Hi Fellow Traders:
Today’s blog is about the things you can’t help. Personal stuff – kids growing up; eldest daughter started Basic Training for the air Force today. I am proud of her but also a little aprehensive as a dad. It is hard to let her go. But she is now in the hands of the US Government. Sent youngest daughter to her first week long camp this weekend. She was soo excited, her mom and I were puttingon the brave face, but it was hard to leave knowing we wouldnot see her for a week.
Trading stuff –
This week I put on a trade in the NDX index on Wednesday afternoon with literally no time to spare in the market. Right at the close. I went through the formula we havve been walking through for the past weeks. The trade had a 96.2% probability of success in the Trademonster calculator which always comes in lower than the Optionshouse calculator.
Then Thursday came along and my almost 3 Std Dev cushion went away as athe day went on. The first big hit was the Spanish Finance Minister coming out saying that Spain would actually need almost 2x what he said they would need in a bailout two weeks ago. I handled this piece of bad news. The market went lower by about 30 points, but I had a 52 point cushion, so my trade was still good.
Late in the day Moody’s said they would drop the ratings of several big investment banks around the world. This is the jolt that my trade couldn’t handle. After this NDX went down about another 25 points. During this slide my trade became a loser.
Now I was able to get out of my trade and make another that recovered part of what I lost, but I did take a hit. The point I want to make here is that sometimes as traders we can do all the analysis and work and research and still end up on the losing end of the trade. If Moody’s makes theie announcement at the same time Friday instead of Thursday my loss would have been a gain. If Spain had anything close to their acto together I would have been ok. I went through all the steps in the model and had a good trade with all the data I had at the time.
Here is the trade I initially did – you guys take a look at the chart and see if you would make the same trade.
TRADES
NDX 2575 Put $2.56
NDX 2550 Put ($1.21) This gave a Net Credit of $1.35 or 5.4% ROI
Paper Trade
Last week we put on a paper trade looking at the longer time frame using the full time for the weekly options. If this trade was a real trade is would have been successful as the SOP (Sprecial Opening Price) was 2566 for the NDX. This is one of those woulda, shoulda, coulda moments. I identified a trade that would have been successful, and thus avoided the loss I took. Here is the paper trade that was a success fule trade:
NDX 2475 Put $4.80
NDX 2450 Put ($2.30) This will give a Net Credit of $2.50 for a 10.0% ROI
Again this is a spread with a $25 difference. This gives the difference in ROI and Net Credit.
I found another one of these long term weekly trades and hav eput on the paper trade as follows:
RUT 800 Call 7.45
RUT 810 Call 4.95 This can give a Net Credit of $2.50 or 25.0% ROI
DISCLAIMER: Hashley Capital Management, LLC; as well as I are not giving any trading advice. All data is historical in nature and is intended for use as an educational tool. Trading in options is risky and can result in loss of capital. There is no attempt to sell any brokerage services or act as a broker or dealer by Hashley Capital Management, LLC. Any forward looking comments on this blog are not attempts to solicit business for Hashley Capital Management, LLC and are the opinion of Hashley Capital Management only. If you choose to follow the same path and invest in the strategies and trades used by Hashley Capital Management, LLC after doing your own due diligence, that is your decision and yours alone.
Reach me @:
Email: hashleycm@yahoo.com
Twitter: @awagel01
Or leave a comment on the blog
TTFN
Ash
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