Change in plan... or a return to the original

I've been busy the last days so I have not blogged much, not too much to blog about anyway.

I was trading the Q's on the side last time around but I sent an email to our trading room mod and suggested that we consider doing this in the room for some easy trades when not much else is happening with stocks and other ETFs. Within a day or two that is exactly what we started to do so I decided to drop my personal trading, it didn't make sense to keep going with it.

We've been trading for very small targets lately which puts me at a disadvantage given my slightly higher commissions. Having said that there are enough changes and orders that do not get filled that moving to another broker would end up costing about the same anyway until I get to much larger trading sizes. So I am in a holding pattern with regards to brokers and seeing small profits in my account. Of 14 trading days in July 5 have been losing days and 8 winning. I am up but not by much more than about $600.

I have been using a formula to calculate expectancy ratios without figuring in the commissions in order to continue to track the potential of our trading. What I will also be doing is running the numbers without commissions altogether in order to get a better idea of the win loss ratios in order to determine. I was going to change my spreadsheets to let the trades reflect this per trade but I am better to just set a field to display the gross numbers either per day or per month.

The issue with the smaller commissions is not a real factor if I were trading with larger positions though. Some traders are posting profits in excess of the $500 target while I may have seen $100. Obviously they may be getting smaller commission, not counting commissions or over stating their numbers altogether. I do not want to gauge my progress against others though. I will grow the account at my pace and that is the way it will go.

Of course I couldn't help but check to see how much larger of trades I would have to make in order to see similar gains to some of those higher numbers. I would have to be trading 4 times my current sizing. I have intentionally dropped my size in order to allow for a few more concurrent trades in my account as we have a good number of trades held for swing trading now that sucks up my cash. Right now, had I my full trading capital I could run 27 trades at my current sizing. Doubling my sizing would put me at 13 trades, which is about where I would want to be.

I'll be glad when we close out those swings.... for some profits.

Jeff.

QQQQ with chart

No real tracking for yesterday, just didn't take the time.

Today I tracked the next week expiry puts (Jul 30) for the QQQQs and noted how their price reacted to the various time and ETF price factors given that today was a Friday... expected range bound day for a number of reasons.

I took one trade and tracked it until after lunch and notice one large factor that affected my decisions to stay in the trade. I bought the 45 strike puts for 41 cents as the price of QQQQ neared the Primary Pivot Point expecting a move down from that level. I should have been more observant of the moves thereafter while keeping in mind that I expected a range bound day, basically a lot of small up and down moves.

Here is the chart for the day with the correct trades marked.

I held the trade through the down, the next up and even through the third test of the high of day at $45.80. I closed the trade just as I saw the price get ready to kick up past the final test of HOD at about 1350h. My exit timing was good to minimize the loss... considering that I was still in the trade.

The interesting part is that the option price kept eroding away over the course of the day. I bought at 41 cents and each time the ETF price approached the same price level as where I bought I noticed that the option price had not regained the entire 41 cents. At one point it would only see 38 cents. This tells me that, like leveraged ETFs held over more than one directional move, the options have some similar reaction... even if it is for a completely different reason. This changes slightly how I will look at these options in future.

So, looking at the chart I plotted the trades that I should have made based on the numbers that I saw while I was holding this one lethargic trade over the day. The puts were the 45 strike and the calls were the 46 strike. These gave me low priced options in the 50 cent area.

Trade # 1 was in at 0.40 and out at 0.47, 12 contracts at 0.07 = $84

Trade #2 was in at 0.37 and out at 0.50, 13 contracts at 0.13 = $169

Trade # 3 was in at 0.35 and out at 0.47, 14 contracts at 0.12 = $168

Trade # 4 was in at 0.36 and out at 0.59, 13 contracts at 0.23 = $299

Less #133.60 in commissions leaves $586.40 in profits based on a $500 startup amount.

This style of playing is right in line with my old Counter Trend Positioning style of trading on a much shorter time frame. What I was missing was the confidence to go ahead and exit the trades when I saw the small profits and re-enter the opposite trade and again capturing smallish profits. The thing is that these small profits add up really quick as I would have doubled my $500 in one day and I have to realize that taking a 7 cent gain is not a bad thing... it just sounds to small to take at the time.

Jeff.

QQQQ index trade Jul 21 completion

Update for the day.

Trade - QQQQ Jul 23 Put 46 strike at 57 cents, 9 contracts

Exit based on neutral day with 1/2 PP stop target = 83 cents, $234 profit

Exit based on 100% profit target reached = $1.14, $513 profit

Exit based on trailing stops using 1/2 PP stops = $1.27, $630

Exit based on near EOD activity = $1.30ish, $657

Jeff.

QQQQ index trade working out well

Today was to be a neutral day after yesterday's large uptrend intra-day so I decided to track and not trade my newish QQQQ index trade plans... which is too bad. At least my plan is viable and that is the main thing.

Seeing as the market displayed a modest gap up from yesterday's close I would play the gap fade at the open to buy puts and consider a bounce to positive to buy calls if everything looked good... the calls would be a pure speculative thing and would have no real reason to play them though.

