June 1st Trade Log
Riots and tensions with China started the market off to the negative numbers, we had high hopes that we would be getting rid of our IWM PUT which we have wrongfully carried on for a while going against the market’s direction. Sadly this hope didn’t last for long as we quickly saw the day flattening out.
Since we were holding the contract a little longer to look for a better exit point and we had a little breathing space to take a decision before expiration we started discussing the possibility of reversing the trend. We do not know if we missed the ideal exit point already or if there will be another down the road so in order not to depend on one direction only we placed a trade on the contrary direction, which will hopefully in the worst case scenario, cover some of the losses for the $115 PUT Contract.
Todays lack of direction and volatility made some damage to our contract, nonetheless it was minimal.
According to our study and understanding of the chart, we bought at the bottom of the price channel, on a Bullish market, not only are we following the trend but we are also buying relatively cheap.
This contract is our biggest loser for the time being and the one weighing the most on the whole portfolio. Our other plays were either long term or still cooking, except for the F contract which we haven’t sold yet but surely will and soon since the target is quite unrealistic and we have little time until expiration.
AMD
AMD which we are still holding has been closing volatility creating a flag like formation.
The outbreak or direction is uncertain, probability most of the time favors short trade on these shapes but it is nothing guaranteed, at the end of the day all trades have a 50–50 chance to win or lose. It is not wise to enter a position betting on just one direction when this outbreaks are about to happen, the smartest way to play and profit is to use the price channel and profit form the volatility before reaching this point of convergence, since we had the position before reaching this point, we decided to hold on to the contract and wait for the outbreak.
Takeaways
We have been holding the IWM contract for more time than what is healthy or acceptable and we even rolled over the first contract for one with a further expiration date. It is not a good sign, we have attached too much to this contract, we have our reasoning and Technicals support the decisión we have taken; the stock is overbought and there is enough turmoil in the US to start off a strong negative rally but the market is extremely bullish at the time and it keeps on pushing upwards. We are not expecting a correction anymore as we were a few days ago and in fact our PUT was never bought on the thought of a correction, we were just expecting a correction on the indicators such as the RSI which has been overbought for several days now; nothing more than the usual volatility on the price channel, of course our entrance point was not accurate so we must deal with the consequences and maybe never face profits on this trade but just a reduction on the percentage loss is more than enough for us at the time.
Markets are a day to day thing right now, these are not normal times and stocks at the time are definitely not reflecting the catastrophic world we are living in right now, the aggressive correction is not natural regarding to how bad economies worldwide were actually hit, in addition the US is facing chaos across the country with protests and President Trump is menacing with using the the military to calm down the masses. As of now futures are negative but it is uncertain whether or not this will reflect the markets behaviour in tomorrow’s trading session.
