S&P 500 SPDR ($SPY) weekly puts trade completed.

Posted by Investing Freak on January 07, 2011
Market Analysis

For those new to options, a call is a bet that a certain stock will go up and a put is a bet that it will go down. So by buying a put option in this post I was looking for a move lower.

At the time of this writing I have taken a 56% profit after commission on some weekly SPY 127 puts that expire today. Entered in at 0.16/contract and exited at 0.28.

As you will see in the chart included, I have placed my entry and exits with yellow stars and my ideal target exit with a green star. The yellow dots in between some of the candles are times where I created an order to exit the trade and cancelled. I wanted to exit twice when I had generated 20% profit and once when I had over 25% loss.

(Click Chart to Enlarge)

My Entry (first yellow star) was just where I wanted it (below the daily pivot). I am still working on my exit execution and controlling of emotions. I usually write out how I feel about the market action or trade via either sharing with another trader via text, chat, twitter etc. When those aren’t my preferred choice I write it down on a notebook. It’s not foolproof but it helps me personally stick to my strategy and most of the time a trade.

I will provide more info about the chart for the curious ones… The purple dots represent the daily pivot point. The red dots represent resistance levels and the grey dots are support levels. The two red lines represent yesterday’s highs and lows so I would have an idea when that tight trend that developed yesterday would be broken. Also the chart is 5 minute to show the entries better but I prefer to use 15 minutes when day trading.

This is mainly on here for me to reflect on as an online public journal, they say when you publicly share something you are more committed to keeping it (in this case sticking to my strategy that works for me and just working on getting better at exits and emotions).

Update: As of 11:35AM Eastern it looks like my ideal exit has been hit and the put options were worth 0.49 a contract. Had I executed that the profits would have been 187% after commission but that’s in an ideal world. Another influencer in my premature exit (pun intended) was that Obama was set to speak around 11:35AM and I wanted to avoid any spikes that would ruin my trade.

As of 12:50PM SPY hit lower than the second support line in my chart.  Emotions got the best of me and I did exit too early indeed (would have been 400% since my entry). Its hard to think of it that way. If i had exited at -25% loss (as mentioned earlier) I would be devastated for the day.

As the new InvestingFreak tag says:  See it, Call it, Trade it, Bank it.
I Saw the potential for a down day, Called it by texting a fellow trader (will work on tweeting realtime to share ideas), Traded it, and well… Banked it.

Make some moneyyy!! 😀

-K

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