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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)
 suko 
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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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)
 suko 
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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Posts: 1,320 since Oct 2013
Thanks: 836 given, 1,409 received

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)
 suko 
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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Posts: 1,320 since Oct 2013
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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)
 suko 
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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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)
 suko 
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
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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)
 suko 
Market Wizard
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Experience: Intermediate
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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)
 suko 
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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Posts: 1,320 since Oct 2013
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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)
 suko 
Market Wizard
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Experience: Intermediate
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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)
 suko 
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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Posts: 1,320 since Oct 2013
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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)
 suko 
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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Posts: 1,320 since Oct 2013
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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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  #211 (permalink)
 suko 
Market Wizard
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Experience: Intermediate
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Broker: TD, TW, IB, Saxo
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My indicators said go short vol a couple of weeks ago, and I put on a number of short vol trades following that. Most of the setups were shitty. The trade was up money for awhile then down then up then down. Very bad conditions for short vol. I knew the indicator was gonna shift long vol today and it did.

According to the rules I have to take the short vol trades off.

My first reaction was to say, dammit I am down $100 on this trade so let me wait another day to see if I can eke out a win. Which is typical of the weasly logic I apply in such situations that always gets me into trouble. Next thing I know it's a week later and that $100 has blown into $1000 and I am married to the trade. Capitulation is in the cards somewhere south of $1000.

So then I got on the IM to my new Risk Manager and confessed my sins. No response. So I filled about ten screens of garbage about why I needed to break the rules and keep this trade on.

After ten screens of garbage sent out over IM I had a change of heart and suddenly capitulated on the $100. So I closed out all the short vol except the Jan credit spreads, which are still in the black. I may take those off too as wins once the market opens up again.

The point is, the presence of the Risk Manager caused me to do the right thing, despite my strong desire to break the rules.

I am going to now declare this as the Turning Point in my trading career.

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  #212 (permalink)
 suko 
Market Wizard
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Experience: Intermediate
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Looking back over the trades of the past year, three of my accounts are up spectacularly. Two are down significantly but coming back.

Anyway, I want to focus on the three accounts that are up. All three are vol strategy, all three followed the rules well. So I take this as proof positive the my vol strategy can perform as expected. A lot of very good trading, traded right through the mini-crash, no sweat, flipped the cards over right at the top tick like a boss. I can definitely do this.

The accounts that are down, this is purely due to big trades that turned into losses and would have been cut off immediately if I had a had this risk manager in place looking over my shoulder. No risk manager would have let me trade that size anyway.

So for 2016 I firmly believe that we are going to make the vol trading work.

It's a hell of a lot harder than I thought it would be.

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  #213 (permalink)
 suko 
Market Wizard
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Experience: Intermediate
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Although I have been in trading the market for two and a half years now, this past year has been the first one in which I was trading on a daily basis.

Some very hard lessons.

One thing that sticks out is that I have made unforgivable mechanical errors due to sloppiness. Either fat finger mistakes or not pushing the order through properly. These errors have cost me dearly. What has typically happened is that the mechanical errors resulted in losing positions that I failed to close the next day upon discovery. The worst one took a week to realize.

So I need to add to my list of Rules that mechanical error trades must be closed immediately, regardless. This is a pretty obvious point. But once a loss gets beyond a few dollars it gets harder and harder for me to take.

Another thing that the market has beaten into me with a stick -- If the directional assumption of the trade turns out to be wrong from the minute the order is placed, then take the loss right away. If the trade goes wrong from the very beginning then there is something wrong about my thinking or timing.

Typically the wrong aspect of my timing is simply that I am late to the trade, and it's an indication of FOMO being buried somewhere in the decision to take the trade. I need to be selling into that big green candle and buying into the big red one.

I am now a week into the experience of using the risk manager/trading partner. We haven't really formally set up the risk management program, so at this point it just amounts to having phone conversations and IMing after the close of trading.

One result of this is I have naturally cut back on the size of my trades. This is going to be a big theme for me in 2016, smaller size. And taking losses faster. Fast loss is the best loss.

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  #214 (permalink)
 suko 
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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Posts: 1,320 since Oct 2013
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I think the trading partner/risk manager sessions are helping. Anyway, my PL is up since I started this. Some good, very mechanical trading in options. This is what I needed.

We are going to have a risk management meeting next week to work out the overall strategy, game plan and ground rules for next year's trading. I am going to stick to the plan and establish fines for my breaking rules. That's it, if the risk manager can catch me breaking a rule he will pocket the fine. Maybe that would be a good set of checks and balances.

