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Trading Plan for March Expiration

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2 replies, 2 voices Last updated by John Locke 1 year, 5 months ago
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    • #15601

      virginie afota
      Participant
      @virginie.afota@gmail.com
      Points: 985
      APM2
      Rank: Freshman
      • In my opinion, the butterfly price is very attractive at less than -$8.
      • I bought a 1610 butterfly and I hedged it with an OTM call at 1660. SO my Delta is -10 for 10 Butterfly and 1 Call.
      • With this OTM Call, I am in a wait-and-see mode. If RUT breaks above 1670, I will morph into a M3.c using an ITM Call. Then if RUT continues to go up and passes 1680, and the other indices show strength, I will morph into a double M3.4u to trade the view that the market has resumed its uptrend.
      • If RUT moves back to 1650, the top of its current downtrend channel and shows signs of roll-over, I will sell the call and stay momentarily in a Bearish Butterfly that I do not intend to scale in. The trigger on the downside would be 1570. I do not expect RUT will reach that level. If it does, I will analyze the market and likely position for a reversal.
      • If RUT continues to go down and breaks below 1630, I will also sell the call and stay in a Bearish Butterfly that I do not intend to scale in.
      • When I am in Bearish Butterfly, I will start to hedge again if RUT shows signs of reversal at around 1600 or 1620. I will use technical analysis (such as support area or trend-line) to help me decide when to put back the call on.
      • #15612

        John Locke
        Keymaster
        @john-locke
        Going to The Trading Triangle LIVE 2016Locke In Your Success CoachAPM2Trade JournalsUltimate Income Trader Workshop

        This seems to be playing out pretty much as planned thus far 🙂

    • #15590

      virginie afota
      Participant
      @virginie.afota@gmail.com
      Points: 985
      APM2
      Rank: Freshman
      • I did not enter the March position on DTE56. Volatility was low in an extended market. I had the February trade on, so already some risk exposure in the market. I preferred to wait to potentially capture some higher volatility.
      • Since, I closed the February trade and this is my plan for the March trade:
      • Today, Wednesday 29th 2020 is FOMC meeting. I want to wait for the announcement before entering the trade. I plan to enter the new trade tomorrow.
      • On the 1h chart, RUT is in a downtrend. On the daily chart, RUT found support at 1645 but trades below 20MA. The two levels to watch are 1645 on the downside and 1670 on the upside.
      • SPX just traded above 20MA but 3300 is now a resistance. On the downside, 3250 is the next support and then the trendline or 3200.
      • I will enter the trade tomorrow on Thursday. If RUT breaks above 1670, I will enter as a M3.c with a ITM Call. Then if RUT continues to go up and passes 1680, and the other indices show strength, I will morph into a double M3.4u to trade the view that the market has resumed its uptrend. Given the M3.4u has a -$2500 max loss, I can have double exposure and keep max loss at -$5000.
      • If RUT stays between 1645 and 1670, I will enter a M3.c with an ATM call as a wait-and-see position. Then, if RUT breaks above 1670, I will follow the same plan as above, first moving to a ITM call and then an M3.4u.
      • If RUT breaks below 1645, I will assume that RUT is going to at least 1620 and maybe 1600, in that case I will enter or morph into a straight 50/50 BB that I do not intend to scale (so Max loss remains at -$5000. I will hedge it again at 1600 or if I see a reversal around 1620. And on the upside, I will follow the plan above.
      • If, according to my technical analysis, I have the strong view that the market has resumed its up-trend, I will increase my size and trade three M3.4u rather than just two and bring my Max loss to -$7500.
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