Stopped out of SPY Call Yesterday

The market had shown a few distribution days in the last few weeks. IBD declared market in correction on last Thursday on 8-14. In the afternoon of last Friday, SPY fell below my stop level around $166 as posted before. So I decided to exit the bullish position trade of SPY on Monday morning as it did not rise at higher volume. Due to an technical issue of the ProphetCharts, my trade did not get posted yesterday.

I noticed the market was in an oversold condition as SPY were sitting around the 50DMA and the lower band of the bollinger bands and the VIX reached the top level of its bolling bands, ... This is kind of typical for my stop levels, which I'd like to honor as part of trading rule. If the market turns uptrend again, I'll consider a new bullish position trade. Otherwise, I'll look for opportunity to initiate a bearish position trade.

Since I'll be on vacation sometime at the current option cycle, I'll not trade the high probability option income trade for this cycle. But I'll spend some time to analyzer previous trades and post my reviews here.

May to July Trading Review

My last monthly trade review was in May. Since then, I had two trading cycles, a smooth one lasted less than 1 month and the other tough one lasted over a month. I was not able to review my trade on a per trading cycle basis.  Overall, the June cycle went well as market offered a good opportunity while the July cycle was rough for me. Here's my current multi-month trade review using my regular review template.

Trading Rules

• Adherence consistency

I think I followed entry trading rules and the exit rules. There is an improvement for the exit rule since I've fune-tuned my exit rules to make them clearer.

• Skillful application/execution

I had a cancellation trade error as described in a previous post when I was making multiple adjustments in a short period of time. My trade validation step does cover review of adjustment strategy, potential cancellation of strikes in existing position, order size and order fills, when new order is about to be placed. But I may still forgot checking one of these components occasionally or in a trade adjustment spree.

• Monthly rule review/study

I did not have time for trading rule review & study in July as I was very busy at work and other life. Need to improve my Delta adjustment values in various scenarios as explained in a prior post.

Psychology

• Action during uncertainty

Used the Greeks and P&L chart to determine trades and adjustments, but need improvements at proper amount of Delta adjustments.

• Risk Comfort ability/Adverse damage impact

There were bigger losses than I had expected in July. I seemed to be able to withhold it. The adverse damage impact remains to be seen.

• Trade anxiety

As usual, there was no impulsive trading for the period.

• Winning Altitude Development

I did not work on this one in this period.

Trading Time

• Trading days

It was possible to meet the target of 15 to 20 minutes per day on average. But on a busy inventory closing day, it may take 45 minutes to over 1 hour to get all trades closed. It did not include the optional trade study and blog time.

• Resting days

I spent time for mostly non-trading related activities.

Trades and Market Replay

• Market Forecast

The following analysis in May also occurred in July:
Was expecting a market correction of some sort, but the correction signal got invalidated quickly. An overbought market can become even more overbought in strong trending markets.

• Trades and Adjustments

Need to study the proper amount of Delta adjustment as soon as possible. I think this is big issue for me at the moment.

To Do List

I should use this to-do-list to help me stay focused for my near term trading work.

• Further review of Integration of successful mind set to trading rules
• Identification of components of trading process
• Create ThinkScripts to track the portfolio for my trading and for trades similar to super trader Karen
• Quarterly Performance Analysis
• Continue investigation of the effect of price, time and volatility on option Greeks
• Study major losses since the starting of the blog and devise proper guidelines for the amount of Delta adjustment

Retrospect of August Option Exits

As noted in my previous post, I'd like to record my exits of the August option portfolio a few days ago. On August 1, the market rose and my option income portfolio had a P&L chart below. Since the P&L (white curve) of the remaining positions was close to the max potential (red curve), I decided to close all remaining positions except the bull put vertical spreads for SPX & RUT. The bull verticals were far out of the money and looked safe to expire worthless.

Looking back for my option trades in July, it was a tough month that ended with a loss. I believe I underestimated the bull market starting at the 1st adjustment of this cycle. In retrospect, the 2nd adjustment on 7-11 did not offer enough Delta neutralization. It was a 2nd confirmation day to follow through the market up-turn. At that day, I should have reduced the portfolio Delta to less than 10 in absolute value (-30 in reality), by closing out some positions like calendars if necessary, in anticipation of a continued uptrend. It's usually not a good idea to expect market pull-backs for a sustained period of time at the starting phase of a market turning point.

Bought SPY Call after it broke out of the small handle

The SPY formed a double bottom with a handle in the last couple of months. Today it broke above the handle. So I bought some SPY calls for a position trade. The stop price is around $166. I'll watch for market condition and Delta rises to exit if market continue to go up.

I also exited most of my option income portfolio for August and will post it in the next couple of days.

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