Weekly Review 8/30/14

This will be a combination of weekly and monthly reviews since it is the end of August.

It was a small profitable month after two big losing months. It gave me a little breathing room. However I am not out of woods yet. There are many positions out there from Sept to next Feb in grain complex. Their outcome are still unknown.

I am more cautious and patience now after the losses of June and July. Over confidence is the sign of trouble. Be humble to Mr. Market.

Be ware of out of balance portfolio. I just notice the other day that I have more positions in soybean than in wheat and corn. soybean is the one with higher margin and more bearish trend. I will stop selling soybean options after my current positions expires. I kept fighting for my losing positions which will lead into bigger holes. I should be willing to accept losses and walk away. There will be other opportunities along the way.

Be willing to take stops base on my rules to minimize my losses. I seam doing better in indices than commodities. I have learned each one the hard way.

Be clear with the size and risk levels with direct options hedging strategy. I took some loses in August during the consolidation period. I wasn't clear how many contract I should enter to offset my other positions.    

A Long Weekend Ahead 8-29-14

Traders are re-positioning and taking risk off before the Labor Day long weekend. ES had a V shap day. I caught a pull back in the morning.

Grains reversed from the gains of yesterday. I am not sure if it was an retest low before pushing up or an resume of the down trend on starting of harvesting in the south. I exited some puts in corn and wheat ahead of the long weekend and avoid further decay. I will add soybean puts next week hopefully with a pop up.

Ukraine Tension Is Back 8-28-14

Apparently Ukraine and Russian leaders' talk broken down this morning before RTH. Market had a small sell off to close the gap made on August 25. I moved 5C on my ES order and missed the entry. Bulls are firmly in control and pushed ES back into yesterday's range before closing.

Wheat shoot up on Ukraine tension again. It closed above last 2 weeks' highs. Corn and SB made gains today as well. I sold one set of Dec 420 corn bear calls and rolled one Dec 570 bull puts to March 540 to reduce delta and avoid the seasonal Oct low. I may have to sell more bear calls on corn and exit some of my direct puts tomorrow before the Labor Day weekend. I am too directional heavy in puts with corn and wheat.

Holding Up 8-27-14

Indices are holding up well. ES has been in small ranges in the last four days. It looks like a compression ready to pop on way or another. The pattern of new highs and sell offs may not repeat itself this time. Market may try to show its hand before the labor day long weekend.

Grains are in a holding mode too. All of the three majors tried to retest yesterday's lows and held. There are no major news or catalyst affecting the market but the bearish trend is still in tack.

Another Try of 2000 8-26-14

ES made another high over 2000. It reached to 2002 then got pushed down but in a small range. Bulls are in firm control and bought every dip. RUT had an impressive gain. It looks like playing a catch up as ES and NQ making new highs. My bear call of RUT 1180, 1185 of this week are threatened now as RUT close at 1175.2 today. I may have to take them out if we get another push up tomorrow. RUT is a little over Fib 62 RT now. I had two more RUT bear call credit spread filled further out at 1205 and 1215. I will try to make them Iron Condo on a pull back.

Grains opened low today. SB made a new contract low of 1020. Both corn and wheat tested their multiple bottoms and bounced before closing. The thought of a later bounce did cross my mind earlier. I sold some bear calls on soybean and bought puts in wheat and soybean too. Are these bottom testing indicating a short term trend change or consolidation? According to the seasonality it's a consolidation period until later September. I need to be more patience. Waiting for another catalyst, such as August's Crop report on September 2nd.

SPX 2000 8-25-14

S&P breached 2000 mark for the 1st time today. It's a much anticipated bench mark. ES only got to 1999.75. The up trend is not done yet. But we may see a small pull back. I sold a bear call of 2030 two weeks out.

Grains resume their down trend today. Soybean and wheat lost over 1%. Corn is holding on a thread. Ukraine is quiet. No any bullish news so far. I sold one set of wheat calls and legged down to 900 and 880 for soybeans for Dec and Mar. CME had technical problem and delayed open last night. I couldn't get IB options quote at all.

Weekly Review 8-23-14

This past Friday was the commodity options expiration week. So far my grains options stopped bleeding. I had only three rollover of wheat lost about $3.2K but made up by future premium credit for the time being. Not counting this rollover this is a $2.3K profitable week. This week's profit mainly came from bear call hedging, VIX and ES. I earned it the hard way: using many small wins to cover bigger losses. The result of not taking stops according to my rules of stop loses.

I also made some roll downs in Dec grains to lock in partial profits during this consolidation period. I am improving my trading techniques in small steps.

