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It ain’t called catching, its called fishing


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It ainít called catching, its called fishing

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  #201 (permalink)
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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Posts: 1,303 since Oct 2013
Thanks: 824 given, 1,385 received

Scalped some Nikkei Leverage 1570.T yesterday in the afternoon session, pure FOMO trade, just for the fun of it. In at 14,130 out at 14,572.

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  #202 (permalink)
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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Posts: 1,303 since Oct 2013
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QOTD: "One of the dictates that life enforces is this: 'You have to do the things you donít like in order to do some of the things you do like.' Itís the vig or commission that life extracts as a payment for living. Donít be fooled as to the ratio. Itís not an even-money bet. Nor is it 6/5, 3/2, or even 2/1. In reality, the ratio is closer to 5/1. You do five things of labor, and life, in turn, gives you one event, one luxury, one ecstacy. Itís neither fair nor unfair. Itís simply the mathematics of life. The understanding of this law will dictate both the amount and speed with which you realize happiness. The foolish and the ignorant are forever trying to cheat life out of its vig. The result is a stacked deck against you as you compound poverty and unhappiness to the hand youíve dealt yourself. Not one man has ever changed one letter of the laws that enforce life as we know it."

--from Poker, Sex & Dying_ Inside the Mind of a Gambler - Anderson, Juel E

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  #203 (permalink)
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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Posts: 1,303 since Oct 2013
Thanks: 824 given, 1,385 received


I've dialed back the vol products trading. Very hard to make money with our style of swing trading in this market -- too much lag with the indicators. I am a little surprised to see UVXY up above 50 for weeks on end. This only happens in about 10% of vol spike instances. But we need to remember that, hypothetically, UVXY was elevated for three months durin the 2008 event.

My other short premium options trades are working out well, mechanically putting them on and setting the software to close automatically at 45% max profit. Have scaled back to very small size for the time being.

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  #204 (permalink)
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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Posts: 1,303 since Oct 2013
Thanks: 824 given, 1,385 received

I have a new checklist I prepared for options trading, and I have started using it in conjunction with journaling my trades. Half of the items on the checklist involve filling in things like strike price, POP, etc., and half are involved with assumptions or psychology. I've tried to do this before but could not keep it up, now it's different. There is a different level of motivation. If I have to fill out the checklist, it forces me to think very damned carefully about the trade, even if it is just a one contract. Which is the size I am trading now.

I have changed my perspective on this trading project, too. When I first started, I was full of belief that I was smart enough to be successful immediately. The market has kicked my ass numerous times since then and I expect it to continue to kick my ass. My new perspective is that I should expect it to take five years to become consistently profitable, and that I am really only about halfway through that timeline. The most important thing is staying alive, staying open for business long enough to learn the lessons that I need to learn.

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  #205 (permalink)
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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Posts: 1,303 since Oct 2013
Thanks: 824 given, 1,385 received

Report on my progress as beginner options trader

I don't like trading the checklist, but I am forcing myself to do it. My feelz don't matter.

Upon entry am setting the platform with GTC sell orders at 50% of max profit and letting the platform automatically close the trades. This has been working very well for me, mainly because I can't stay up all night to trade the Chicago market, and also because I have a tendency to be indecisive about closing trades when they are becoming profitable. IDGAF, I want the trade closed as soon as it touches 50% period.

Portfolio management. Starting out this year I did not know squat about portfolio management, wouldn't have known a delta if it bit me in the ass.

Now I have on four super-liquid core positions, QQQ, SPY, TLT and VXX, and we are beta weighted to the SPY and delta neutral with a slight short bias at -17 deltas, all on November expirations. I am slightly over 50% deployed.

So the market can go up down or sidewise IDGAF, bring it on, I am going to collect theta. If there is a big move down I have plenty of dry powder for some UVXY, etc.

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  #206 (permalink)
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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Posts: 1,303 since Oct 2013
Thanks: 824 given, 1,385 received

Made a very nice little 2049.T (XIV) overnight trade, in at 9040 and and out at 9800. VIX related indicators are still negative, so I could hold the trade but I decided to take a profit.

Then I did something I have never done before, I drew some profits out of the trading account and took the wife and daughter out for a very nice lunch.

Then I made them sit there as I explained the trade.

They don't really get the idea of volatility products. For them, stocks are for companies like Apple or Starbucks.

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  #207 (permalink)
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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Posts: 1,303 since Oct 2013
Thanks: 824 given, 1,385 received

My TLT position closed at 50%, and then all my other positions were up on the last day of the month, except VXX. So, I am short QQQ and SPY, long FXE and UNG. Also short call spread UVXY. Cash position in XIV. Long BTC. Which has had a monster run.

This October has been the best month for me in PL terms since I started trading. Best overall and best single trade. This is pretty counterintuitive. Or I guess it goes against the Gambler'a Fallacy in the broadest sense.

That is, during the summer I was expecting us to coast through August serenely then hit some severe turbulence in September or October. Instead it happened in August, and September and October turned into a crash upward.

One thing that has really helped my options trading has been these GTC at XX% of max profit sell orders. I set the GTC order at the same time as I enter the position, then just sit back and forget about it. This really helps me to stay mechanical because I have a tendency, out of greed or whatever, to dither over when to manage the winner.

