with the standout performer being a bullish silver trade that was based on the macro environment. By macro environment, I mean equities, credit markets, and cryptocurrencies were strong, suggesting possible upside potential to the “Lagging” precious metals complex. In my opinion, there is more “Catching up” to do, but recent price action suggests I may get better pricing soon. Other than my hedging related M2K trades for my RTY trade, ZB and RTY were reversion to mean(RTM) setups. As it turned out, I missed out on a good amount of profit on RTY due to a late afternoon decline that I was not sure was going to happen or not. Given my strong tendency to close out my trade ideas the same day I open them, I am best served by being long gamma, not short gamma as was the case on both of my RTM trades. My account utilization hit 25%, which suggests larger position sizes would have allowed me to book some significant early profits while some maintaining exposure for possible further gains. In the alternative, I could have either restructured my existing positions or partially hedge to reduce my exposure, effectively booking some profits, especially since RTY and ZB were generating theta. In the future, I will be focusing on debit option positions.
Bad trading day for me. Started out with a video game type trade on mini silver that was based on my feeling the price was cheap because it corrected more than I thought it would and I was eager to buy rather than be guided by any actual setup. Then I mismanaged the trade after I got in and took a larger loss than necessary after hemming and hawing about getting out. The fact that silver ultimately went up was irrelevant because I had no plan. If I am ever to scale up my trading size for greater potential returns, I must be absolutely consistent with utilizing my trading plan. While I made money on a couple ZB option spreads on a reversion to mean idea, my perception of how much negative delta I had was way off, resulting in a disappointing return. Perhaps if I thought out my trading idea more thoroughly, i would have realized another structure would have been better than what I did. Next up was a half-baked idea similar to the silver trade, only this time I had the idea of a synthetic straddle in GC to benefit from a perceived opportunity based on current “low” IV and expected range expansion today. I also thought of gamma scalping along the way. In the end, I chickened out and closed my position, fearing volatility contraction after the expected inflation report, but not before making a few, yes, a few, order input mistakes. I decided to stop trading at this point, but before I logged off… At the open of the US RTH session, I had a high confidence RTM setup on PPLT, but ended up going with small size, perhaps related to diminished confidence because of my earlier fook-ups. Then I closed the position after a little heat whittled my small profit by a bit, well before my normal objective (The mean). My final insult to trading as a profession was shorting MNQ based on the idea of someone else without having an actual setup. Sure MNQ was in RTM territory, but the timing element of my setup was missing. Just a little important when going counter-trend, I think. Then I got sticky with the position and losing more than twice what I should have. What a weak, undisciplined trading performance today. Why do I do these things? Was it complacency after the previous good day? Was it my inherent laziness? Did lack of sleep affect my focus and intensity? The common denominator to the above is lack of discipline. Maintaining an irregular sleep schedule is ultimately the result of a lack of discipline. Therefore, I will make the following changes in my trading routine: 1. I will set my alarm to remind me to go to bed and to stop whatever it is I’m doing at the time. “Sorry honey… “! 2. No trading without me exercising at least an hour beforehand. 3. I must affirm why I am trading and what my goals are each day before trading. 4. Before each day of trading, I must review charts for at least 30 minutes while identifying my setups, including entries, targets, and stops. Put effort into thinking about contingencies for situations that may develop during the trading session. 5. I must post in this journal that I performed the above four tasks along with each trading performance update.
Met my self imposed trading prerequisites this morning by riding my new mountain bike for an hour (Actually just after my one and only trade for the day), said my trading affirmations, reviewed news on a news aggregation site, and extensively studied charts involving multiple time frames. Only one trade, as I was focused mostly on chart reading today. Very worthwhile as I have additional ideas on trade visualization and how to create a more refined intraday trading strategy that will give me both greater confidence with my stop placement and increased applicability of my trend setups relative to ATR versus mean. I reviewed charts on FDX for the past year, notable for it’s particularly strong trend persistence while completely ignoring my reversion to mean setups. A lot of money could have been made fading my commonly used RTM strategy. While I see correctly done RTM trading as having a 80% POP, risking 1:1 using X ATR versus mean, my partially completed FDX study highlights the importance of diversification and willingness to trade certain bullish signals even when the underlying is in reversion to mean territory, as trading can be very polarized, which is tailor-made for defined risk option strategies, in my opinion. As far as my partially hedged bear spread on NQ, the only noteworthy thing was the size of my current open loss in that it was not accounted for by delta or theta. This leaves vega as being the culprit. Vega being a potential force to contend on size with on a two week, tight vertical spread? While I sure don’t have an intuitive feel for volatility, I am open minded into putting on larger size than previously, in option debit spreads in our lower volatility environment on high confidence signals.
Completed one hour of exercise on my mountain bike, reviewed my watchlist on multiple time frame charts, but was weak on planning the trading day, so I sort of fulfilled my trading prerequisites. Notably, my metabolism seemed higher for about 24 hours the last time I rode my mountain bike, judging by me not feeing cold by my roommates’ hypothermic climate control settings. Account value down .84% mostly on an adverse move in NQ on my overnight vertical spread. Should have at least maintained my partial hedge, if not taking my loss outright. Regardless, this position gets closed out Tuesday if trade does not start working. I feel I’m still struggling with being consistent with closing out trades that are not working. While my outlook is usually 1 to 3 days and I am willing to take one day’s worth of heat, I let the fact that it was a “Fed day” affect my trading plan. Further, it seems most Fed days have been bullish for equities and I basically ignored a couple of leading indicators that today was going to be bullish for equities. I am reminded of the saying that “Poker is not a card game played by people, rather it is a people game played with cards”. Perhaps I should treat trading the same way. My job is to not place trades that reflect my opinion of a market, where-ever I pull out my idea from, rather my job is to evaluate the market’s action and trade accordingly. Attempting to anticipate what the market is going to do can be ok, but it seems that waiting for a specific setup after a primary condition is met is more efficient than what I’ve been doing. Extensively reviewing charts on multiple time frames has been an eye opener for potential idea generation as well as potential avoidance of losing trades. Further, having trades of multiple duration may smooth my trading results. An example of a trade that has considered multiple frames is NG. On the weekly(Up to 1 year horizon), the daily(Up to 3 month horizon), the 30 minute(Up to 1 week horizon), and the 5 minute(Intraday horizon), NG is in or near reversion to mean territory for each time frame. Looking at a recent EIA.gov supply demand report on Natural gas does not seem to provide an extremely compelling bullish case, although I do have concerns over how fast production can be increased to meet a Summer demand surge or the potential effects of a major hurricane on prices. I am treating NG as a swing trade, but there may be a good longer term trade. Still, given the longer term price history of natural gas, the current $3.30 price does seem cheap, especially considering that inflation may be increasing. Again, I out of the trade tomorrow if it does not perform. I’ll have some uninterrupted time tomorrow to do some scalping and will review may varioys setups.