Trading Journal Entry For Wednesday 3-12-2014

Amazingly, it was yet another near perfectly flat net day for US indices, with the S&P500 index finishing the day up barely a half of a point, or a whopping +0.03% gain for the day. Notice that we said net flat for the day. Because it sure wasn’t flat in between that opening and closing bell today. Although there were periods of extreme calm and low volume mixed in with the periods of extreme volatility. It was kind of odd actually. Unfortunately, today’s markets definitely didn’t provide the forward guidance that we were hoping for. Today’s indecisiveness provides basically no useful or actionable information about the future. It’s still wait and see for now.

daily s&p500 index chart for 3-12-2014

 

As for our own trading today, there definitely isn’t anything to brag about. And on top of that we made a stupid, completely avoidable mistake that cost us (or might cost us at any rate). We’ll get to that in its due course though. We were all about trading this volatile index for today, sticking exclusively to S&P500 futures for our trades. We were attempting, with mixed success, to ride the rather regular and pronounced up and down waves of the index today. Let’s see how that worked out for each trade, shall we.

first s&p500 future trade for 3-12-2014

We tried to take some nice screenshots today that show, as best we can without taking up too much space, what was going on in the market at the time of the trade, and what it was that we were seeing to get us into the trade. We use TDAmeritrade’s ThinkOrSwim platform (free) for all our serious, or longer-term binary options charting (basically anything but 60-second options). In the image above you can see where things stood with the S&P just after we entered into our first trade of the day. You can also see the trend lines we drew, and therefore the pullback we were looking for here. A pullback which we got, for an ITM finish.

S&P500 Future Trade #1 – High/Low Put Option

Trade Outcome: ITM
Entry Time / Expiry:
 17:47 / 18:00
Investment: $100
Returns Offered: 73%
Entry Rate / Expiry Rate: 1865.375 / 1865.125
Returns Received: $173.00
Profit/Loss: $73.00 Profit

successful s&p500 future trade two for 3-12-2014

Our next trade was made only minutes after expiry of the first. We didn’t get the bounce off the top trend line and the decline we were looking for with the first trade, but still just barely managed to finish ITM at the end. But immediately after that ITM expiry, price started to jump, and broke right through that top, downward-sloping trend line. So at that point we quickly turned around and went the other way, purchasing a call option this time with a roughly 30-minute expiry. Price did in fact take off a bit from here, for a while at least. But in the end the outcome was very similar to the first trade, with price going more sideways than anything, but just barely finishing ITM by expiry.

S&P500 Future Trade #2 – High/Low Call Option

Trade Outcome: ITM
Entry Time / Expiry:
 18:02 / 18:30
Investment: $100
Returns Offered: 73%
Entry Rate / Expiry Rate: 1865.875 / 1866.375
Returns Received: $173.00
Profit/Loss: $73.00 Profit

Looking good so far right? Well, maybe if we had just quit here while things were looking so good. But that isn’t what happened. Instead, we “crapped out” on the next two trades, and then botched the tiebreaker in a rushed move that lead to a mistaken trade. It wasn’t pretty overall. Let’s look at crap out number one.

first losing s&p500 futures trade for 3-12-2014

The idea behind the trade shown above was that price was breaking back down, and should continue to do so below the flat red trend line on the chart. As you’ll see quite clearly in the chart for the next trade, that isn’t what happened at all. And we deserved what we got, really. We jumped the gun on this one. We should have waited for confirmation of the move by a break in that second trend line. Because instead of breaking down, price hit that trend line and bounced right off it, violently.

S&P500 Future Trade #3 – High/Low Put Option

Trade Outcome: OTM
Entry Time / Expiry:
 19:17 / 19:30
Investment: $100
Returns Offered: 73%
Entry Rate / Expiry Rate: 1863.125 / 1863.375
Returns Received: $0.00
Profit/Loss: -$100.00 Total Loss

s&p500 future and long-term s&p500 trades for 3-12-2014

You can see in the TDAmeritrade chart above just how violently price ran up after bouncing off those lower trend lines. We obviously knew at this point that our trade was a hopeless proposition. But not all was lost, we thought. As price hit that top trend line, which also happened to be the indices high for the day, we thought that there was a very good chance price would pull-back some. A good enough chance to bet on it at least. And this tie breaking trade would take the day from being a significant loser, to being a slightly profitable one. But first the summary for the hopeless loser.

S&P500 Future Trade #4 – High/Low Put Option

Trade Outcome: OTM
Entry Time / Expiry:
 19:36 / 20:00
Investment: $100
Returns Offered: 73%
Entry Rate / Expiry Rate: 1863.125 / 1867.625
Returns Received: $0.00
Profit/Loss: -$100.00 Total Loss

So, what happened with that other trade? Well, this is the trade we botched. It should have, could have, and would have been a winner, had we only purchased the correct contract, the contract we meant to purchase. We intended, of course, to purchase a standard high/low put option on the S&P, expiring at the approaching closing bell. Instead, in our rush to get the trade executed at the price we wanted to get in at we accidentally purchased a “long-term” contract expiring on the 14th, the markets closing on Friday. Oops. So, hopefully markets fall from here before Friday. Oh well, shit happens, right?

daily investments history totals for 3-12-2014

Clearly it wasn’t a good day. On the other hand we haven’t had many losing days lately, and they’re bound to happen sometimes, so in that sense it’s acceptable. The “big picture” goal is simply to have your losing days be smaller in magnitude and less often in frequency than your winning ones. And if our “botched” long-term trade ends up being a winner in the end we could actually move this day to W column. We lost $27 on each loser for a total of $54. If our long-term trade expires ITM it will return $175, for a $75 profit. That would make for a net of +$21, w00hoo!

Daily Investments History Totals For 3-12-2014

Trades Made: Four (4) Standard High/Low + One (1) Long-Term
Trade Outcomes:
 Two (2) ITM + Two (2) OTM
Total Investments: $400.00 + $100 Long-Term
Total Returns Received: $346.00
Total Daily Profit/Loss: -$54.00 Total Daily Loss
Daily ROI: -13.5% Daily ROI + (1) Open Long-Term Trade

Hopefully the next two days will give us more information than the last two have, because that hasn’t been much. For the time being we will continue to watch the major indices very closely, and make only short-term trades based solely on intraday technical analysis factors. Until next time people, trade smart and be lucky!

Monday, 10th Trades | No Tuesday Trades

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