Trade The Journey

Trade The Journey

Trade Review: Week of March 24th

Trading Asset:

SPY (S&P 500 ETF)

Strategy: Vertical Spread

1ST Spread (SPY)

Leg 1: Buy $513 Call

Leg 2: Sell $517 Call

Premium: $9.75

Profit/Loss: $7.50

2nd Position

Strategy: Vertical Spread

2nd Spread

Russell 2000 (IWM ETF)

Leg 1: Buy $517 Call

Leg 2: Sell $519 Call

Premium: $6.80

Profit/Loss: $0.15

2nd Position

Strategy: Vertical Spread

3RD Spread

S&P 500 (SPY ETF)

Leg 1: Buy $517 Call

Leg 2: Sell $519 Call

Premium: $4.50

Profit/Loss: $1.50

Total Premium: $9.15

Hypothesis: Indices sold off at the end of the week, not much data this week except for central bank decisions. The big question is Fed dot plot, it could be not so good, since inflation is still uneven in its trend down.

A risky play but I think that some profit taking may occur after the run up to the new high.

Hypothesis Explained: Indices are eagerly awaiting the Fed’s interest rate decision, particularly their projections. Recent surprises in CPI and PPI have cast doubts on whether the Fed will alter its monetary policy trajectory. Following this trade, my second hypothesis was that indices would see some profit-taking, retreating from their highs—a move driven purely by economic/inflation factors.

Trade Management: Last week, I initiated three trades; two bullish and one narrow spread aimed at capitalizing on a minor pullback from profit-taking. Opening vertical calls in SPY and IWM, I anticipated short-term losses before the release of the Fed Press conference and dot plot, and indeed, the trades declined as the market fluctuated. Before the report’s release, I was down nearly five hundred dollars but chose to maintain my position, expecting the Fed meeting to significantly impact the market. Despite the Fed maintaining its policy trajectory and dismissing the inflation reports as temporary fluctuations, I closed the Russell 2000 trade prematurely, missing out on larger gains in the SPY position.

The put debit spread performed as anticipated, though not without volatility. Persisting through the short-term setbacks could have yielded the full premium.

Trading Review: This trade involved significant risk, and attributing the outcome to luck or skill is challenging. Trusting my judgments remains difficult, as is discerning the right time for profit-taking or cutting losses. Emotional involvement complicates decision-making, often leading to preoccupation with potential profits or hopes for a turnaround when facing losses. Experience has taught me the value of patience in trading and the importance of solid reference levels for market analysis. As I’ve become proficient in securing consistent profits, my focus is shifting towards refining my trading skills, particularly in recognizing subtle market signals and understanding trend dynamics.”

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