The key lesson of this week is still risk control in a different prospect. Hedging is part of risk control. Couple weeks ago the grains futures were crashing liked the end of the world. I bought many puts to hedge my losing positions. Especially for corn I was totally in puts for the next 3 months. It looked so bearish that I was certain these puts would pay off a large portion of my losses at least. The thought of hedging did come cross my mind but I didn't form any action plan until the WASDE on Aug 12 without another sell off. It approved that there is no 100% certainty in trading, only probability. Therefore hedging risk must be a part of position. When ever I am so sure about the market direction and my positions it's the time to hedge my "certainty". Since there is no certainty in trading before a position is closed the rules of taking profit and stop loss need to be followed strictly.  Buffet's rule of "never lose money" should not be considered in one trade, but a strategy and a portfolio.

Topping? 8-22-14

ES had its first red day in the last 8 days. Although small bulls looked a little tired. Central Bankers are having their annual meeting in Jackson Hole, WO. Yellen's talk made the market drop and pop. I sold 2 bull puts, 100 pts OTM and three weeks out in a small pull back this morning.

Grains moved up in small range. It basically is still in consolidation. I sold one set of Dec 710 bear call. Corn and soybean didn't have fill. I also took out a set of Oct 520 puts as it's near 50% value left. I will buy it back at different strike. Wheat closed weak today. It's very much affected by Russia/Ukraine tension.

Waiting for My Time 8-21-14

ES closed on new high of 1989.75. The market is on steroid now. Buyers step in on every dip. I am waiting for a sign of exhausting, BB or Fib target to enter my bear calls. RUT is still legging. My Iron condos look alive now. But anything can happen. There was an reversal bar in hourly chart today. If the majors' new high don't get sold off RUT may catching up too.

Grains are still in consolidation mode. All of my Aug grain options are closed with a net loss. I am adding bear calls and buying puts on pops for the major low of late Oct base on seasonal.

Marching On 8-20-14

Indices marched on towards new highs. ES is only 16 points to 2000 now. I sold a bear call of 2010 for next week. My expectation is to see a sell off after a new high if the past pattern repeat itself. A better timing may be after a new high is made.

Grains explored lower again today on Pro Tour of fields. Overall they are still in a holding pattern matching their seasonality.  The next USDA progress report may give a better picture of grains yield. The general expectation is to see a better yield which is bearish for grains prices. I need to be more patience. The next shoe drop may be in mid of Oct according to seasonal of grains.

Melting Up 8-19-14

Indices are melting up. Nasdaq made a new 14 yr high to 4527. Russell is the only one legging which I am in an Iron condo. I will roll up if it gets close to 1180.

Grains consolidated as they are near expiration of August. I continued to take losses on my direct options. I didn't do well with those direct bets. Need to roll in and scale out. Seasonality is pointing to a consolidation and slightly up.

Monday Again 8-18-14

We got back from UNC yesterday and I didn't do my weekly review this weekend. ES gaped up overnight. It looks ready to challenge the high of 1895.75 made on July 24. I added my RUT Iron Condo on the bear call side of 1185/95. It may be still too early. I will roll up if it gets too close. No trade in ES today.

Grains came down today on favorable weather and growth rating. Corn formed a bearish engulfing today. It could resume the down trend soon. Soybean and wheat had a inside day and a IHS on daily short term. Wheat is on edge for Russia/Ukraine situation which is quiet today. Is the trade waiting for another shoe to drop?

Options Expiration Day 8-15-14

It's stocks and indices options monthly expiration but not commodities expiration day. All of my five ES bull puts were winners. I had to take stop losses for some of my grains direct options. A lesson learned. No matter how confidence you are about a trend and trade there should always be risk control rules and an exit plan in place.

Indices dropped on Ukraine attacking Russian convoys inside of Ukraine this morning. A morning drive was interrupted and later recovered. I didn't get any fill on this p/b. I wasn't eager to get in either when the situation wasn't clear. I don't want to have new exposure over the weekend.

We are taking June to her college this weekend.

Grains Up Again 8-14-14

Grains are up near 1% today. They got some signs of life now. It looks like that they are following their seasonality.  Corn is challenging last week's high at 20 day SMA. It has a decent low of 348 from USDA report. Soybean is harder to read since next three futures contracts are very close in terms of prices. Now the demand may stay strong. Wheat is still in down stair steps. I got couple bear calls in corn and sb today.

Indices are up but in a consolidation mode. ES closed at Fib 62 RT from top but now sign of selling at this level. We may see a gap up to fill a old gap from 7-30 tomorrow. I tried to sell a bear call at 1990 for end of Aug but no fill. I won't chase it. Fib 78% may be the next level to fade it.

Tomorrow is regular stock option expiration day. We could see another choppy day or wild day.

The Same O' 8-13-14

Grains came back to retest lows of yesterday. Wheat and soybean broken yesterday's lows but corn had an inside day. Over all, the down trend continues. I am some what late to exit my this month's direct options which will expire next week. I am still not very good at trading directional options. I am trying to break even on my overall options for this month.

