Markets continued their steady and rather impressive climb again today, with the S&P500 index finishing at 1819.75, up nearly 20 points for the day, or 1.11%. We remain very cautious in this market, however, with no confidence in a continuing climb whatsoever. For this reason we have been keeping all our trades very short-term, and based entirely on technical analysis factors. This lack of conviction has also lead us to keep our investment amounts modest, never exceeding $100 per trade. Market conditions change faster than the weather so restraint until more favorable conditions develop is the smart move here. Of course, “favorable conditions” is a matter of trading preferences more than anything else.
We made a total of four trades today. Three standard high/low trades, and one 60-second series. We are not huge fans of 60-second options because you can never be very confident in what price will do over such a short period, but we still “play around” with them sometimes and have been consistently profitable in the contracts overall.
The unfortunately blurry image above is showing the opening of our first trade of the day, a Facebook high/low put option contract. You can’t see it very well here but on our ThinkOrSwim charting software this asset looked like it was “rolling over” and due to at least temporarily move lower. And it did, shooting much lower than our entry price…before shooting straight back up just as quickly right before expiration. In the end it was very close, but no cigar, as the old saying goes. We purchased this put option contract at 18:09 for $91 with a 18:30 expiry and a payout of 70%. This loser was offering a 10% refund rate at least so we did receive a $9.10 return on our investment, for a loss of $81.90 on the trade.
Next up was the 60-second series trade. We like the Apple v. Google pair option when trading 60-second options and when cycling through some charts it was a pair that looked good for a bounce so we went for it without further delay. All three contracts in the series finished ITM so we received a return of $50.40 on our $30 investment, a profit of $20.40 on the trade. Not bad for a whim (Disclaimer: “whims” are not a BOTrading Bosses endorsed trading strategy haha).
With that losing frustration neatly flushed out of our system, it was time to move on to the next “serious” trade of the day. Actually the next two trades since they were made in sequence, on the same asset and with the same expiry. The S&P500 index had been rising steadily throughout the entire day, and was now beginning to flirt with that 1820 price level. Using some of our favorite technical analysis tools suggested that price was very likely to test that level but fail. Stochastic indicators especially were strongly reinforcing what the charts were telling us in this regard. It was time to either make a play or call it a day.
You can see in the chart above where we originally entered this S&P500 trade, hiding under the “Sell” near the middle of the chart. You can also see how the market had flattened out after its near continuous rise throughout the rest of the day. Feeling reasonably confident that we were not likely to get a better setup than this today, we pulled the trigger at 18:28 and entered the trade with a $100 put contract, offering a 70% return and with a 19:00 expiry.
After the purchase of our first contract the S&P continued to just slowly drift up with very little volatility. It was this lack of volatility that helped assure us that nothing had changed, and our trade was still technically correct. Of course that doesn’t mean it can’t be a losing trade. And it was with both of those things in mind that we purchased the other, identical but smaller contract for the odd $29 we had sitting around. This is a partial hedge trade, as you might recognize. There are several benefits associated with making trades like this (which we will talk about in future articles). Both trades finished solidly ITM.
And that brings us to the day’s outcomes and total Traderush investments history. Out of the three high/low binary option trades we made today, two finished ITM and one finished OTM. Our total investment on these trades was $220, and we received returns totaling $228.40, for a grand total of a whopping $8.40 profit! I guess it’s a good thing we made those 60-second trades after all. Including those 60-second trades gives us an overall total of $250 invested for the day, with a return of $278.80, a profit of $28.80, or an 11.5% daily return rate. Not great, but not too bad either.
So far we have two days into the week, with two days of small profits. Those daily profits can add up fairly quickly though. It is consistency which is more important than pretty much anything else in trading. We also prefer to keep our individual trade amounts relatively small for the purposes of this journal. We can provide more educational value by making many smaller trades than we can by making just a few larger ones. More trades means more opportunity for explanations and covering different trading scenarios. Until next time, trade smart and be lucky!