Trade The Journey

Trade The Journey

Trading Results for the week of July 7th

Trading Asset:

SPY (S&P 500 ETF)

Strategy: Vertical Spread

1ST Spread (SPY)

Leg 1: Buy $545 Call

Leg 2: Sell $549 call

Premium: $4.62

Profit/Loss: 5.12

Hypothesis: 547 is acting as resistance, and I think SPY can break through.                                                          

Hypothesis Explained:

This was purely a technical play as SPY struggled to break above the $547 level. If it could surpass this level, SPY might reach a new high. Several job reports were scheduled for release during the week. These reports could serve as a catalyst to push SPY above the $547 reference level.

Trade Management:

I opened this trade as SPY was trending sideways near the $547 reference level, uncertain if it would break above. Despite knowing that several job reports were due, I focused on the charts. Given the holiday-shortened week, I anticipated extreme market moves. The next day, SPY opened lower, testing the previous day’s low during premarket.

Fortunately, SPY rose several points throughout the day, pulled back, and tested the 547 level. I watched closely, and it held at this level. SPY then began to rise and closed above the 548 level. The next day, SPY used the 548 level as support and continued rising. As the position had captured 80% of the premium, I decided to close it, leaving some money on the table.

Trading Review:

This trade was purely technical, potentially helped by the shortened week and economic data reports. The markets tend to be more volatile due to thinning volume. Leading up to July 4th, option volume was significantly lower than usual. I’m never certain how a trade will work out. The hardest part of trading for me has been learning how to cut my losses and take my profits.

I’m improving at knowing when to take my profits and close my position. If I achieve above a 50% return, I seriously consider closing the position. However, closing a losing position has been more challenging. I’m always optimistic that SPY might bounce back, fearing I’ll miss a big recovery. Most of the time, about 75%, this doesn’t happen. Even when it does, it’s so stressful that it might have been easier to close the position earlier.

Another lesson I’m learning is that successful trades usually show promise from the start or turn profitable quickly. Trades that are losers generally struggle to become profitable. If I can master the skill of knowing when to close a position, the sky’s the limit.

Finally, I believe I can trust my technical levels. They have been accurate and are visible to the market, which is beneficial for trading. When the market moves around these levels, you can be fairly confident there are enough traders to influence the market’s direction.

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