Gee, Think.

Today was a typical pre-fed meeting day showing volume around 60% of the
average. To my delight the Qs slid a bit downward, and my QQQUJs
touched 0.75 for the third time in 5 days. I couldn’t bring myself to
take defense action by selling again. I really think the Naz is going
to suffer tomorrow, rate hike or not. If there’s a hike, cash gets more
competitve versus the stock market, which at this point in the hiking
policy could do some damage. If there is no hike then the Fed is saying
that the economy is slowing enough that they don’t have to do any more
damage themselves. Hike or not, inflation is running hot and company
earnings are going to drop next quarter. They weren’t so great this
time around anyway.

Today the non farm payroll numbers came out. We had only 114,000 new
jobs created last month. This was about 30,000 lower than the
estimates. This information was released around 830 am today. As would
be expected, the market gapped up. It continued to rally until around
1230. Then it started a serious downtrend into negative territory. The
Qs covered 60 cents of movement from plus 30 to minus 30 intraday.
I had opened a position in QQQUJ. That’s the september 36 put. I got
into this postion on the monday and tuesday before last. That’s
somewhere around the 24th. My cost basis for 16 contracts was 0.98.
When I checked the position after vacation, it was worth around 0.55.
Wowza! That really hurt! I saw it move up to 0.75 earlier this week on
movement around the time of inflation data coming out. I did not sell
out at that point though.
Earlier today the position was worth 0.45. When the market was
sufficiently dipped, I sold 6 of the contracts for a 120 dollar loss.
At this point though, I’m trying to reduce the amount of capital I have
working in this trade. If it goes further against me, I certainly
don’t want to lose more than 23 cents per contract. I should never have
lost more than 10.
So I still have 10 contracts out there. I’m pulling for inflation fears
to kick in big time on monday. Then hopefully I can exit at break even
before tuesday.

So now I’m really glad that I held onto the put position I established
last monday. It seems like the market is starting to head back toward
fear of the Fed because the inflation data is staring right at us. The
fed has promised to be data driven, and now the traders that were really
hoping for a pause are stuck in a bad spot.
This could be a place for me to cut my losses and jump out, but I don’t
think that the fear will subside so quickly, so I’m going to hang in
there.

Ah yes, let me tell you about the skelton in my trading closet. It’s
evidence of everything a trader could do wrong. It’s so bad, it’s
embarrassing.
Those of you following along know that I entered a bearish position of
the Qs last Monday and Tuesday. I thought that I was SOOOOO right in my
play that I could leave the position open while I went away from the
market for THREE days. Ah. It’s painful to write about.
So now I’m coaxing myself into believing that I can still hold on to
what could potentially wipe out my trading portfolio. It’s a sad
situation. I’ve already lost 50% in the trade but I’m still clinging to
it. I’m thinking to myself that the trade obviously wasn’t right last
monday and tuesday, but maybe it will be right by next monday or
tuesday. Oi!

Trade Journal Qs 20060724, originally uploaded by Gare and Kitty.

If you can see the little yellow circle on the left side of the peak, you can see where I entered a position in Qs puts around 1130am. I watched the market on and off until about 1320 (120pm). At that point I felt content to walk away since the Qs had fallen through two lines of support and was channeling nicely. However, today I was to be fooled by the market once again.

You know, I have a habit of really putting in the time to analyze the market AFTER I trade. For example, the past two blog posts about moving averages. I was also unequipped to use the nastick and nastrin indicators during the trade. I simply forgot how to interpret them. I also didn’t look at the first hour trading range. I did trade based on the daily pivot points though. I bought in when the Qs were at 36.19.

So today was a huge up day. I thought I was buying just after potential top of the day. It turned out the just after I left the chart, the Qs broke through the trendline channel I had drawn. Totally blindsided. My only consolation is that the weekly moving averages are still moving down in parallel.

Also, one of the last things that I saw on the Darlene Nelson videos I watched was that the at the money options have the highest implied volatility.  This contributes to an options price.  She sad that the implied volatility is highest in the options at the money.  As soon as the price of the underlying instrument, in this case the Qs, the implied volatility goes down and some of that value is lost.  In this case the option I bought was at approximately 24 when I purchased it. Now its at about 21.

