Trading Journal Entry For 5-1-2014

We just happened to get ourselves a little bit of “free” time today to do some trading and put out a trading journal entry. Something which we have unfortunately not been able to do much of at all lately (though we hope to rectify that soon). US indices themselves today ended roughly net flat by the closing bell, but it was a bit of a ride in the getting there. And now we find ourselves once again right back at those record highs which the bulls have tried and failed to break through for four consecutive times now. And since we tested that area again today mid-day and then finished lower it implies that yet another failure and pullback is the most likely outcome. It was also an outcome which we went ahead and “bet” on in our trading today. Let’s first take a quick look at today’s daily chart for the S&P500 index.

daily s&p500 index chart for 5-1-2014

We did all our trading today over the course of just 30 minutes or so. However, we purchased our standard high/low contracts as end-of-day expiries to give the fundamentals more of a chance to assert themselves. We made two indices plays on this. The only other trade we made today was a multi-contract ladder option play on oil using two $50 contracts on each side of the trade (more explanation later). Let’s start by taking a look at our biggest winner for the day, on the good ol’ S&P500 index.

s&p500 index high/low trade 5-1-2014

S&P500 Index Trade Summary – High/Low Put Option

Trade Outcome: ITM
Entry Time / Expiry: 17:07 / 20:00
Investment: $250.00
Returns Offered: 76%
Entry Rate / Expiry Rate: 1886.42 / 1883.36
Returns Received: $440.00
Profit/Loss:  +$190.00 Profit

The other standard high/low trade which we made was really just an extension of the first trade in some ways. But we felt that if one of the indices were to perform more poorly than the others, it would probably be the NASDAQ based on its recent history. So for that reason we purchased a $100 put option on the NASDAQ for the same end-of-day expiry rather than just tacking on another $100 to the S&P trade. In the end it didn’t really matter, the outcome would have been the same regardless of which way we did it since the declines came across the board. Unfortunately we forgot to screenshot the opening chart for this trade, so here is the daily chart instead.

daily nasdaq index chart for 5-1-2014

S&P500 Index Trade Summary – High/Low Put Option

Trade Outcome: ITM
Entry Time / Expiry: 17:08 / 20:00
Investment: $100.00
Returns Offered: 76%
Entry Rate / Expiry Rate: 4139.42 / 4126.97
Returns Received: $176.00
Profit/Loss:  +$76.00 Profit

Last up for the day was that ladder option trade. Even though it is two separate $50 contracts (made up of four $25 contracts) it was actually all one trade. You can see where our cursor is in the image below of the opening chart for these ladder options trades, and that points to the area where we were aiming for price to finish up at. The way this strategy works if price finishes anywhere between the two levels then all contracts pay out. If price finishes below a level then half the contracts pay out, and if price finishes above a level then half the contracts also pay out. It is a low risk, low reward strategy in general, but can result in good returns overall. Today was a split finish day, with two of the contracts finishing ITM and two finishing OTM for a modest loss. Let’s take a look.

ladder option oil trades chart 5-1-2014

Ladder Option Oil Trades Summary

Total Contracts Purchased: Four (4) * $25 Contracts
Ladder Trade Outcomes: Two (2) ITM + Two (2) OTM
Total Ladder Investments: $100.00
Total Returns Received: $71.05
Ladder Contracts Profit/Loss: -$28.95 Loss = -28.95% Net ROI

ladder option expired trades 5-1-2014

Daily Investment Totals For 5/1/2014

Total Trades: Two (2) Standard High/Low + Four (4) Ladder Contract
Standard Trade Outcomes:
 Two (2) ITM
Ladder Contract Outcomes: Two (2) ITM + Two (2) OTM
Total Investments: $450.00
Total Returns Received: $687.05
Total Daily Profit/Loss: +$237.05 Daily Profit
Daily ROI: +52.68% Daily Net ROI

standard trades daily investment history 5-1-2014

Pretty good day for how little time and effort we put into it. We’ll certainly take that kind of hourly wage any day. However, our confidence level regarding where markets are headed from here is not exactly at a high point. We lean fairly heavily towards a pullback, but we’ve been right on that score too often already at this point, and are about due for a mistake it would seem. We will probably be adopting a cautious approach to our trading until the markets can provide us with more conclusive information about their future. Until next time people, trade smart and get lucky!

Leave a Reply

Your email address will not be published. Required fields are marked *