T.J 4-30-13 Patience or Greedy?

I got a fairly good setup and entry on ZW this AM. It's a BBM cross and pull back to mid on daily. It had 2 pts heat and now up 25 pts. I have to admit that I raised about 1 point of my entry thinking it may not reach to my setup since it was a big up day yesterday. Learning to be consistent not using guess work and letting emotions to interfering with the system.

Not being consistent also apply to setting target. I kept raising my ZW target up. Trying to get few more ticks or points out of the trade. Had 735.5 at R2 whick would be filled by now. Instead I moved it to last swing high and the edge of CHVN. Now missed it by 1.5 point. Is it patience or greed? I guess I have to site on this trade for over night. It's a bull flag formation right and I have stop at B/E. Now my option is to wait for the market reopen.

Being waiting for ES put to fill all morning but hasn't get them yet. Getting better of waiting patiently by looking at bigger picture. One small call filled after hour.

ES Option Trader's Rules

The way I trade

1- I focus on selling the S&P Futures options deep OTM weekly naked puts. I like the S&P for the liquidity, the relatively low volatility, the large documentation on it, the long history that allowed me to backtest it deeply and because it is less prone to sudden spikes like individual stocks. I also think chasing too many stocks is hard, I cannot deeply study and understand too many stocks, my knowledge would be too shallow. I sell only puts because OTM calls are underpriced and OTM puts over priced on the S&P futures. You get about 3X more premium for same deep OTM distance on puts than on calls.
2- Entry/exit on support/resistance levels.
3- Take a trade only with confirming majority large blocks and money flow in direction of my intended trade.
4- Avoid opening a position before major news, either macro or earnings of a mega cap that can spike the IV and inflate the premium.
5- Always having a close eye on the bond market, the U.S dollar and the VIX futures, if their correlation/anti-correlation with the S&P are disrupted I tend to take the closest support/ resistance for exit/ entry.
6- Watching the divergences between the price and MACD/MFI, using them as an indication for earlier entry/exit.
7- I look closely to the momentum of the price and get out when it starts fading and price starts reversing.
8- Concerning the sizing, the method is, before entering the trade, to look at the risk graph and assess the drawdowns and ask myself if I can stomach them, reduce size until it is true.
9- For my stop loss, I always immediately place a GTC limit order as contingency order equal to 2X the premium they gave me, but I get out with a day limit order when market say clearly I'm wrong early, way before I reach the 200% loss, most often @ -50% (half the premium)
10- For profit taking, if market still collaborating I tend to get out if I reach 80% of the premium , if I see possible reversal, I'm immediately out
11- I tend to avoid holding a naked option position the weekends as it is not possible to trigger my stop loss in case of an unexpected event, the stop loss will get 'jumped over' Monday in case of market moving event

4-29-13, Monday pops again

Quotes

- "Simplicity is the ultimate sophistication." Leonardo Da Vinci. 
- "You can only get good at chess if you love the game." Bobby Fische

All equities popped up this morning. ES is trying to Challenge new high of 1593. I have couple of sell calls waiting for the new highs. 

Grains moved up to higher ground due to weather concerns and strong export report. Corn planting is far behind its average. My wheat put sell looking good now. Too bad I didn't get any fill for corn and beans. 

Well, no fill for my ES puts sells at closing. Will wait for next day or two. I have been patient with a view of bigger picture. ES was less than two points form a new high. It may push up strong tomorrow. It seems that the market will push out strong.  

T.J. 4-26-13 Cha Chi Friday

Finally exited out the two grain short and took losses on them. Will wait until Monday to re access the trend. I was able to overcome the urge of revenge and to jump back in. Overall it was not a well planed trade and fear took over when XB came to my adding area.

I like the idea of collecting premiums more and more. It's safe and less stressful. It gives more room to maneuver for short term market fluctuation. I need to learn more of it while collecting some premiums each week. Watched Super trader Karen's video again. My ES call was exited premarket today with a small profit. Adding my first ZW put sell for 2 months out. Need to develop a new routing the check on pending orders before and after market each day.

