Saturday, September 19, 2015

White Caps 71-5, grade A- for September

When the wind picks up, there are white caps on the ocean. After last month's big losses, I made profits. I am not all the way back, but neither is the market. This cycle, I sold a lot of weekly options and most came in safe. Unfortunately, some of the losers were whoppers, and winners are all small to tiny. So even with above average win rate (80% is average for this method) the grade is A minus.

I got whipsawed in SPY and NFLX. I did a lot of trades in SPY and IBB. Despite a couple of bad whipsaws where I got stopped out in SPY, overall it was a big winner for me this cycle. Same with IBB.

One trite saying: "if I knew better I'd do better," meaning that if knew where prices were going, of course I'd make more money. After getting burned a couple of times, I moved further out in price and closer in on time, for higher probability and lower profit. This helped the win percentage, and also brought in some decent profits.

Going forward, my market predictions tend to be no better than coin flips, so mostly I watch the market action and try to listen to what it is saying. This tends to be better than me trying to predict. I do use support and resistance on the chart, and do trade off news events. The market reaction to the Fed news seems rather bearish, but we have all seen the wide swings in mood and price.

Will the lows hold? If I had to guess, I'd guess no, that lower lows are coming. If I get that first question correct, the next question becomes when. Some are looking at experience of the 2010 flash crash. 

Back in 2010, it took four months for that market to find a bottom before a rally took hold. For this 2015 action, we are only one month in, so it is still early in the correction process. Time and price can be equally important for options traders.

There is a chance that this correction becomes a bear market. The German and Chinese stock markets and many others around the world, are already in bear market mode, defined as down over 20% from their highs. I am still thinking the bear comes to the U.S., after the second Fed rate hike (whenever that is), but that is only a guess, a working trading theory. Sometimes I am wrong.

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