The market forecast is for more volatility next year. I understand that to mean a change in the short vol strategy we have been following with VIX, etc. One of the key indicators for that whole strategy, the weekly roll MACD on XIV, has been trending closer and closer to zero, indicating that the XIV trade is going to get tougher and tougher. Not a lot of layups like before.

So, we will have to retool the strategy and learn to trade volatility from the long side. UVXY debit spreads and synthetics. I am also going to learn to scalp UVXY to the upside. Should be a lot more action in that regard, given the new environment.

I've been learning to scalp using Bitcoin. Single coin trades, simple strategy "buy on big red candle short on big green candle." I need to find a better charting solution for this. I wish I could trade it via TOS.

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  #215 (permalink)
 suko 
Market Wizard
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Experience: Intermediate
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Broker: TD, TW, IB, Saxo
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The theme for this year's trading is 'disciplline'.

I have decided to start fining myself $100 for rules violations.

Will stay mechanical, trade small, trade the checklist.

No FOMO, no revenge, no fat fingers, no shotgun marriages.

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  #216 (permalink)
 suko 
Market Wizard
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Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
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The first week of trading under a regime of out-of-pocket fines for rules violations.

The result?

No rules violations. Very steady and mechanical. A lot of hands-sitting.

I took one profit on perfectly executed SPY iron condor that maxed out, and one other in FXE. I have some short vol positions on that I am feeling some heat on, but with a month to expiration I expect to get relief at some point.

I am mostly in cash now but I still have long deltas on in Feb expiration in addition to the vol products, and I need to start working to reduce these. I would target a short 300 deltas for the near term. Unless the Fed and the other central banks come out soon with big easing I think I want to be net short near term.

As I said before, hiring a risk manager is the turning point for me. Now I am going to trade small and get consistent and forget about PL. This can and will take some time. But I have plenty of time, and I have capital.

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  #217 (permalink)
 suko 
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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Posts: 1,320 since Oct 2013
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Three weeks later and still working with the risk manager. Success!

Discipline has been outstanding. No rules violations. No big trades, no excessive risk. Very mechanical. My market awarness is much better than before. All around much better.

I've had a change of mentality about PL, decided to focus for this year on getting more and more disciplined in my life, particularly around emotions. So that has become a major theme for 2016. Master the emotions.

Another thing that has changed is that IDGAF about making a big profit. If I can average $50 on my one lot Johnny trades, I will take it. I am going to focus on keeping grinding it out and worry about making serious money later. I don't have lots of time, none of us do, but I will pretend that I do have all the time in the world to make this happen.

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  #218 (permalink)
 suko 
Market Wizard
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Experience: Intermediate
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Broker: TD, TW, IB, Saxo
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Trades for today (trying to get on some short deltas):
XLU Mar call spread 47 49 $0.64 credit IVR 81
FXE Mar call spread 110 113 $0.86 credit IVR 100
CAT Mar call spread 67.5 70 $0.94 credit IVR 76

Put in a LNKD IC order earnings play at 100 IVR, didn't get filled, thank goodness. Sheesh, LNKD is a POS but at least no cat photos if that's any consolation.

Otherwise, in the portfolio I've got
AAPL IC
CCL call spread
FCX put spread
GILD put spread
coupla TLT call spreads
TSLA IC
TWTR put spread
buncha rotten UVXY call spreads
and some VXX calls spreads
and some rotten XIV

Waiting for 'em to rally up to 1950 then clear off some of this old inventory and put on more short deltas.

Mo' short deltas.

[side comment, as for the UVXY and VXX trades, we have now had a month of backwardation, which is actually a 2SD+ event (very rarely happens). That roll yield generated by this backwardation has raised the support levels for all of these vol products. Maybe 3 or 4 points for VXX and 6 to 7 for UVXY, I am unable to calculate how much. Anyway it is significant. So the assumption behind these trades no longer holds, and unless we get a good dose of contango next week on a major rally I am going to have to take them off for a painful loss before Feb expiration. And this leads me to the point that I have avoided putting on any long vol hedges in UVXY up to now, since I got my fingers burned last time, but again, the old assumptions from the low volatility regime no longer hold. I need to start getting some short deltas on via UVXY. Every time we get one of these rips I want to take on a little more.]

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  #219 (permalink)
 suko 
Market Wizard
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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Posts: 1,320 since Oct 2013
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Highlights of the past week for me, my FCX play paid finally came in, after inflicting a lot of brain damage on me. Like a lot of other positions lately. I got caught by WTW, initially it was green then I made the mistake of holding into earnings. One of these days I am going to learn about earnings. There's a right way to do it and a wrong way.