All my ES puts of this week are expiring worthless today with 100% profit which offset the two grain losses. It feels good to see the profit. May move to more of these safer trades.

T.J 4-25-13

A none event day. I tried to exit ES 1590 put position but the market kept going up most of the day reaching 1588 and fall back some. Wanted to add couple positions at higher numbers but didn't get filled.

My mini B and C are facing first notice by Monday. I must exit both tomorrow and rollover to next contract period. I let them run for too long with out a clear plan to rescue them.

T.J 4-19-13 Friday and Options Expiration

Another lesson on sugar. I thought I was not going to make a trade on sugar last night due to both contracts fall below previous day's low but still above BBM. However, they are in a down trend and broken down from the upper trend line. After reading Daily Mini's signals I thought I would short WSG from top on a pull back. I didn't feel it was right because it wasn't my clear setup. After debating internally a bit I thought the chart looks promising and I could miss a good short opportunity since it just fail on 50ma and trend line test. I felt that I need a winner pretty bad since my futures trading results had not been very good for the last two months. I even thought about to take the trade off when I went to bed last night. Then my staboness took over and thinking it was a small risk ($260) and I could afford it. For all the wrong reasons that I let the trade stay. The order got filled this morning but quickly cross up to a new high and formed a bullish engulfing daily bar.  It may be a news driven but I failed to follow my rules and broke my discipline. I passed DB's SB short two days ago due to the rule of mine but I broke it myself. A lesson to remember.

Finally I was able to exit that GLD put position. a big loss ($1300) and lesson. Stop loss must be in place. The size of gold price drop never happened in the last 30 yrs. It happened while I had 1 small position Remember that anything can happen to the market and a position.

On the bright side, all my put selling options for this week are winners except the gold which I have to close it today regardless the price.

T.J. 4-23-13 Pop up!

Quote of the day: “As a general rule of thumb, simplicity beats complexity because simplicity travels light.”

“Becoming a great trader is an evolutionary process. It’s a series of trial and error transformations, mental map adjustments, and incrementally acquired skill sets, all blended together. And there is no substitute for hypothesizing, testing, and experimenting, with the requirement of organizing one’s thoughts logically and empirical verification serving as the great crystallization.” - Sparrowisms,  www.mercenarytrader.com

I set up couple sell calls yesterday as the ES was slowly grinding up. I didn't re-adjust my entry last night to prevent a sudden pop, especially this morning when overnight market clear showed a up drive. Now my this week's ES call is only 12 point away with 4 day left and 17 points for next Friday. They are clear in danger now. Looking back, I didn't use my plan's forward thinking and anticipating parts. Now I will manage to exit these positions to reduce risk. Remember that selling calls are riskier than selling puts. 

T.J. 4-22-13

The equity market continue moving up this Monday.  I put in couple ES put orders but nothing filled yet.
I am still learning sell put options in grains and crude oil. I like this approach for its high win rate, more tolerate for price moves and less stressful. Risk management is the key. One big loss will wipe out weeks and months profit.

Overall, it's a non event day.

T.J 4-18-13 Lower low again

My expectation of the market direction was push down to test yesterday's low and then move up. I was wrong in failing to read daily trend lines.

USDA's export report came out quite positive but corn and wheat fail after opening push. Soy bean pushed up to Fib 78% which was my add on level. I didn't execute in fear of it pushing through. Habit is hard to change. In my trade of LE long, I calculated my BBD/M pull back entry which would have been a perfect entry within a tick. I was thinking it would be too low and move it 1.75 up. It's the same behavior repeatedly. 
The LE now is closed between 5ema and 13ema. It can go either way tomorrow which may be waiting for meat export report from USDA. I should have avoided this trade had I remembered this report date. LE is a volatile product. Better be safe than sorry.

T.J 4-17-13 Retesting low or else?

Market come down to test Monday's low again and closed at mid. There is no telling which direction the market is going. I entered 2 positions of ES put nearly 90 point below current. They looks safe for now. Also swapped a put with a lower one for this week's expiration from 45 point to 60 point, just in case something crazy happens in the next 2 days. I feel good using this tactic to reduce risk and maintain profitability.

