To my surprise it looked like the order didn't take. I was relieved...yeah, that was a spur-of-the moment decision, the kind that get me into trouble...but then I examines my positions. I did a double and triple take. Those 2055 calls I had sold...I got $160 for them? REALLY??? I thought it was closer to $500.
And I did a triple take. A quadruple take...and I realized...my new order essentially bought back those calls...ok. That's not the best situation perhaps. Certainly NOT what I had planned.
Oh well. We are rallying strongly. Hope we aren't derailed and that we reach 2070 by the close of tomorrow.
ABOUT THE MINERS:
The last bit of my plan was to ditch the miners if they were falling. But they appear to be trying to break through again. And its so early that I'm gonna let them run and see what happens. The miners are doing a wedge. They are either going to break up or down at some point. This is what I get for not waiting for a conclusive breakthrough to place my trade. I have to admit, the volume does not look encouraging. Looks like people are SELLING up at the resistance instead of BUYING. Meaning that we won't break through. I don't know if I should hold or sell. Sell would be safest. I should probably take the path of safety even though I'll book a $100 loss on this trade. But....no want to take loss...
Conclusion:
My original trade cost 1100 for a potential of $2000 max value so $900 profit. That was acceptable. Ratio of max profit to risk: .81 Break even on expiration: 2046
With the second trade the overall cost is including commissions was $1,605. Max profit = 3500-1605 = 1895. Ratio of max profit to risk: 1.181. And I took on significantly more risk. 2070 is a long stretch from 2055. Break even on expiration: 2051
The second trade was supposed to be:
Cost -510, Max profit: 1000. Nearly 2 to 1 ratio.
I used too much money. I am not happy with that. Too much firepower. I only have $2600 cash right now. Committed over the top. I should have just entered the trade with a wider spread at the start. But then I didn't know we were going to rally so strongly, either. And Ideally I would have entered Yesterday but wasn't sure of what was going to happen. If I had entered yesterday the cost would have been about half for the original trade.
It's 11:00 on the markets, and they are at 2055 so we have 15 more pts to go before we have 2070. And 2 days to do it. We are in a strong rally (after an impulsive and furious decline) but I'm sure it could get de-railed with some catastrophic event, like worse-than-expected US payroll data. I will monitor the market throughout the day and will cash in my spread if we don't keep moving up but hit a wall around 2055, because that is significant resistance. If we go much above that I'll be relieved. Because then that will become significant support.
But I AM SCARED STIFF!!! I think that Greek crisis is looming so who knows what could happen. But then there's always uncertainty in the market. And we have had an intense sell off over some speculation about an event half a month away.
I'm listening blindly to the market this time but I'm still scared. Don't know how I acquired the courage to enter the trade in the first place.
Ok. I lied. Now its 11:05 and we nearly hit 2060. 10 pts from my target. We are moving up at a phenomenal rate. We could hit 2070 today...and with that strong of a rally, it will be very hard to derail. I suppose I shouldn't get my hopes too far up.
8:12...I just realized the critical-ness of the situation. We must break 2060 decisively...if we do, OMG. We are in. This is the last major resistance before 2075. We'll be in that range, a day early. I'll be holding my breath. I get the 2075 from looking at the 10 day chart. Which, for the record, is below the 5 day.
Update. We are starting to form a head and shoulders pattern after a double top. Oh, no. NOOOOOOO. Well, the "head" is trading in a tight range so...
If we complete the pattern I will be very worried. We are most likely bouncing off our new support at 2055 (more accurately 2057) and then going to try again though. Forgot that support was there. The trend is hitherto very strong. 30 pts in 3 hours. 10pts an hour. We can't continue at that rate, but will we all of a sudden reverse direction? seems unlikely. 11:30 market time. 8:30 my time.
Oh NO! I just realized I also did another blunder: I should have waited to sell the call until the market was higher. Just bought the beginning call and then wait before selling the other one. This would have opened up my window and allowed me to not blunder $200 away with getting in and out of calls and it would have given me my target at a higher price, lowering the cost of the trade. While maybe not worth "legging in" during a slow moving market, with something like this its absolutely the best strategy.
Wow. I have a few lessons to take from this trading session. Overall I made significant blunders, again. I suppose I should just be happy that I haven't lost money this time yet, and that I've actually come close to reversing $1000 of losses. With $400 more from careful options strategizing, however, I'd be really happy. Till next time. In a rapidly moving market I'll buy the call, then wait until the market loses momentum for the time being to sell the put. And then, I'll have a lower break even and more profit...and the risk of a reversal with an extreme rally is slim.
And I've been trying to find a reason why buying a call spread could be advantageous as opposed to selling a put spread to get the same action. Well, aside from doing the buying up front, you can easily leg in relative safety. With the put spread one might not have enough margin and man you want your protection. Cool. +1 for the buying.
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