I have long positions in base metals and PMs and also biotech.
GDX and SLV. I am waiting to get some USLV.

I put on a bunch of short verticals in SPY QQQ DIA IWM for April, as I see us hitting 1800 at some point before then.

Options portfolio is now short delta for the first time ever, just slightly. I'd like to get a few hundred more deltas on, at least, before we make the next leg down.

Vol products. Despite the fact that my XIV position is up 33% from the low last week, I have decided I need another toolkit. Swing trading these things when VIX is over 20 can be very painful. Very choppy. Sailing in a very gusty wind. I do not like it, and I it's just untradeable for me. So I am venturing into intraday, trading off the charts, now learning VWAP reversals.

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 suko 
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I need to say something about the contrarian approach vs the trade-the-trend approach.

One thing I learned when I first started trading is that FOMO on trending stocks is a huge problem for me. My biggest trading psych problem.

FOMO chasing after trending stocks is the default retail trader/investor mindset and practice. If you talk with retail traders they will mostly repeat the mantra of "the trend is your friend."

OTOH contrarianism is the default mindset for professional traders (by professionals I do not mean self-employed retail but traders on salary and market makers). Market makers by definition always have to take the other side of your FOMO trade, so by their nature they "sell into strength and buy into weakness."

Anyway, coming at this with a retail mindset, and making the switch to contrarianism is tough. There is a lot of fear. It's like you have to rewire a lifetime of thinking and behavior.

It's really like making the switch from blue pill to red pill. Or from no game to got game. Lotta fear and pain in the process of making the change.

Old habits of thought die hard.

But I need to do it not because contrarianism is better than trend trading or momo trading or whatever, but just because I need to rewire my trading psych to burn out the old, bad habits of thinking.

So nowadays I am doing some very small day trading using the VWAP reversals strategy. Keeping the size down.

And I have been learning about VWAP. It's kind of the all-purpose indicator, the one indicator to rule them all.

An interesting thing about VWAP is that institutional traders, guys at banks and funds, are incented to trade a certain way with respect to VWAP. That is, VWAP is a sort of benchmark for pricing for the day. It's one way banks judge trader performance objectively.

If VWAP is the benchmark, then if the current stock price is below VWAP it's considered to be underpriced and thus buyable and vice versa. So as a trader you get a bonus from your employer if you can get your buy order filled below VWAP, and likewise for sale orders.

The institutional trading platform is even set up so that the trader gets a bonus of a certain amount of money for each share purchased below VWAP and sold above VWAP.

In other words, contrarianism is hardwired.

OTOH, for the retail trader, when a stock breaks up through VWAP it's a bullish signal and a sign to buy, and vice versa.

Now that I understand this it becomes very easy to judge my own performance. If I am buying above VWAP I am calling it a FOMO trade. I need to focus on how the stock behaves right as it hits VWAP.

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 suko 
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Since the February expiration, all of the old junk from 2015 has been washed away and all the trades I have on now have been made since I got the risk manager, instituted rules on size, and started trading the checklist.

I have done a few daytrades with VWAP, as mentioned above, in some hot stocks like FEYE, RAX and RPSL, and also I have started trading the Nikkei index during the day here via leveraged ETFs and vol ETFs. PL wise it's been positive. I even think the win rate may be over 50%. The important point is that I have been downright zealous about closing down the losing trades and embracing the small losses. A small loss is a good trade, I tell myself. And what I am looking for here is good trades, not monster profits.

But most of my activity has been in trading options, defined risk spreads, 45 DTE. One lots. I am trying to get a dollar credit and maybe risk up to two dollars.

During the past week or so I have finally succeeded in getting the portfolio net short. We are a little less than 50% deployed at about 130 betaweighted short deltas with 20 positions on. In terms of cash, we are 2 to 1 short over long. POP on the portfolio is 55% This goes against the grain. I see all that green on the board and I wanna buy not sell.

Names include AMBA ASHR DHI FXB GM GS HYG IWM JD JPM MDLZ MS MU QQQ SLV SPY TLY UVXY UWTI VLO XOP YHOO. The ones among these that are indexes are all short in APR expiration and also short bonds. Also short banking. UVXY is actually a long vol hedge, something that scares me since I got bitten very hard by that last year. But I want to put some more long vol on with VXX.

Now the point here is that this has all been very mechanical. I have a checklist with certain critieria (high IVR, high liquidity, a certain duration, RR and so forth). If the trade checks the boxes I put it on. Once I put the trade on I set up a GTC order in TOS to close at 50% of the max profit on the trade.