I got an idea of incorporating the future options selling into my trading practice. Adding one arsenal to my system. I made a outline late last night. Will continue to improve it while learning more about such options.

T.J 4-16-13

Equities recovered 2/3 of yesterday's loss. ES is parked at a critical point. It may form a head and shoulder or push up to a new high. Next few days will tell. I took some option positions off today and will watch for the market showing hand.

I am still under water for gold and grain. I voided 3 trade of DB because they are opposite of my setup rules.  It appears I dodged couple losses.

It was a relatively uneventful day.

T.J 4-15-13 Black Swan Day.

Monday, Monday, often a trend changing day. Gold has done a lot of damages. It has dropped over 100 points in the last two days. It hasn't happened in the last 30 years. I am caught in this big down turn with a sold gold put. I failed to put a stop order in last week while wanting to add one more. A total fault in my part.  I had an exit order for a lower price but failed to set a stop loss order. When gold price was crashing last Friday I was like a deer standing in a head light. I didn't think of hedging my position. Now I am waiting for a bounce to get out of this position.

I passed a wheat short from Daily Batch because it's against my BBD/M setup. It looks like a winner now. I am OK with it. It's more important that I follow my rules. It's good for me to overcame my fear of missing a trade.

On the other hand, I entered a ZM long trade because it was a BBD/M cross and PB set up. MACD is up 2nd day although it's counter trend. I totally forget there was a USDA export inspection report at noon today. It's only 5 minute after I entered the trade and the report came out somewhat bearish. So far it's about 3 ticks to hit my stop. Another mistake I get to pay for it. Update at 2:15pm closing: ZM got hit. the clue of the trade was it breached overnight low and never break the high. Also the news on China GDP lower was a major factor driving down most commodities. I followed my set up but it didn't work out.

I started reading a e book "The option Trader's Hedge Fund". It helps me to get a sense of selling options as a insurance business. Risk control is job one. I exit out two ES 1595 calls for a small profit on today's 20 point down move.

Wow, after Boston's bomb news, the market tanked again. All of my ES entries got filled. I forgot to take one at 1505 out. Now ES is at 1547 and only 40 some point away for 4 days. I may have to work through my next week's positions to a higher ground. Gold and ES have shown the risk of such large scale movement happens from time to time. One must always be prepared.

Working toward to have more right trading process than wrong ones. Always make controlling risk the priority!!!

T.J 4-12-13

All equity market are turning lower overnight and this morning. My ES puts were covered overnight with a small profit. Lucky for a ill planned trade. Make sure to follow risk control rules. Crude filled its target pre-market so I didn't get a chance to extend my target. Sugar turned out to be a loser. It was opposite of my BBD setup. When it's not clear setup, don't trade. I guess I was afraid miss a trade from DB. Trust what I see not thinking someone else know more. Stay disciplined and let Mr. Market do whatever it wants to do.

T.J 4-11-13, Jobless claims

Today's jobless claims are 42K lower than anticipated. It got to a seasonal adjusted 346K according to DoL. March had only 88K new jobs. The two numbers may be suggesting there are less new hires and also less layoffs.

ES moved up slowly to a new high this morning.  Both of my sell calls are under water although not in the money yet. Need to close this week's position before end of today.

I am getting into a habit of moving my entry around when they are near filling. It's either fear or greed. I must respect my research and decisions, not wishing washing in the last minute.

T.J 4-10-13

The USDA report did make a lot of swing moves in prices. But they all settled in yesterday's ranges except wheat went lower. There were no new low made in any of grains. I would expect the market testing up, especially corn's inventory came in lower than estimate.

On the other hand, ES broke out to reach a new high of 1584 before lunch time.

T.J 4-9-13

AM, the markets are in range bound. Grains have tested up side and now are pulling back. I guess the big guys are positioning for tomorrow's USDA report.

ES tested new high but fail to close it. It may do it in the next couple of days. I was not patience enough when getting in selling 1595 calls.

