October post, the TBT trade was going on according to plan. I did not realize that I had the best opportunity to close all the trades to achieve the maximum profit around 9-18 as shown in the chart above. I thought the far OTM puts were expire worthless as TBT was turning into a up trend. However, it did the opposite, and broke down my support level of $54. On 10-7, I settled to take a 50% profit by buying back Oct$53 put. There were no bids for Oct$49p at the time so I had to leave it on (I was not able to close the position as a spread trade) with only 2 weeks to expiration. It was the far OTM, worthless straight put that saved the overall position several days later when TBT crashed around 10-15 along with the stock market. As mentioned in the previous post, that was a test of 3 SD event. The other bull put position Oct$51/46p got crushed as price tumbled from $51.2 to $48 just 2 days before expiration. I decided to close the straight put which become ITM by selling it and the short bull put spread by buying it back, for a small profit on the crash day.
I think it was this small profit that gave me a little bit of psychological boost to follow my trading rule to hold on to the TLT position which was suffering a temporary loss that was over 3 times of potential MAX profit at the time. I did not look at the intraday loss and felt OK since I had a good amount of capital available in the account for possible rolling adjustments.
As happened many times in strong bull market before, the market sell-off was short lived. The market rallied back quickly. I strongly believe that bulls would not die without a big fight. For 5 weeks after the sell-off, market kept advancing. My TBT bear call spread Nov$57/62c (C5S/C5B in chart) was expired worthless last Friday. Now, I'm out of all TBT positions and transitioned fully into TLT trades as planned.
So what are the lessons to be learned from the market and the trades? This is the tough part of the trade review. With the help of the chart that recorded the trades, I think the following points are important for me.
- After entering a trade for 1 month and with 1 month left for expiration, the trade may be exited for minor profit or loss if the stock prices goes against the position in general.
- I could have exited positions around 8-14 to open new positions.
- Made a mistake around 8-15
- Around 9-19, TBT pulled back from 4 month resistance which was identified in an earlier post. That was the best exit point.
- Trades on 10-7 was perfect as market broke down the support level.