Take the case of AAPL earnings the other day. I haven't done too many earnings plays but I know the drill, open at 2 pm before the announcement and close at market open the day after. So, the day after, I can see that everybody is closing at 9 and I am sitting there like a jerk thinking, "AAPL has got to go up more. So I will just hold it." Then some sense came over me and I just put the GTC order in and forgot about it. IDGAF.

So then AAPL heads up and my 50% target is hit and the order closes. Great. That's money in the bank. And then AAPL heads up a lot more and I realize I would have made 100% on the trade if I had managed it by hand. And then I feel myself starting to rationalize over this. But IDGAF because I did it mechanically, perfect execution, and that's goddamn money in the bank.

And it gets me to thinking about the one UVXY order last summer that got away from me. Really fantastic setup, trade was immediately profitable at about 25% and then on one day it touched right at 50% but it didn't close automatically. Because I failed to set up the GTC order properly, just plain poor followup by me. I could have and should have gone in at that moment and closed since it had hit 50%, which was the original criterion on the trade, but instead I got on the hamster wheel and decided to ride it out to the September expiration. And then it went from a 50% profit to a 100% loss just like that.

My takeaway is that whatever I can do to stay mechanical I should do, because my emotions suck and my thinking sucks.

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  #208 (permalink)
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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Posts: 1,303 since Oct 2013
Thanks: 824 given, 1,385 received

First time to trade earnings with options this past week. Very nice wins at 50% max profit AAPL, SBUX and FB and then a stinky loss on an iron condor in TSLA. So that's 3 to 1 and I am up a little money on earnings.

Otherwise, I was perfectly positioned to trade this monster rally in Bitcoin this week, I already had a decent position on when the parabolic action started since I had been riding the trend already. I took a profit of about 25% on the position then reloaded and took out another 25%.

Then flipped it and scalped a small win on the way down. First time ever scalping to the downside intraday on a monster decline.

Beautiful damn trading, gotta pat myself on the back. Was euphoric about the way I traded. Resisted the urge to get too big, kept a lot of powder dry, it was just all good.

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  #209 (permalink)
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
suko's Avatar
 
Posts: 1,303 since Oct 2013
Thanks: 824 given, 1,385 received

Goals for 2016:

For my options trading account, I started off with $2500, just for learning purposes. I learned a lot and that I can do this.

For 2016 I am going to ramp up the capital to over $25K so I can get around the pattern day trading rules. Not that I want to engage in day trading per se, because after all my strategy is based on six to eight week durations. After I develop more skill, I am going to work on getting the account to Portfolio Margin and Tier 3 options.

Now that I am past the rank beginner phase, I am going to target 1% profit per month. I want to believe that I can do 3% but I think a reasonable expectation at this point is closer to 1%. So, on a $25K account I have to make $250 a month. Doesn't sound like much.

I also want to set a goal of putting on at least one trade per day, so that would be north of 200 trades for the year. The more the better. Not just vol products, which is my inclination (since I feel more confident about my directional assumptions), but everything on the board that moves. I am going to have no more than 50% of the net liq in positions at any time and I am going to keep it to within a range of 250 deltas long to 250 deltas short. For the sake of argument, let's just say that I would prefer to be short 250 deltas in 2016 than long. If I can hold to that I will know I am making some progress.

As for trading the vol ETFs in the cash market, three of my accounts this year have exceeded expectations, about par for the course for volatility traders. So I know that I am in the hunt, I may trail the pack some but I am in the hunt. One account has done poorly, but I know what went wrong there and the problem is fixed. So, for 2016 the plan is to get a lot more mechanical and rules-based and target 10%. And trade smaller. Less frequent trades and smaller trades.

Also, for 2016 I am going to really focus on learning how to manage a portfolio. Up to now learning the focus has been on learning how to trade and about price action, but I have been confused and ignorant about how to run a portfolio.

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  #210 (permalink)
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
suko's Avatar
 
Posts: 1,303 since Oct 2013
Thanks: 824 given, 1,385 received


Gee, that was a fun week.

My contrarian commodities options plays came in: copper, silver, gold. I love it when the contrarian thing actually works. It's like going to therapy for a year with nothing changing, then suddenly one day something in your life clicks. Contrarianism is painful therapy for my terrible FOMOitis. I don't like it one bit. I want to get out there and run with the big dogs.

Speaking of running with the big dogs, this week for the first time I stayed up late following the New York markets and actually got into the melee in the cash market "attempting" to scalp UVXY during the move on Thursday like the day traders. So the FOMO is still alive and beating inside me.

I need to acknowledge that this is part of my wiring, and keeping it under control is going to take continuous work. But it can be done, because I observe myself most of the time making the sort of conservative, well-set up trades according to the rules, the sort of trades that I want to be making. So, we will have to keep working on this.

Progress not perfection.


Risk Management

I took a hint from something I read and decided to get a trading partner to conduct regular risk management reviews with me, to keep me on track. Staying vigilant about risk management is not my forte, and I need to be upfront about that and institute a system for dealing with this weakness in my business.

We had a first meeting last night and I laid out on the table some of the failures and successes from 2015, and now we are going to institute a system of accountability for next year with regular reviews of trades and positions, trading plan, trading rules, and so forth.

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