Trading Journal Entry For 4-15-2014

It was another day of indecisive and inconclusive market movement for the major US indices today, unfortunately. We were certainly hoping that today would provide more clues as to the future than yesterday did (which is to say basically none at all). But alas, it was not to be. There is a substantial minority of technical analysts that were looking at the 1,840 level as an important ceiling to break, signaling a return to the bull market. And that level was in fact broken today. We, however, are not among that group and we remain in cautious mode until we see further supporting evidence. Because frankly, we’re of the opinion that it is correction time. The market has not had an “official” correction (10%+ decline from peak) in over 2 1/2 years! Nothing goes up forever, especially when you consider that the US, and indeed world economy is still pretty blah overall. Anyway, let’s take a look at today’s daily chart for the S&P500 index, our favorite broad market proxy.

daily s&p500 index chart for 4-15-2014

If you look at the chart above, most of our trading today was done between the 12 – 1 pm period on this time frame (EST). This was not by choice, but rather forced by an appointment we had. Thankfully it actually ended up working out rather well in the end. Really, we should say “luckily” it worked out well in the end. Because it truly was mostly luck in this case. As you can see in the chart above, that 1 pm point marked the lowest level of the day, and that’s also when our put contracts were expiring. Any time after that and we would have had across the board losers, instead of across the board winners. Let’s take a look.

s&p500 index call option trade for 4-15-2014

The first trade of the day (pictured above) kind of goes against much of what we have been talking about over the last week as a counter-trend trade. Not something which we usually recommend. However, for very short-term, purely technical plays it can be an acceptable risk in some cases. We felt that this was one of those cases. We purchased this call option as a very short-term bounce play, with an expiry of only 17 minutes from the time of purchase. It was the right play.

S&P500 Trade #1 Summary – High/Low Call Option

Trade Outcome: ITM
Entry Time / Expiry: 16:12 / 16:30
Investment: $100.00
Returns Offered: 76%
Entry Rate / Expiry Rate: 1821.850 / 1822.530
Returns Received: $176.00
Profit/Loss:  +$76.00 Profit

s&p500 index put option trade for 4-15-2014

These next two trades were opened even before the first one reached expiry, as we (incorrectly it turned out) believed that the index was turning back around to resume its downtrend of the last few hours. As we know from that daily S&P500 chart in the introduction, that is not at all what happened. But this “fake out” reversal did in fact last just long enough for our trades to finish ITM, and by a fairly “safe” margin too. This goes back to that 1 pm low point we touched on earlier. With an outcome like that it’s impossible to claim pure skill with any kind of straight face. Nobody is that good.

S&P500 Trade #2 Summary – High/Low Put Option

Trade Outcome: ITM
Entry Time / Expiry: 16:22 / 17:00
Investment: $100.00
Returns Offered: 76%
Entry Rate / Expiry Rate: 1821.150 / 1817.830
Returns Received: $176.00
Profit/Loss:  +$76.00 Profit

nasdaq index put option trade for 4-15-2014

Last up for the standard high/low trades for the day was basically just a “doubling down” on the other S&P500 index trade. In fact this contract on the NASDAQ index was purchased just seconds later, also at 16:22 system time. A play like this is only slightly different from just buying a $200 contract on the S&P. But it can also sometimes be an important “slight” difference. In this case it wouldn’t have mattered either way though, with the returns being exactly the same regardless.

NASDAQ Index Trade Summary – High/Low Put Option

Trade Outcome: ITM
Entry Time / Expiry: 16:22 / 17:00
Investment: $100.00
Returns Offered: 76%
Entry Rate / Expiry Rate: 3964.760 / 3948.970
Returns Received: $176.00
Profit/Loss:  +$76.00 Profit

ladder options oil trades chart 4-15-2014

Last up today we had a series of ladder option contracts purchased on oil. Four contracts to be precise. All on oil, all for the same expiry, and all purchased at the same time. You can actually consider all four contracts as making up one single trade. It was done as part of a strategy which we are working on developing for ladder options trading. It is actually a pretty simple strategy that other ladder option fans are probably independently using. But it has been working very well for us for the last couple weeks. Hopefully we’ll get a write-up done and published on this strategy soon, probably sometime this month if all goes well.

ladder option expired trades history 4-15-2014

Ladder Option Oil Trades Summary

Total Contracts Purchased: Four (4) * $25 Contracts
Ladder Trade Outcomes: Four (4) ITM
Total Ladder Investments: $100.00
Total Returns Received: $147.37
Ladder Contracts Profit/Loss: +$47.37 Profit = +47.37% Net ROI

daily standard trades investment history 4-15-2014

Daily Investment Totals For 4/15/2014

Total Trades Entered: Three (3) High/Low + Four (4) Ladder Contracts
High/Low Trade Outcomes:
 Three (3) ITM
Ladder Option Outcomes: Four (4) ITM
Total Investments: $400.00
Total Returns Received: $675.37
Total Daily Profit/Loss: +$275.37 Daily Profit
Daily ROI: +68.84% Daily Net ROI

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As you can see today’s trading resulted in a “perfect game” of seven ITM finishes, and not a one OTM finish. Can’t ask for much more than that. There was certainly a fair amount of luck in today’s outcome, but luck goes both ways in the long-run so you should be happy with the good when it comes. Since we took yesterday off from trading that makes today our opening for the week, so that’s a good start. But it will also be a very short week with US markets closed on Friday. See you all next time, and good luck out there!

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