Trade The Journey

Trade The Journey

Trade Review: Week of March 16th

Trading Asset:

SPY (S&P 500 ETF)

Strategy: Vertical Spread

1ST Spread (SPY)

Leg 1: Buy $510 Call

Leg 2: Sell $518 Call

Premium: $7.50

Profit/Loss: $9.30

2nd Position

IWM (Russell 2000)

Strategy: Buy Call

Leg 1: Buy $206 call

Premium: $3.20

Profit/Loss: ($1.54)

SPY (S&P 500 ETF)

Strategy: Vertical Spread

1ST Spread (SPY)

Leg 1: Buy $517 Call

Leg 2: Sell $519 Call

Premium: $4.00

Profit/Loss: ($4.00)

Total Premium: $3.76

Hypothesis: A retail sales and ppi report play as SPY near its all-time high.

Hypothesis Explained: The markets surged following an unexpectedly high Consumer Price Index report. Considering the Institute for Supply Management indicated a decline in material costs, the upcoming Producer Price Index might temper expectations, suggesting the CPI spike could be an outlier, despite a consecutive monthly increase.

Trade Execution: My initial SPY trade was a triumph, as I entered near the day’s low and exited at the peak the next day. It was a stellar execution, marred only by my subsequent overreach. Anticipating favorable PPI and retail sales data, I entered a call position on the Russell, expecting further gains.

However, the Russell didn’t ascend, and the PPI release sparked a rise in Treasury yields that persisted. The Russell trade stalled, leaving me to mitigate losses, which I managed to do somewhat as it ticked up at the next session’s start. Yet, another SPY position, premised on a misread of retail sales influence, faltered.

Trade Psychology and Review: I should have settled after the first fruitful trade, but my eagerness led to two unprofitable positions, nearly negating the week’s gains. A pattern of unnecessary trades mirrored the preceding week, squandering an opportunity for significant profit. To avoid complete losses, I’ve implemented a ‘limit loss’ strategy to define boundaries for cutting losses. With the Federal Reserve’s meeting on the horizon, the market’s cautious stance requires vigilant, disciplined trading, especially around the anticipated dot plot projections.

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