Hedging Against Watergate

05/17/17

Trump really is as dumb as they warned us. Last week when he fired Comey I thought to myself, "this won't end well" and after the market kept stable for a day or two I bought 5 SPX May 26 2380 puts (SPXW 170524 P 2380). Cost basis is $6,358.42.

It wasn't particularly calculated - I just had roughly that much cash sitting idle so I moved it into a puts position that had a couple weeks to breathe. Just bought the fuckers with a market order.

For the next several days the market edged up and my puts deteriorated, to the point where I was down about 75%. Yesterday I thought about selling them and cutting my losses but decided to stick to my guns and let the position run its course. Well, today I was vindicated in doing so as the market fell over 1.5%.

Part of the reason I'm writing this post is to highlight how effective options can be for hedging. My portfolio is very simple right now:

Ticker              Qty       Cost basis
AMZN                100       $93,799.45
FB                  600       $89,866.95
GOOG                100       $92,605.98
SPXW 170524 P 2380  5         $6,358.42
Today, with the bloodbath from the Comey memo, the end-of-day change was:
Ticker             Abs           Percent
AMZN               -$2,131.00    -2.21%
FB                 -$2,958.00    -3.29%
GOOG               -$2,338.00    -2.48%
SPXW170524P2380    +$11,450.00   +618.92%
                   +$4,023.00    +1.42%
So a $6000 position protected my entire portfolio from a 2.5% drop - I actually made 1.4%. Of course the puts trade was purely based on gut instinct that the market has been on thin ice and I just as easily could have been wrong, but I feel good about the fact that I stuck with my original trade plan and it's working out how I expected. You can't control whether you're right but you can control how consistent you are. And no I haven't sold yet.

Blog system

05/13/17

I spent a few hours writing some scrappy go code to run a blog on this website. I've also moved previously published shit into it.

What's been up?

Not a whole lot. Tried to buy a house in upstate NY but got shafted by the seller's agent. Started a rewrite of Mondrian but that won't see the light of day for a while. Working hard at Kraken. Enjoying the East Village.

Trading Notes - SPX Weeklies Edition

02/15/17

SPX stomach churner

I need to get this off my chest.

I've been having good success lately trading SPX FD's (faggots delights; weekly options). I buy them with as little time premium as possible and leverage the fuck out of the SPX. A 0.2% move equals 100% gains etc etc.

Anyway, a couple weeks ago I made 100% in under an hour doing this. It fucking works. This morning I went for it again and it went beautifully and then I made two mistakes in a row and I knew they were both mistakes as I made them. So I am writing them down so I can hopefully avoid them in the future.

The setup

The setup is simple. In the first 10-15 minutes of trading, if the S&P is showing a clear direction one way or the other, just bet on it. Buy 10-20 SPX FDs. It's so simple it's retarded but the S&P tends to follow its initial trend throughout the day.

This morning

This morning I thought I saw this setup so I bought 16 SPXW170215C2340 for 1.70 at 9:55am or so. You can see the opening bell volume at 9:30 in pic related. After watching a mild but consistent climb for ~25 min, I went ahead and bought those calls. Then I walked to the studio.

On the way to the studio, I checked my phone and saw my calls went down to 1.10. I said fuck it, this is just a minor retracement and it will continue to keep going up. So it did. And then it fucking climbed until the calls were going for 5.0, 5.3, 5.5. I felt smug as fuck because I had just tripled my money right?

Well I was feeling greedy and waited to see if it kept climbing. This is when it settled out where I have the 5.5 label on my chart. I could have taken a $5,000 gain but I didn't because I thought the position still had some juice.

After it went sideways for about 15 minutes, I decided the move was over and I should take profits. I opened a sell, but it was a little greedy. I opened it at 5.50. I saw it go up to the point where 5.5 was the best ask. I was sitting there staring at my monitor watching the 5.5s get filled, and yet mine didn't. I was begging it "just go up a little bit more". That's when it started to crash (around 11:30).

I was cursing out this sell-off but it seemed completely rational that it would happen. After a move like that there's often a retracement about 30-50% back down. I waited to see if upward volume kicked back in after it seemed to bottom out and it fucking didn't. I was sure it would continue on the uptrend throughout the rest of the day, so I just opened a stop loss at 2.2 and told it to fuck off.

Well the stop loss gods fucked me and somehow it fucking filled. I never saw when because it was a split second when it hit 2.2 and came right back up to 2.6. So I got completely fucked out of my profits.

And then wouldn't you know it. It's back up now much higher than it went before, and I basically fucked myself out of 400% profits by staring at the chart and panicking like a little bitch. Had I just bought these and taken a nap for the rest of the day, I would have made 6-8 thousand dollars only having risked 2.5.

Lessons

  1. 30-50% retracements after a move are normal. Ignore them unless it retraces more than 50%.
  2. Ideally take profit when the move has run out of steam (this would have been at 11:15 this morning), or sit through the inevitable profit-taking and wait for the move to resume. Don't fucking sell at the bottom of the profit-taking like a loser.

Feels bad

The hardest part of this for me is I already knew that the market moves in patterns like this. And yet I was too much of a pussy to just hold, and too much of a greedy cunt to take 200% profits when I had them. So both of these combined cucked me hard core. I should have made 200-400% here but I didn't. Hopefully I never make this mistake again.

Next Page