Indices kept moving up. I am safe with all of my positions now. I will close my 1830 bull puts in S-5 tomorrow.

Don't Be Too Sure 8-12-14

As I suspected yesterday I was too heavy leaning to short side before WASDE. The report was close to traders' estimates. Corn came out even slightly bullish on production rate. Prices didn't go down as much as I expected. All of my puts targets didn't get filled. As the pros often say, the numbers are priced in already. Corn closed up 4 cents. I bought a Sept call to hedge my positions. I will re-access market and my positions. Always remember to have protections and expect unexpected. There is nothing for sure in trading once I am in a position.

ES held up well between Fib 38 and 50RT. Bulls may challenge the above level again in next couple days.
I dipped in a bull put of 1830 for Aug 29.    

Positioning for USDA Report 8-11-14

The much anticipated USDA WASDE August Report will be released by tomorrow noon. Grains auctioned up and down in a relatively small range. I read a High Tower's report regarding the WASDE numbers. The tune is fairly bearish. Based on the report's price outlook and trading strategies, I bought puts in all three grains. I also added one each to my under watered directional puts which I entered earlier. I got filled 9 puts and 3 rollovers. I started to realize that I may be too heavy on put side. I don't have any calls other than those bull puts, to protect myself in case there is a upside surprises. I may consider to buy couple of calls in wheat and soybean tomorrow. Most High Tower's trading strategies are spread.

ES reached a 50% RT on daily today. Is there going to be another sell off base on the Fib level? Based on the past pattern and current trend it's not likely but possible with a push down. I may add bull puts if ES gets another pull back.

I will be focusing on grains before the report. If they are turning down again I will have to wait 1-3 days to see how bad they will get.

This Week In Review 8-9-14

My result in the week of August 4-8 is flat. I had only three ES bull puts for this weekly expiration. One which I gladly and rightly took stop out and one took a b/e. The last one had a 100% profit.

In the grain front, while waiting for Aug 12 USDA WASDE report I have been mainly adjusting my positions. Selling on the pops and rollover current month underwater positions. It looks like there may not be a pay out for this month either as grains continue in bearish trend. Near perfect weather is the main factor for now. Corn has a clear direction and expectation of down trend. My positions are 100% bearish. I may consider adding some calls of Nov, December bullish options after early Oct seasonal low. My positions in wheat are mixed. I have many bull puts resulting from rollovers. I added couple of puts and sold some bear calls. Some of these bear calls I sold are underwater due to my chasing. I will prepare to take stops for my Aug positions if the USDA report boost wheat price. As for soybean the next 3 futures prices are very close indicating a flat to downward trend. On the other hand the demands appear very strong from China. Would Argentina's debt default cause the farmers there to dump their soybean? Right now my main reference is the seasonality trend. I may continue to rollover my positions to end of this year or early next year for a new plating season.

As the volatility has increased dramatically as geopolitical events develops and grains in a waiting mode, my anxiety level escalate. I have been going to sleep very late, say 3am. To avoid the tiredness and emotions affecting my judgement I need to keep a cool head and make sure to go to sleep before 2am or better.

A Bull Engulfing After A Bear Engulfing 8-8-14

A wild two day swing for indices. ES had a bear engulfing yesterday. It dropped further after Obama announced authorizing air attack ISSI in Iraq. I thought my IWM was going to be a big winner. This morning when I woke up ES was up 20 pts from last night low of 1890. It looks like I don't have to take stops for my next week's ES.

In the grains' front, corn and wheat had over 1.5% drop on supply concerns. Soybean was supported by strong demand. It closed at day's high. My hypotheses of small range day didn't play out. Of course my plan of buying puts on a up or range day didn't work.

NG popped 1.5% to the break down point. It looks like I was too eager to get in yesterday. I may leg it up if it break out early next week. The seasonal trend is down and I will wait to see if it plays out with seasonality.  

Increasing Uncertainty 8-7-14

Indices had a head fake after taking out overnight highs in the first hour. The selling was measured and made a new low of 1900 before closing. I had two entries at noon after the double bottom bounce. They are appear to be too early. The sell off may not be over yet. There are geo-political uncertainties in Russia/Ukraine, Middle East. ES Fib 50% RT is at 1888-ish. I will take stop for my S5 1880 put by Monday if no turnaround by then.

No major changes in grains. It appears in holding mode for next Tuesday's USDA Report. I had a rollover in 570 wheat from this month to 550 next month.

Grains Up Again 8-6-14

Grains are up today on Putin's ban on importing grains from West, strong demand of proteins and Ukraine tension. Wheat gained 2% and made some of my bear calls under water now. I am watching the change but sticking to my down trend bias for now. I bought  one more put for corn and wheat and sold bear calls of Dec corn. I have 2 rollover of SB and wheat pending.

