Trade The Journey

Trade The Journey

Trade Review: Week of the Feburary 11th

Trade Asset: SPY

Trade Strategy: Vertical Call

Trade Leg 1: Buy $492 call

                       Buy $498 call

Trade Leg 2: Sell $496 call

        Sell $500 call

Premium: $5.25/$2.57

Profit/Loss: $3.24/$1.64

Trading Theory: In the absence of significant economic disclosures or impactful reports, the S&P is expected to oscillate between recent peak levels and lower reference points. There’s potential for the SP to achieve a new peak.

 Explanation of Trading Theory: With the schedule clear of major economic announcements likely to sway the market, the focus shifts towards market sentiment and company earnings. Several Federal Reserve speakers are anticipated to share their economic outlooks, potentially offering insights into future fiscal policies, though their messages are expected to align with Chair Powell’s previous statements. Despite the uptick in bond yields, their implication has evolved from signifying tightening financial conditions to indicating a robust economy. The S&P 500 is on the verge of reaching a new zenith, with the 500 mark for the ETF representing a significant psychological barrier that the index appears to be aiming for. Outside of Disney’s earnings, the path to this milestone could be tumultuous.

Trade Execution: This trade was immediately profitable, experiencing some fluctuations. On the first day, the trade was neutral as SPY moved horizontally, encountering resistance at the $498.51 level, leaving me to await SPY’s next move. With no significant reports to drive the market, I leaned on technical analysis. For the initial days, SPY struggled to gain momentum, but I held off on closing the position. After a period of lateral movement, SPY began to ascend in pre-market trading, indicating a promising day ahead. Upon market opening, SPY surged, aligning with my sold call, and I observed a substantial profit, prompting me to close the position for a 50% return. My evening analysis revealed SPY nearing the 500 mark, suggesting a bullish momentum. Consequently, I cautiously entered a vertical call spread with tight margins, betting on resistance at 500. Typically, impulsive trades have not been favorable for me, but this strategy proved successful as SPY hit a new record by week’s end.

Trade Reflections: I ponder whether my trading prowess is evolving or if the market’s bullish trend is aiding my success. It’s likely a combination of both, as timing entry and exit requires skill. The market seems optimistic about the economy, with expectations of decreasing interest rates in the upcoming summer. Identifying market peaks presents challenges, emphasizing the importance of market flow adherence over prediction attempts. My experiences underscore the complexity of market prediction, especially in the absence of significant news driving market movements. Trading under these conditions demands a reliance on technical analysis and lower volume, which can lead to precarious situations. However, a strong trend and reduced volatility have been advantageous. Reflecting weekly, the intricacies of market trading become evident. The ability to generate income in this manner remains a fascinating aspect of trading, akin to performing magic. This realization strengthens my belief in the efficacy of a solid strategy and a deep understanding of market technicals. I now feel more prepared to pursue substantial earnings through trading.

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