April 30 Trade Log — SPY Swing Trade
The markets had a strong rally yesterday, April 28, after leaving a gap in between trading sessions and continuing an upward trend throughout the day the S&P 500 ETF that we follow (SPY) gained around 2%, from tuesday’s close to yesterday’s it gained around 7–8 USD, the trend didn’t change in the after-hours, instead, the fear of missing out on the rally kept the stock trading high afterwards.
We discussed our strategy for today’s trade and we all agreed that we had to go LONG on whatever contract we would buy, we had seen the profitability of SHORT trades compared to LONG and the difference is clear, if we swam with the current the odds would be in our favor. Because we trade option contracts, we use underlyings that trade with high volume, this makes it more likely that it will have a large options chain or at least a chain with high liquidity and we also look for volatility, if there aren’t any major price fluctuations or it trades at the same price then the probability of a profitable trade, long or short diminishes.
We had the following stocks in mind for today’s trade:
- NVIDIA Corp. (NVDA)
- Advanced Micro Devices (AMD)
- Western Digital Corp. (WDC)
- Micron Technology (MU)
- Applied Materials (AMAT)
- SPDR S&P 500 ETF Trust (SPY)
We were looking for stocks that had a long term ascending trend since the lows from March, all of these passed that filter. Since it had been a really positive day, we were expecting a drawback, and we wanted to take advantage of this and buy cheap.
The day started off and the most promising seemed to be once again the SPY, it has a highly liquid options chain and it was making a promising correction, perfect to buy at a low price. Including the pre-market hours the day had already defined a descending trend, lately these downward rallies are of about 2%, more or less. Early into the session, it started to pick up a little bit and tested a resistance, it had bounced off from a -1.62% support so I was scared that it would be the days lowest, we bought a SPY July 17 2020 297 CALL at $11.84, the trade took place as I was adjusting the BID for a better price.
Without a doubt we entered at a high point of the day, the fear of missing out got to us and didn’t want to be left out so we bid early.
The trading session closed at $290.48 which favored our contract but the aftermarket reached lows of $286.20 which still fits for the frame of regular negative rallies. The market had a similar behavior to the end of last week a strong selloff continued by a further descending aftermarket so we were not startled.
Tomorrow we are able to day trade, so we will hold the position respecting our swing trade plan and see if we can profit from an intraday movement.
