Weekly: Hell Week

This week included, two huge down days, two up days and one balancing day result in my worst week since starting this blog. My account down about 9% for the week, down about 10% for 2018. For the most part I stayed mechanical, about taking my losses. The big Tuesday rally and strong open on Wednesday were another trap and I fell for it. Overall, a lot of red ink.

Again, I’ll repeat the signs of a market top: inverted yield curve, transports leading the market lower, popular sentiment wildly bullish. The yield curve is getting closer. The transports are falling but are more coincident than leading. Some might say that semiconductors are a better leading indicator.

I made a lot of trades, but not much helped. Here are the trades (p=puts, c=calls, number near end is price per contract, sell means sell-to-open, cover means buy-to-close):

Mon Disaster! DJIA down 1175 points, 4.6%. SPY down 11, 4.1%. My account down about 9% at the close, then shows -11% a few minutes after as late trades shows more selling. Yikes! This is probably my worst day of trading since starting this blog about ten years ago. I make a bunch of trades, selling calls, but can not bail water fast enough. More holes appear as the market sinks.

Sell BA Feb 385 c 27
Sell SPY Mar 290 c 26

Sell BRKB Mar 220 c 146
Sell QQQ Mar 176 c 31

Sell VIX Mar 45 c 20 looks like free money, then VIX doubles from 17 to 35 by the end of the day.

Sell SPY Feb 283 c 25
Sell QQQ Feb 171 c 18

Sell TIF Feb 112 c 16
Sell RCL Feb 138 c 21

Sell AAPL Feb 175 c 19
Sell UNH Mar 250 c 117

Sell GS Feb 280 c 29
Sell MCD Feb 175 c 28

Sell MMM Feb 255 c 22
Sell JPM Feb 121 c 17

Sell IWM Feb 159 c 18
Sell RTN Feb 220 c 22

Sell ATVI Feb 83 c 17
Sell KSS Feb 70 c 25

Sell BRKB Feb 210 c 63
Sell BA Mar 395 c 98

Sell NFLX Feb 300 c 29

Several mental stop levels are breached during the day, I cover multiple legs for huge losses, ranging from -500% to 2000%. Ouch. More stops may be breached on Tuesday. This isn’t the time to get cute and try and pick bottoms. Rule #1 is to live to trade another day, and using stops is one way to do that. Other ways are defined risk, or large cash reserves.

Cover SPY Feb 272 p 384 first stop level for SPY
Cover UNH Mar 230 p 755
Cover GS Feb 255 p 815

Cover MMM Feb 235 p 720
Cover SPY Feb 265 p 670, SPY falls another 7 more points in about an hour. This is after 100 days of no more than a 2 point decline for a full day.

Tue I cover during mid-morning. I do so mechanically, unemotionally. Turns out that a strong rally into the close made these closing trades look like mistakes. It is not a mistake to follow my trading rules. Outcomes will vary. Trading by the seat-of-the-pants, has almost always resulted in poor results. Overall, I recover about 40% of Monday’s steep losses. -11% on Mon, +4.5% on Tue

Cover SPY Feb 264 780
Cover UNH Feb 220 p 670
Cover SPY Mar 263 p 1009
Cover BRKB Feb 200 p 620

Later in the day, with the rally on firm footing, I rebalance a bit and sell some further out puts on those same underlyings (in hindsight this turned out to be another mistake):
Sell SPY Feb 224 p 49
Sell SPY Mar 218 p 88

Sell BRKB Mar 170 p 50
Sell AAPL Feb 145 p 20

Sell GS Feb 220 p 24

Wed Roller coaster ride continues, SPY up early then closes lower. WYNN has a new CEO.

Sell WYNN Feb 160 p 54
Sell WYNN Mar 145 p 97

Sell SPY Feb 250 p 40
Sell SPY Mar 227 p 66

Sell NVDA Feb 185 p earnings tomorrow
Sell WYNN Mar 140 p 60

Sell UNH MarW1 200 p 71

Thu Another hard down day for stocks. The major averages are above Monday’s lows, but my account is at a new low for 2018. I lose about 8.5% today. The day starts calmly enough, then the bottom drops out again.

Sell TSLA Feb 380 c 42
Sell CAT Feb 165 c 13

Sell QQQ Mar 172 c 24
Sell IWM Mar 162 c 19

Sell SPY MarW2 281 c 31
Sell TLSA Feb 365 c 54

Sell BA Feb 365 c 52
Sell QQQ MarW2 167.5 c 40

Sell WYNN Mar 200 c 110
Sell NVDA Feb 280 c 22 just before earnings

Sell QQQ Feb 165 c 19

Five more stops get run. Losses range from 400% to 1200%
Cover CAT Feb 150 p 285
Cover LRCX Feb 165 p 490

Cover TIF Feb 100 p 197
Cover AAL 49 p 137

Cover XLU 49 p 88

Fri I cover another batch of five for big losses on the dip. As much as I want to believe in a positive turn, I follow my rule to use the strike price as a mental stop level. I sometimes give it some room, another point, a close below, but this is not a market to get cute in.

Cover MCD Feb 160 p 305
Cover IBB Mar 105 p 490

Cover QQQ Feb 154 p 326
Cover IWM Feb 145 p 260
Cover CAT Feb 145 p 425

Sell TSLA FebW4 365 c 46
Sell CAT Feb 130 p 50
Sell IBB Mar 80 p 25

Sell NVDA FebW4 185 p 49
Sell DIS Mar 80 p 21
Sell GS Feb 205 p 19