When I wake up in the morning Tokyo time I usually see a couple of TOS notifications on the iPhone that GTC orders have been filled at 50%. Then during the day I put in orders for some new positions to replace the ones that have been closed. Lather rinse repeat.

This strategy will do well if the prediction of VIX reverting to the historical mean for 2016 pans out. If we get back to a situation where VIX hangs below 15 for months on end, then I will simply go back to selling UVXY. It's a layup.

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4Play
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12. No CNBC

Hello was going through your journal and reached a post on the set of rules you have defined for yourself - Found this rule 12. "No CNBC" bit really funny :-)

Best.

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 suko 
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Hello was going through your journal and reached a post on the set of rules you have defined for yourself - Found this rule 12. "No CNBC" bit really funny :-)

Best.

Actually, since that time I started watching Nikkei CNBC, which is a Japanese language channel about Japanese stocks. In order to learn how to talk stocks in Japanese. The have a segment that airs every night called "Derivatives Corner" that I enjoy. Although it is primarily about commodities.

The other day I cut the cord on my cable box and now I can brag of being TV free.

Just the price action, ma'am.

My journey to becoming a disciplined trader in 2016 has been going well. I have been sticking with it.

As I posted before, I got a trading buddy to help me manage risk. Every morning I write a market report on my activities from the night before. I have rules on trade size and procedures and penalties. I have yet to trigger a penalty in 2016. I am sorely tempted to but I don't.

I am trading off checklists now. Every trade gets a checklist and a screen cap of the setup. I have the checklists set up as keyboard short cuts, such as "options" or "volatility" and so forth. I just put the checklists right into my daily journal in Day One, then review later by searching on the #trade hashtag.

Now I am in the process of getting more systematic about the bookkeeping end of the business. I am allergic to bookkeeping, but I don't give a fuck, if I have to do bookkeeping and a bunch of other stuff I hate in order to be able to succeed at this, then so be it.

If I have to crawl in the mud for kilometers IDGAF I am gonna do it.

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 suko 
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I need to make a very embarrassing confession, about fat finger mistakes.

One of the items in my checklists now is to re-check the order after a fiill to catch fat finger mistakes.

When I first started trading and I heard some guy on Youtube tell the story about an ultra scary fat finger mistake, I thought ďNot me, how could he be so stupid, thatís not gonna happen to me.Ē

Well, it did happen to me. Last year. I ended up being short 1000 shares of XIV when I actually intended to be long. By the time I discovered the mistake, which was a week later, XIV had shot up (this was at the start of that epic run last spring) and the position was already seriously underwater. My zero discipline on cutting losses early resulted in me rationalizing staying in the trade, figuring that Vol would have to perk up pretty soon.

This trade turned into an epic loss when I finally capitulated. And of course, capitulation occurred just before Vol picked up over the Greek thing in 2015. My original trade idea, that Vol would pick up, was quite correct, but I got myself squeezed out of it.

This resulted in me setting another trading rule that "fat finger trades must be closed upon discovery, regardless of whether they are losers or winners." On principle. Itís a bad trade.

So back to Nikkei CNBC for a moment. When you watch Japanese stocks live on their screens you will notice a strange thing, that up is represented by red and down by green. So the ticker at the bottom of the screen is red and green except the colors mean the opposite of what the mean in the English speaking world. (dunno if this is the same for other Asian exchanges). Why is this the case. Dunno, the Japanese are just bassackwards about everything, that's the way they are.

Same color coding bassackwardsness goes for the order placement interface. The SELL button in green on the *left* side and the BUY button in red on the *right* side on the SBI Japanese mobile app, which I usually use for trading. The buttons clearly say ďbuyĒ and ďsellĒ in Chinese characters, but reflecting back, I think my brain reacted to the color and blocked out what was written on the buttons. The inverse is true for the IB Japanese mobile app.

Anyway, I made this same mistake again and again, and going over my records for the year I could not figure out why I had kept doing it.

Until I did the same thing the other day, and caught myself in the act. Some sort of cognitive dissonance created by user interfaces.

I think that readers of this forum, who are mostly daytraders, probably wonder why how I could be so unfamiliar with my user interface for this problem to still be with me after all this time. And the answer is simple, I do not get enough practice.

If you are swing trading once a month or once in several months, you just do not get enough practice.

With my options spread trading I have developed very good interface skills. I am pretty good at my options platform, TOS. That is because I try to make at least one trade per day. The more the better.

Mechanics.

