Dec 2016 Swing #1 – RUT

8 Dec 2016 – Entry

  1. RUT is trading at its 10 years high. Fed will be announcing it’s decision on interest rate on 14 Dec 2016, which market is expecting it to raise it’s interest rate from 0.50 to 0.75.
  2. With these two reasons, there is a chance that RUT to move downward next week in anticipation of the Fed announcement. So I decided to open a swing trade which will be closed latest on 14 Dec 2016 before the FOMC meeting at 2pm.
  3. Since it will be closed within next week, I have chosen options that will expire on 16 Dec 2016. This will give me the highest Theta possible. I have chosen the broken wing butterfly strategy because:
    • It is cheaper. I got it at 1.80 per Fly. With this my loss is capped at 180 per Fly even if it continues to move up and the option expired worthless.
    • If it moves downwards, the increasing IV will increase the option premium and also move into the profit zone, and I will have a chance to close the trade with a nice profit.
rut.png

Risk profit of the BWB during trade entry.

14 Dec 2016 – Exit

  1. RUT started to move downwards slowly from 12 Dec 2016. The underlying price movement did not generate profit. However the Theta had helped and by today, Theta and the increasing IV in anticipation of Fed announcement in a few hours time had helped generated enough profit for me to exit the trade.
  2. Bought the BWB at a debit of 1.80, and sold to close for a 3.50 credit.
  3. Nett profit for this trade 158.96 per Fly.
rut.png

This was captured after I closed the trade for a 3.50 credit. Always follow plan and book your profit, and never chase the maximum profit because you will never know when the trade could turn from a winner to a loser.

Dec 2016 Butterfly #3 – RUT

Day 1 – 29 Nov 2016

  1. Entry day. 51 days from expiry. RVX was at about 19. Managed to buy the Fly for 9.50, slightly cheaper than the usual 10.00.
  2. Fed will be announcing interest rate decision in about 14 days and RUT is at 10 years high, therefore there is high possibility that it will be trading sideway, or pullback slightly. Even if it continues to move up, it should move at a slower pace until Fed decision on the interest rate. This condition is good for this trade.
  3. Lesson learnt from the previous Fly trade, I have also opened the IWM Long Call to neutralise the negative Delta from the Fly which is 20 points below ATM.
RU1.png

Risk profile on Day2 – 30 Nov 2016.

Day 8 – 6 December 2016

  1. No adjustment needed for this trade. RUT was more or less trading at the same level as when I entered the trade.
  2. But today it looks like it was going to move closer to my breakeven point, so I decided to take the profit instead make adjustment.

Trade Summary

  1. This trade went through the weekend without much movement. Theta had helped generated the profit.
  2. Another reason for the profit was I manage to buy the FLY at a lower debit.
  3. Net profit for this trade is 74.18. It looks small but consistently generating winning trades is what I am aiming for right now.

Nov 2016 Swing #2 – GOOGL

Day 1 – 28 Nov 2017 : Entry

googl1

Daily chart. GOOGL broke the mean after a series of price resistance at mean. However it still closed below the mean.

GOOGL2.png

5min chart. GOOGL started declining after lunch time.

  1. GOOGL broke the mean on the first hour of market open. The wave indicator at that point was around 1.7.
  2. This is a directional bullish trade. To reduce my exposure, I opened the Bull Put Spread for 4.00 credit per contract when GOOGL was trading around 793. The BPS gives me positive Theta if it stays above 780.
  3. I made the entry just before lunch time at 11:30am US EST and went to sleep. Then GOOGL started to decline around 2pm US EST, just after lunch time.
  4. This trade will have a higher probability of winning if it closes above the mean.

Day 3 – 30 Nov 2017

  1. GOOGL was still trading and closed at the mean on 29 Nov 2017, so I left the trade open.
  2. Today it started to decline and it came with volume. So I decided it is time to cut the loss and close the trade.

GOOGL.png

Trade Summary

  1. This is losing trade, nett loss of $140.56.
  2. The wave signal indicator not strong enough. For expensive stock like GOOGL, wave indicator should at least crosses 5.0.
  3. For directional trades that will be carried over more than one day, it is better to make the entry on second half of the market, best during last trading hour.