ES had a major push this morning but gave back half of it by closing. It's back in yesterday's range but hourly down channel is in place. No fill in this front but ready to take stop if we get another leg down.

News events risks are high and be on the look out.

Tuesday Turn Around 8-5-14

Indices turned downward today. It appeared the pushing down was a inside day with a retest of Monday's HVN. Then the news came out in early afternoon that Russia increased its troops in Ukraine boarder. ES broke Monday and last Friday's lows. It closed below yesterday's low and right at daily Fib 38%. It's hanging on a thread. A Fib 50% RT is at 1889. I am glad that I took the stop of 1910 yesterday. Otherwise I would have to take a much bigger loss. Following rules have its reward.

Wheat had its fifth up day. I roll over 580 bull puts of this month to March 15, $550 at a 1:2 ratio. Also sold 2 bear calls for Oct and Nov based on seasonality. Corn and SB had minor downward skew. Weather forecast for next 2 weeks is favorable to grain growth which put more pressure on grains prices. Trades start to setting up for USDA report on 8-12. I will plan for position adjustments. More rollover may be needed.  

Monday Bounce 8-4-14

Indices bounced today. ES tested overnight high and low, then moved higher. It's still below BBM and less than 50% of Fib. I exited out my 1910 and S-5 1900 bull puts with a small loss and b/o respectively. Regardless which direction the ES moves this week. I followed my plan and didn't hold and hope.

Grains are green today. My plan was to fade the pop and position puts. Too bad I only had a partial corn bear calls. There is going to be another USDA report due on August 12. The general consensus are bearish with bigger production estimates. I need to plan some exit and rollover before it.

The Review of July - The Draw Down Continues

July turned out to be another losing month in grains. Weather has been perfect for grain productions in most of growing regions worldwide causing grain futures dropping continuously. Many of my bull puts from June required rollover in addition of June's rollover. My thoughtless entrances of soybean and corn in June and add on proven to be disastrous on top of wheat losses. The total loss was $19,700 offset with some small gains in ES and CL. Some of my bear calls and puts in grains helped some but were not enough in size. I still haven't figured out the ratio of hedging.

The right things I did:
1. Stopped fighting the trend in corn, wheat and traded with the trend. These bear calls and puts buying made $7000 to offset the losses. Otherwise my loss would be much bigger.
2. Being more patience. I didn't rollover immediately after taking losses. I studied the seasonal trends and decided to wait for prices to come down further before entering my recovering orders. It's hasn't been good timing but I think it has saved me some further losses or better entries. The down side of it is that it may take me much longer to stay in these trade thus increasing my risk and cost of carrying such positions.
3. Less emotional. I recognized more of my urges of fighting the trend and making up my losses. It's the human nature to react to threats and attacks immediately. In trading it requires to think and react them differently. Winning and recovering can be achieved from opposite directions.

The mistakes I made:

1. Not following rules. I continued to use add on despite my updated recovering procedures in June already limited this strategy in commodity options. In my reasoning and calculation such add on is not effective and often leads to bigger losses in a clear trending market.
2. Not taking stops as plan required. The losses of this month could have been much smaller and manageable if only I took stops as my trading plan required. Instead I let it run much deeper and thinking I could add on to such losing positions.
3. Lack of continued learning to improve my trading skills and knowledge. I used to take webniar or recording several times a week. But I haven't done so for several months. I haven't even finished the Option Selling book which I ordered at the end of last year.

Those are the areas I need to correct in August. Remember: If I keep doing what I have been doing I will keep getting what I have been getting which is big draw downs that wipe out my entire gains of months and years. Am I willing to be successful in this business?

No Bounce 8-1-14

Indices took a breath after yesterday's 2% drop. ES tried to get back into yesterday's range but got pushed out every time. It closed outside of the daily BB lower band. I tried to close my positions of 1910, 1900 bull puts but no fill. I may have to take bigger losses Monday if it's still not bounce. One of my RUT credit spreads is under water now. I tried to take a stop loss. I will try again next week. Now I realized that following my plan and discipline have their rewards. I planed to close my RUT the day before FOMC. I only had Etrade position closed with a small profit due to a miscalculated entry. Also I did right on closing CL bull put last week with the concern of the expiration date was a month away. CL has come down a lot and my $95 bull put would have been under water.

In the grain front, corn and soybean (Nov) made new contract lows. My yesterday's  SB rollover  entry looked like too early since SB was down 20 points today. Wheat went up to challenge last week's high but failed to close above it. I exited out couple direct puts of this month to protect my profit.

July closed with a loss again. I will review July and last week tomorrow.