Trading journal – 15th April

Just got back from 2 weeks holiday in China, some interesting moves over this time.

Major surprises for me were:

  • the equity markets continuing to push on, I really thought they would fail near the 200 DMA.
  • cocoa spiking with a large rally, circa 10% up to 2450.
  • Orange juice CRUSHED all the way down to 106.
  • grains have continued lower
  • oil continued higher.

not so surprising but perhaps reassuring

  • palladium finally having a pull back circa 10%, was into the very high %’s distance away from the 200 DMA so betting on the 10% pull back when the price goes more than 18% from the 200 DMA would have lost money quite a few times.

disappointing

  • coffee continuing lower to 90 after I had put options at 97.50 and 88, but clearly I wanted to have a larger position size than longer time frame. This is another mistake for me to correct because it frequently appears to be an issue for my profitability. It was also an example of the situation I describe below with having not taken partial profit on a short term spike then keeping the remainder to maturity.

Currently long:

  • 100 x 127 call options on April 26 expiry 10 yr note.
  • 103 x various euro put options with strikes between 1.04 and 1.075 which will likely expire worthless and so tonight I will look at a limit order to set for capturing any volatility if there was a spike.

Thoughts

  • While I was away I was thinking I often have options which have a highly profitable spike and then drop off and rarely I have options where the underlying continues and makes the options at the money or in the money. I have previously realised I can solve this opportunity decision by always taking more than 1 position and getting out of half of my position on the first profitable spike and leave the remainder to run and see if it becomes profitable. The modification to this thought I had while I was away, was to weight this by how likely I thought the outcome was or history tells me the outcome is. So if I assigned a 20% probability to the options becoming at the money then I sell 80% of my position on a short term favourable move and the remainder keep to expiry.
  • looking back at my two largest winners, neither of them were related to an underlying macro view. I have had two big winners which were both related to a specific trade set up and that was it.
  • on the other hand all my losers have been related to either holding on to a view or a losing position. So either way a losing position has only lead to me holding a bigger losing position and rarely recovered enough to generate a big profit. The main takeaway was that my short term views might have some pattern recognition value (with an unknown level of accuracy as I have not collated all that data on my trades), my medium term macro views 3m-1y are not reliable enough to make money, my medium term pattern recognition views need half the position size and double the time frame to be profitable.

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