I jotted down the entry at the open for the Jul 23, 46 puts at 57 cents (the ask). Being that it was a neutral I would target the next PP level. Opening at $45.75 with R1 at $45.72 and 1/2 R1 at $45.26, that would be my target.

Once the QQQQ hit $45.26 the puts were at 83 cents for a profit of 26 cents based on 9 contracts. $234 in profits.

Not bad for a little hit and run. I am still tracking the price to see what my other plans would have produced and I am considering scaling out of positions using various techniques rather than using an all or nothing approach. ie: First half closed at first PP target, second run for trailing stops... I may have to double my trade size to make this worthwhile so I may skip it and stick with the profits (losses) based on my plans in the all or nothing fashion.

Jeff.

QQQQ index trading, charting

I miss playing with the charts to figure out trades and back testing and whatnot, so I like getting back into this again. It let's me do my own thing.



This morning I had not really formulated all of the rules and plans for trade management nor had I really thought the whole thing through. Seeing as the older option pricing is not as easy to sift as a stock I could not really work out the full potential of some variances of the trades.

In the above chart I entered the short trade, in hindsight I know why but I do not know why I did not enter the long trade instead or as well. I saw the setup, the huge gap (don't trade against a large gap...DUH!) and should have gone long where indicated. I know I certainly thought about it but I was stuck in my one trade mindset this morning.

I bought a put (July 23, 44 put) for 50 cents and held it for a 10 cent stop loss. Once the price hit the low of day the first time I recognized that it was a prime entry for a long call being that it was not only at a support level but it was immediately following a large gap down. If I had a choice to play a gap I would choose to always play it to fade the gap. I think I was sidetracked with other trading today and that is partly why I was not on the ball.

So a 10 contract trade at a 10 cent loss leaves a $100 loss.

The long trade was also 50 cents (July 23, 44 call) a few minutes earlier. I should have sold the put for a profit (9 cents or $90 dollars) and bought the call.

Following my various plans would have me exiting the call trade at 67 cents for a 17 cent profit (I marked it down when I saw it as if trading it, not just backtesting). With the 10 contract tradee that was $170.

Using the trailing stop or EOD produced the same result as it was a great uptrending day, exit was $1.35 or an 85 cent profit, $850.

So, entering the put trade at teh ideal time and entering the call trade at it's ideal time would have me netting $750, not bad for an indecisive trade after taking both sides. I would expect that there would be times where the day whipsaws me out of both trades for a loss but it would take a lot of that to eliminate these sorts of gains. I almost exited the put trade, had I had more confidence in my trade plan (newly formulating) I would have exited and bought the call. Each time that I take a profit decreases the odds of ending on a down day. Had I actually done that today I could have easily netted over $900.

Should have, would have, could have means nothing in trading other than to teach a lesson or enlighten on a tweak to a system.

Jeff.

Index trading needs some work, the plans.

I could not sit by and not place a trade on my index trading idea. I always find that putting money on the line keeps my attention to the matter at hand better than just sort of watching it. This prompted me to recall an old idea I had in taking two sides of a position in order to capture an overall move, sort of a stopped hedge idea.

I'll get to that later, or it may just be plainly obvious in a moment, or the next post anyway.

The overall idea is to trade calls or puts on the ETF using the price activity to trade with the trend and daily bias for the day using the Pivot Point (PP) and Support and Resistance levels (S1,2,3 and R1,2,3) for entry determination. I figure that using the PP would be the best but the other levels may be suitable under certain circumstances.... today for example.

Any further planning is really just guidelines to use to manage the position once entered.

Plan ONE is to use the very next PP or Support or Resistance level as a target to exit the option trade. Quick in, quick out and quick profits. Use for neutral or light days.

Plan TWO is to use the Support and Resistance levels as stops, once the price of the underlying index ETF (QQQQ in this case) passes each level the one immediately preceding is then the new stop... or move the stop as if a VTSO based on the space between the levels. Use for more heavily biased days or when the stock price takes off and allows early stop setting in profit.

Plan THREE is to enter initially and close near the End Of Day (EOD) in order to take advantage of large intraday trending moves. Sort of the default ini the case where nothing else gets hit and I want to exit to be in cash overnight... no holding these overnight.

Plan FOUR is to set a target of 100% profits. Based on the initial price of the stock I would set a limit exit at 100% of the option price no matter what the stock is doing. This is not so much a total plan as an add on to the exiting ones as I might just use this point as a stop order to secure the 100% gains and perhaps let the price run with a true VTSO (if I can do those on options...I've forgotten now). I might also consider this as a default as perhaps I should be happy with 100% gains and just get out to be out at this point every single time.

In all cases the stop loss will be set to exit the trade if the stock hits the next PP, Support or Resistance level in the wrong direction... that might be 10 cents on the option or so.

Also, I will ALWAYS use the front month (very next expiry series of options) and very close to the money. The QQQQs run $1 strikes so this is very easy.

Jeff.