T.J 4-8-13 Monday

Monday, it appears a turn around and retest upper lines for the market.

I took out a ES put of 1490 to reduce my risk for short side. The risk of North Korea threatening of nuke still present.

Both of my mini corn and bean positions are under water but I am with the down trend. It looks like traders are trying to push out weaker shorts and positioning for Wednesday's report. I need to decide my add on locations and calculate my risk if I can't get out of the positions tomorrow. It appears I am often one step behind in catching the trend. Need to be quicker.  

T.J. 4-5-13, Jobs, Jobs

The much anticipated job report came this AM and was worst than expected, 90K vis 200K for March.
ES dropped 20 points, near 1.5% initially.

I entered a mini SB short on O/N break down and pull back to yesterday's low ledger. 1 tick heat to my entry. On the other hand, my corn entry was quiet the opposite. I kept changing my prices and it missed it by 1 tick. Then I had to wait for the overnight to break and pull back which is about 7 point lower. Wheat is going up and help hold corn price. It could provide a double bottom for corn. Will wait for next week to see how the grain market work. It may come to a bounce since it has gone down so much. All three grains closed firm today.

TJ 4-4-13

The markets were up over night and at open. It's b/e at noon after Ben's speech.  It's choppy so far and trading at lower side of yesterday's range. Looks like the market is just marking time and waiting for tomorrow's employment report. All 5 of my ES Sim trades were losses. Stop doing it now.

Corn and soy bean broke down at noon. My mini corn got stopped out and my pull back entry has not been filled so far. Missed my entry by 2 ticks. Have a SB short waiting as well. It looks like the train left without me. I am fighting my emotions of chasing them. There is always another set up and need to be patient.

ES breached overnight high and now is testing its low. All of my ES options have not filled yet. I will have to adjust my target in the afternoon to reduce risk of tomorrow's report.

I was only able to get out the 1500 weekly put and made some profit out of it. The others seam ok for now except the 1490 put with two week time left. ES is parked at middle at end of the day. It's ready for tomorrow's report to go either way.

TJ 4-3-13

Today was the first 1% down day and ES closed below 20 SMA since Feb 25th. The North Korea nuclear threat made people nervous. Perhaps large investors are taking profit before Friday's job report. Is this the beginning of April effect? Funny how things come together at such timing.

I sold some ES options earlier today thinking it was a small pull back. Until this afternoon I realized the selling was serious with NK news. Some of my weekly options look OK with expiration date coming soon. The two April monthly options are under water now. I was too eager to get a position in at two weeks out.
However, I learned not to revenge by adding to the same position to average down. Rather I took another far out of money position to off set the old positions. Remember to plan risk control.

I anticipated NK could be a risk factor yesterday. The news came out a bit late. FT's group got hit this morning too. It's an abnormal day type.

Corn didn't move much today. I lowered my corn target wanting to get out. Tomorrow's export report should provide some price movement. I will take a small profit or loss to exit out.

TJ. 4-2-13

I can't believe it has been 6 months since I blogged last time. Trade journal really must be part of my trading business. It's for my learning, improving and succeeding in this business. The process will help me to review my trade setup, studying emotional issues.

Corn futures dropped over 11% during the last two sessions (3-29 & 4/1). I entered a counter trend trade at over night low of 643.5 using mini contract. I misread the over night high due to my Ninjar charts' different start time. However, there is no clear setup even if the o/n high was broken. I guess I was eager to get some kind of action since I haven't had any futures position for 4 days. Greedy is also kicking in trying to catch a bottom bounce. My thought was the RR of 2.7 is attractive with risking $120, but the odds is not high. At mid day now, the grains are pushing down and testing yesterday's low. Looks like a bear flag pattern and 123 move are playing out.  I will have to take a stop if corn breaks to a new low. I forgot the 3 day rule also. It's not a right win even if this trade is saved.

I am in ES futures options now. They are additions of my futures trades. I feel that I am more suitable to swing positions than intra-day trade.

My corn has not been stopped yet. No other event today. S&P has set a new high. No fill for my ES options.