Saturday, June 23, 2018

Fat-fingered trade leads to profitable insight

I typically put on all trades with the same strikes for the few accounts I'm trading for. But week before last, I wound up with one account short the 2770/2800 call spread in SPX, when no other account had this.

Anyway, I rolled this out 2 days when it was in the money, but just "straight across" (same strikes,  not further away from the money),  thinking that since the market top was something like 2809 months ago and we have plenty of trade war pressure that it would come in a few points any time ...

But it didn't for several expirations (Monday, Wednesday, Friday) for SPX and I kept rolling it ... and making around $2000 every couple of days in this account (on 4 contracts, risking about $10000) ...



I finally figured out what was happening and that I needn't limit this to the fat-fingered account but could get my other accounts in on this profitable action.



So for as long as this lasts I'm going to run this trade "until my hands bleed"  (as Sosnoff would say ...)

What could go wrong?

First, the market could burst way up past 2800. I'll be really, really surprised if this happens ... but I should be able to roll 'up and out' and still for a small credit several times to make sure this ends profitably.

The other possibility:

If this happens, volatility spikes and I can go back to the previous system and make a better return than I have been making previously.

But the lovely thing about just selling this call spread without the (much less profitable) put spread (because it's further away) ... We're then immune to the "meteor strike" problem ... so I am going to bump up the risk a bit to 25%/25%/25% (so 75% will be "in play" for a few hours Monday, Wednesday and Friday) ...

Otherwise this week: AMZN behaved, returning about 5.7% on risk ...

Here's to further sideways action!




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