Now that was fun… After just getting flat hammered earlier in the week with crazy market movements and then readjusting to cover additional possible movements, the market decides that it would be fun to panic sell all through the morning. Violating almost every single level that I’m looking at for support. So what did we do… Well, personally, I went to the dentist. I’m not kidding either, the market was dropping like a rock, I decided that I would go to my dentist appointment, and then depending on what was happening after that I would make a decision.

The crazy selling to me didn’t pass the sniff test. I figured it was panic selling, a knee jerk reaction to foreign market influences and that after my dentist appointment, I’d re-evaluate and decide what to do. So off I went to get a good teeth cleaning. After leaving the office, the Dow had rebounded a good 50 points or so, and it looked like the momentum was moving up. Again, I decided that by the end of the day I would make a decision, based upon the days activity – stay in, or get the heck out!

At the end of the day, we had what looks to be a bottom form. Today’s action will determine (for me at least) if this is confirmed as a short term bias, and if I want to stay in over the weekend to gain a bit more time premium. Early morning activity looked to be a weak confirmation of a market bottom, and likely enough to keep me in the action over the weekend. I’m running the analysis on all of my trades right now, and my targets are for a quick exit on Wednesday or Thursday of next week. I do not plan on holding till Friday and waiting for the settlement prices. This market has just been too crazy and I’m not in the mood to lose any more money to monkey business.

Now, back to the rules – intra day trading violated the 5 point cushion that I target for all of my positions. Why did I stay in? Because the market didn’t close within 5 points, and I just simply couldn’t see this sell of going any further. Had the market continued downward into the afternoon, I would have had to make an early (and expensive) exit from each position. I guess that is were a bit of analysis and experience comes into play. I took a look at the numbers, the charts, volatility, news, etc… then made a decision. Was it the right one? So far it looks like a good move, but then again, only time will tell.

Looking back, I’m glad that the early week decisions were made, and that the positions were closed. Using my rules and taking a look at the data, I made a quick exit and had to swallow some losses, but also saved some serious capital. Had my 700/690 Russell positions not been closed earlier in the week, I’m pretty sure that I would have closed them yesterday for a much larger loss. I don’t know the exact numbers, but as the market continued to drop down, there just wasn’t much room to breath in the earlier positions. It is possible that the losses would have been so large that I would have simply held to try and get an intra day swing to help me out… The only thing that I know for sure is that it would have been ugly!

So, ideally today will be a solid up day for the market in general and we will be able to ride into next week with some good news. I’m going to make some major adjustments in the papermoney account as the day moves on, and I’ll post those later today. I think we can scrape a few more dollars out the market; the VIX is much higher than it has been lately and that means there is more premium to be had. Good luck, trade smart and grab my feed.

Categories: Options Trading