I'm seeing the bid/ask at 5.95/7.30 now. A day trader I was observing said that is the hardest way to make a buck in the markets. You not only have to get the direction right, you have to time the entry pretty much to perfection and get the stop loss right as well. I prefer to give myself more margin for error to be honest, but that's probably because I'm not cut out for day trading.
Mid on the fly is a little over 7 as I write this, although it's not really relevant at this point. I completely agree with your sentiments. In my opinion volatility trading is easier than directional trading, much less directional daytrading, and my journal trades point to my very limited abilities with regard to the latter. I usually stay away from it for that reason but this seemed like an excellent opportunity with a high r/r. And in hindsight it was. As you noted though, execution is everything on a trade like this and mine wasn't up to par this time. Thanks as always for the valuable feedback and I hope your trading is going well.
This week has been OK, though I'm still filling the hole from the 'no taper' aftermath; not that I was trading that announcement, but sharp moves took me out of pretty much every position on an almost delta neutral book so it ended up hurting anyway. Like you, I respected the stops so I got to see closed trades come back, but that's just part of the game so I'm more interested in working out how to hedge those sort of announcements.
Sorry to hear it, JT. That was definitely a rough time to be neutral and I am thankful that I was out of the market for it (that is my new hedge around such announcements). Good luck with the rebuilding and I hope you have a good weekend.
This seems like an appropriate point to review the progress to date in the journal, as well as what is, and isn't, working in terms of strategies. Here are the big-picture numbers as of Friday's close: Starting date: Aug 15 Starting equity: $6,020 Current net liq: $5,190 (inc. commissions and data/news fees) Max drawdown: ongoing Trades: 26 Half of my losses came on one impulsive ES futures trade, which speaks to my need to stay away from trading that underlying for now. Much more interesting, I think, is the following quick-and-dirty analysis. I broke the trades down into two very crude categories, recognizing that there is some overlap: volatility (inc. butterflies, calendars, and ICs) and directional (DITM calls/puts and verticals). (I excluded the one non-options trade for this analysis). The differences are pretty stark: Volatility trades: 19 Journal return b/f commissions: $268 Journal win/loss/scratch: 11/5/3 Journal average holding time: 2.3 days If held to expiration(or MTM for those that have not yet expired): $3,561 return before commissions Expiration/MTM win/loss/scratch: 14/5/0 (much larger average win and average loss) Average time to expiration: 11.4 days Directional trades: 6 Journal return b/f commissions: -$218 Journal win/loss/scratch: 2/2/2 Journal average holding time: 1.3 days Expiration return b/f commissions: -$1,720 Expiration win/loss/scratch: 1/5/0 Average time to expiration: 6.5 days Key caveats here are that this is a small-n sample, and it was done in a fairly rangebound market over the last few weeks. But with that said: * The most obvious takeaway I think is that I need to stay away from directional trades for now. Clearly my directional trading ability is not as advanced (to put it mildly) as that for volatility trading, and the directional trades are causing a significant drag on my account. * The second critical takeaway is that it seems that I may not be holding my volatility trades long enough. I put a tremendous amount of time and energy into developing and entering each vol trade, but as evidenced by the journal return vs. potential return at expiration, I need to have more patience to wait out the market gyrations so that the trades can mature and actually make money. I should only exit when the market has definitely disproven my thesis for entering the trade. Until my experience level increases, I may need to use a more mechanical stop for my vol trades to prevent me from hurting myself by exiting early. I am thinking that one such method might be to use two criteria and exit when either is satisfied: 1) the initial position theta is halved; or 2) there is a clear reversal signal on the daily chart away from neutrality. I am not sure why I am struggling so much with my exits but I need to get better here. I am confident that I can turn around the initial performance going forward. The first step now will be to get back "in the green." Thanks for joining me on this journey. Finally, for the week ahead, I think that there is a lot of potential opportunity in the VIX. The market in my opinion has not yet priced in any real chance of a continuing deadlock on the government shutdown and debt ceiling situation, and the cash/ futs inversion on the VIX last week may be the beginning of more to come if the situation is not resolved. I plan to focus nearly all my energy on VIX options, and potentially some futures spreads, this coming week. To keep from cluttering the journal, I may post at the end of each day with the results of that day's VIX trading as I may continue to work on legging into flies on VIX volatility. I currently have Oct flies on up and down the vol line from 13 to 30, so I believe that I have a nice "cushion" to begin getting a little more aggressive in that regard.
If I might ask, why would you consider closing a trade just because theta has halved? If price is still well within your range of profitability, why not just leave the trade to run? As you know, with a fly the real reward comes when it reaches expiration so I always shoot for that if possible.
Good question. It is just a rule of thumb. At least for flies with the parameters and time to expiration that I am generally trading, the initial theta seems to generally halve at about the expiration break-even point (which may be another potential exit marker to use).
Long the Oct VIX 25,45 calls (2-lot) from .43. Looking to fly these off on what I anticipate will be a continued upward march in the VIX as the default date approaches in the absence of a resolution. From a negotiation perspective, one could argue that it is in the best interest of those involved (or at least some of them) to hold out as long as possible before cutting a deal. This trade is a bet that that is the case. "Anyone who has never made a mistake has never tried anything new." - Albert Einstein