Trade The Journey

Trade The Journey

Trade Review: Week of Birthday

Week of November 26

Trading Asset: IWM ( Russell 2000 Etf)

Trading Strategy: Vertical Call

Leg 1: Buy $177.5 call

Leg 2: Sell $182 call

Premium Paid: $2.08

Profit/Loss: (0.64)

Trading hypothesis: I think there’s still room for the indices to move higher.

Hypothesis Explained: Having achieved the largest gain in my brief trading journey, I believed it was opportune to leverage the recent surge in bullish market sentiment. Post-CPI report, which indicated a further easing of inflation, indices experienced an upward gap. Most indices sustained near their peaks, buoyed by the CPI data.

Trade Management: Reflecting on this venture, it epitomizes imprudence. My rationale for entering was the anticipation of further upward movement in the Russell. The true cost of this trade became apparent only as time progressed within the position. Its management was compounded by the abbreviated trading week and an absence of significant market drivers.

From inception, the trade was on a downward trajectory, and I overlooked numerous chances to exit with minimal losses. During the week, I repurchased the previously sold call, speculating that the Nvidia report would catalyze market movement, which it failed to do. In a moment of haste, I sold another call at the same rate. Observing the rise in IWM, I hastily adjusted my limit order upwards, a grave error that caused me to miss a potential exit point.

On expiration Friday, as IWM dipped below 178.12, it seemed to be a repeat of previous patterns. My losses grew, yet IWM unexpectedly rallied later that morning. I exited the position at what seemed like the daily peak, only to watch IWM pull back from its highs.

Moments after my exit, IWM rallied again, setting a new high for the day, and I missed another chance for a profitable exit.

Trade Review: This trade was fraught with challenges from its inception. In hindsight, it was unwise to initiate this position, given its complexity and limited market-moving factors. My initial prediction was that the FED minutes and Black Friday retail data would favorably impact IWM. Although this partially materialized, IWM’s quick decline and halt on Friday left me perplexed.

Upon reviewing the chart with a 1-minute timeframe, the reason for IWM’s fluctuation and subsequent rally became clear. I had primarily focused on longer timeframes during analysis. Despite initial regrets, this trade imparted a crucial lesson in recognizing reference levels and improving trade planning.

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