Now I need to get work on this with my swing trading. I just need practice, so I have set the rule that I am going to daytrade the first 90 minutes of the NY session each night. This is very painful for me, because I am a very early riser and the market opens at 10:30 at night here, but IDGAF I am gonna do it. I need screentime and lots of it.

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 suko 
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Another painful lesson I have had to learn the hard way, is about options assignment.

I had a couple of one lot call spreads with a that got assigned back in March. The minute they got assigned I thought of exercising. The trade thesis behind both of them was weak, they are POS names, and anyway I did not want to own the stocks. But I delayed. And I ended up holding shares that I did not want, with no stop on them and then the losses ballooned. Now I am sitting on losses much larger than the original defined loss on the trades, and I am stuck in the same old same old slope of hope mentality, dammit. So I have to bite the bullet now and cut these losses, which will wipe out a month's worth of profits or more.

So, add a new rule to the list, If I get assigned I exercise immediately.

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Kurt from Rva
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Haha don't feel bad I also double check now. If it was so uncommon there wouldn't be a saying for it.
As for the call assignment were you -100 shares? I'm a little confused on that. Anyway, I have also learned that the hard way. Around the middle of last summer I got this genius idea that I was going to sell a 74 put on XLE thinking it was definitely going to act as support. Needless to say I got hammered on that one and was sitting on quite a loss at one point. The only reason I held it was because it was a sector. I would've never held a company stock through all of that. At the end of the day though it would've been better to take the loss and buy in lower if I was really that determined to go long.

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 suko 
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Kurt from Rva View Post
Haha don't feel bad I also double check now. If it was so uncommon there wouldn't be a saying for it.
As for the call assignment were you -100 shares? I'm a little confused on that. Anyway, I have also learned that the hard way. Around the middle of last summer I got this genius idea that I was going to sell a 74 put on XLE thinking it was definitely going to act as support. Needless to say I got hammered on that one and was sitting on quite a loss at one point. The only reason I held it was because it was a sector. I would've never held a company stock through all of that. At the end of the day though it would've been better to take the loss and buy in lower if I was really that determined to go long.

I double check expiration and also for event risk. Even so, occasionally one slips through on an unintended expiration.

I had a credit spread on HYG based on a kind of vague thesis that was not supported by the odds. So, I got assigned short 100 HYG. And then oil exploded upward.

I had another fat finger mistake today, due to a different reason. Executed the right closing trade as per signal with good timing in the wrong account. This time the result was up slightly. I had the conversation with my risk manager in the morning after, and was wavering over whether to leave the trade on.

Then I decided to just follow my rules and close the trade, winner or loser.

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Kurt from Rva
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Ha I have made that one too. It's a good idea closing the trade even if it's a winner of it wasn't done by plan though. Good discipline for that!

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 suko 
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I did a little review of the first five months of the year for my options trading.

On a $15K account, 76 wins 46 losses and up about $200, before fees.

These are all defined credit trades, condors and spreads.

I am actually encouraged by this result.

It shows that I am beginning to get the hang of it, and that I can make money despite making a lot of stupid beginner options trader mistakes and getting my market direction wrong. And despite having a low volatility environment for much of the time period.

OTOH, as for the volatility cash trading, in the two small accounts I have done 61.5% YOY.

This is exactly the kind of performance I have been looking for since I started trading. Now that I have seen with my own eyes, I feel encouraged for the first time to really bear down and become a hardcore volatility trader. I've had to pay alot of dues, and more to come, because UVXY is a hard taskmaster, but I am willing to do what it takes.

Furthermore, although I did not realize it at first, there is a good bit of synergy between trading options and cash products for volatility. And now I have a good bit of experience in trading both. I know the common sensical setups that work and more importantly, I know what not to do.

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 suko 
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I was just reading back over this journal of my first three years of trading, because I wanted to recall who it was that had kicked my ass over my shotgun marriage to USLV.

It was user SMCJB.

Belated thanks to SMCJB for coming back and repeatedly kicking my ass to get me on the road toward Discipline that I am on now.

That was just what I needed.

This journal has been retired, and now I am continuing it as Lady Vol's Primer for Young Geniuses, which is the story of my journey into the belly of the beast to do battle with UVXY, VXX, VIX, /VX and all of their lesser cousins, using options and someday, I hope, futures. This journal is in the elite section, so if you are not an elite member, you should be, because Volatility is the asset class to rule all asset classes, and this is going the best journal about trading volatility products in the universe.



So, this is a Big Thank! you to all of the people who have read, given "Thanks", and most of all commented critically on this journal. It has been a big help in sustaining me over three years and propelling me forward on this surprisingly difficult journey. At first I thought this was going to be easy.

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