Trade The Journey

Trade The Journey

Trade Review: December 03

Trade Asset: SPY (S&P 500 ETF), IWM (Russell 2000 ETF)

Trade Strategy: Vertical Calls

Trade Expiration: December 08, 2023

Trade Premium: $2.70 (SPY ETF), $1.70 (IWM ETF)

Profit/Loss: $2.80 (SPY) & $1.70 (IWM)



Market Insights Revisited: Reflecting on the past week, my market outlook was predominantly positive, spurred by the anticipation of key economic reports. The indices had previously plateaued following a sharp rise driven by an optimistic CPI report, leading me to adopt a measured stance on the impending GDP and PCE announcements.

Observational Analysis: In my scrutiny of the SPY and IWM ETFs, I noted the struggle of SPY to break the $455 barrier and IWM lingering near $179. I foresaw the upcoming economic indicators potentially aiding these ETFs in overcoming their latest resistance levels.

Strategic Trade Allocation: In a bold move, I committed over 90% of my trading capital to acquire vertical spreads in IWM and SPY. This substantial investment, straying from the usual practice of limiting trade exposure to a maximum of 3-5% of capital, was a deliberate challenge to my risk tolerance and management skills.

Reflection on Prior Week’s Trade: Despite encountering losses in the preceding week, tactical modifications helped in curtailing the damage, thus reinforcing my confidence in handling these significant positions. I observed that IWM, with its focus on smaller firms potentially burdened by debt, did not mirror the uptrend seen in other indices, indicative of the market’s risk sentiment as reflected in the Russell 2000.

Trade Execution Dynamics: Following the initiation of the trades, both IWM and SPY initially surged but then pulled back after a Fed official hinted at possible rate hikes. This reaction erased the gains spurred by the GDP report, leading me to exit the IWM position and give SPY some room to potentially resume its upward trajectory.

Managing the SPY Position: Entering the SPY vertical call spread at a rate below the market average offered me a margin of safety. Despite several pullbacks, the minimal losses in SPY warranted a longer holding period for the trade.

Response to PCE Report: Contrary to my predictions, SPY declined following a lower PCE number. Yet, identifying $455.22 as a robust support level, I closely monitored SPY’s behavior around this point, ultimately deciding to close the trade at the profit level I had initially targeted when entering the position.

Trading Strategy Reflection: In weeks marked by significant economic reports, I tend to increase my trade sizes, capitalizing on the market’s momentum. This strategy involved taking advantage of the current strength in the indices, despite SPY’s oversold RSI and the Russell 2000’s neutral stance.

Profit Decision Challenge: The market’s inherent volatility highlights the difficulty in determining the optimal moment to lock in profits versus letting them run. Going forward, setting reference levels based on historical trends could bolster my decision-making in times of rapid market ascents.

Professional Trading Perspective: Understanding and applying these nuanced aspects of trading is what separates experienced traders from novices.

Trade Journal Review Via Chatgpt/Pictures:

From the logs, it seems the trader maintains a professional approach to trade management. However, for a thorough analysis, it would be necessary to consider additional factors such as:

  • How are the trades aligned with the overall trading plan and objectives?
  • What is the risk/reward ratio for each trade, and how does it fit within the trader’s risk profile?
  • How does the trader manage multiple positions and their correlations?
  • Are there contingency plans for unexpected market events?

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