Trade The Journey

Trade The Journey

Trading Review: Week of the 25th

Trading Asset:

SPY (S&P 500 ETF)

Strategy: Vertical Spread

Leg 1: Buy $497 call

Leg 2: Sell $501 Call

Premium: $6.36

Profit/Loss: $6

Trade Expiration:  2/28/2024

Hypothesis: I anticipate that the market’s upward momentum is waning, yet I expect a brief surge to new highs before a stabilization in market sentiment.

Hypothesis Explained: My decision to engage in this trade was motivated by the SPY approaching another record peak, potentially encouraging traders to extend the bullish trend. The upcoming period lacked significant economic announcements, aside from the Federal Reserve’s minutes. Nevertheless, Nvidia’s earnings announcement was poised to inject vitality into the market.

Trade Management: Initially, the trade showed losses, with scant motivation for traders to speculate on market direction. My attention was drawn to financial news highlighting Nvidia’s impending earnings report on Wednesday. With expectations of robust growth in Nvidia’s earnings and revenue, fueled by ongoing AI enthusiasm, the market was in search of direction, fluctuating within a narrow range. On the earnings announcement day, SPY gained momentum, and I concluded the day with a $96 profit. Nvidia’s results exceeded expectations, propelling the S&P 500 upwards after hours.

Following the announcement, SPY’s gains continued, approaching record highs. While post-market activity indicated strong bullish sentiment, it was uncertain if this would persist into the opening market. The bullish trend did continue at the open, but then SPY plateaued. Faced with a decision, I opted to secure my profits, observing as SPY reached new highs from the sidelines.

Trading Review: Although I profited from the trade, I refrain from labeling it as either poor or exceptional. Two areas in my trading require improvement: adhering to predetermined loss-cutting thresholds and maximizing profits before exiting. These skills are challenging to perfect and may require a lifetime to master due to the unpredictable nature of the market.

The rationale behind my decision to take profits was based on nearing a maximum profit of nearly $1000, with $600 representing a substantial return of over 50%—a balance between ambition and caution. The market adage, “Pigs get slaughtered,” resonated with me, prompting my exit after capturing a significant portion of the move. Nonetheless, I remain committed to enhancing my trading expertise.

Reflecting on my trading account over the weekend, I contemplated the progression to a new phase in my trading journey. Achieving earnings comparable to my regular income, once a distant dream, is now within reach, marking a pivotal moment in my trading career.

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