I’m having technical difficulties this morning. It’s a bit frustrating, but I’m not freaking out about it. Sometimes there’s only so much you can do! I use the optionsXpress website, and I just couldn’t get the java charts to work for me. You have to jump through a couple hoops in order to have both streaming java charts and options price data on your screen at the same time. Or at least I thought you did. I was trying to copy the internet explorer window when it was on a java charts page. This would create two identical web browsers on the java charts page. My browsers froze up at this point, TWICE. This is not the recommended method. After restarting my computer, I went back to the site to try heading to the charts page, detaching the chart window through the link on the page, and then detaching the chart from the detached page. Yeah, its a little confusing, but that seems to work. Detach, Detach, and the Clone that window to make other streaming charts. Then you can go back to the original window and use it to get quotes for options prices, or you could just use streaming charts for those as well after you find the symbol of the option you’re interested in.

Today I thought I would try my hand in the market. I noticed the sever
down turn, but since it was pretty much done at 1030, I didn’t get in
for a profit. I bought and sold at the same price today, catching zero
action on .QQQSL. I have an aversion to trading the first hour of the
market. I’ve heard it called amatuer hour so often. I did get in
around 1030am, and out around 1545, or 345pm for those of you not using
military time. I thought that even after catching essentially the end
of the move at my entry point, come 230pm the big players would start to
move the market it is downward direction. No such luck. The market
just wavered back and forth. It didn’t quite look like a triangle
formation at the time. I would almost call it a flat as described by
the wave principal, but I’m not quite sure of that. Either way I
thought the Qs had another 20 cent move in them when I bought. Not so!
But I live to trade another day.
Be sure to search for the post titled disclaimer regarding this and
other entries to my Trading Journal.

I’m going to give myself a current trading sentiment of 5 out of 10.
This is a rating of how I feel in relation to the market and my trading
performance.
This past monday I lost about 18 percent on a trade. Turns out that if
I had held the position instead of selling at my 20 percent stop loss
rule, I could have broke even on Tuesday. If I had held it until this
afternoon I could have made at least 20 percent.
Currently I feel like I’m not equipped with the trading skills for such
a volatile market. I am aspiring to gain these tools though. If I had
the conviction that may play in .QQQSM on friday at 1.30 was right, I
might have bought more at 1.10 on monday. That would have reduced my
cost basis and by wedneday afternoon I would have been rolling in
profit.
So what does this mean for me? Well it’s another lesson learned, and I
am resolved to take a more disciplined approach to trading. When I say
I will be taking a more disciplined approach I mean doing more research
on market conditions, establishing thesis on where the market may go,
and then acting only just after my thesis has been proved. I think this
should increase my chance of being right.
I read the classic “How the Stock Market Works” to understand the
workings of the markets. I read jim cramer’s “Real Money” to learn
about investing and trading. I had my introduction to options
strategies with Freddie Rick from Market Essentials. I have had my
introduction to technical analysis with Constance Brown. I have had
some instruction via DVD from Darlene Nelson from BetterTrades.com. I
am now reading “Elliot Wave Principal” by Prechter and Frost. I plan to
keep reading for one.
I think that understanding the Elliot Wave principal should help with
market timing in the month and week timeframe. the use of price pivots,
tick, and trin should help me with intraday market timing. The patterns
and relationships detailed in Constance Brown’s “All About Technical
Analysis” will help me confirm trends I see through the wave
perspective. When I learn about intermarket analysis I will throw that
in the too, but that book hasn’t even arrived yet.
My plan is to use the weekends to develop plans for the upcoming week,
keep tabs on the market each day, and then pay close attention when the
market moves into my range.

When people ask me “Why ‘Get The Money 2006′?” I have one simple answer:
jewels!
I am running this campaign single mindedly. I have one objective, and
that is to game the options market in order to buy rubies, emeralds,
diamonds, and other precious stones.
Jewels are not just about dazzling jewelry, they’re also important for
treasure chests. There’s nothing like having a chest of jewels buried
away somewhere to give you piece of mind. Where else could you turn
when your home is ran sacked? That’s when you want to have a treasure
map with an X marking the spot, the jewel spot.