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BookingAlpha Option Trading Advisory

Sunday, January 29, 2012

Weekend Thougths (01-29-2012)

Overall a narrow trading range for the past week. With the usual strength from 3:30pm to 4pm to recover the losses of the day. Except for Friday when it closed weaker than normal.
Overall the trading range over the 10EMA is still holding and the uptrend intact. The SP500 hit a new high during the week but ended the week with just a little gain of 0.1%

(Click on image to enlarge)

I decided last week, (after about two weeks trying to predict the top) that I wouldn't try and predict the reversal anymore. It will happen when ever it happens and all I can do by now is the same thing I've been doing for three months: to enter trades when probabilities are, in my opinion, clearly favorable. So, this week, A new Credit Spread on the SPY was opened. Betting that SPY wont hit 137 by February 16 (just 18 days from now).

There was a little mistake opening this position which I want to share. The position was opened around 2pm. However, if I had waited just a little more, till 3:30pm I could have received a much better credit of 0.22 instead of the 0.19 I got. Just because the market trended up in the final hours of trading that day, something that was usual in January. I could have used that occurrence to my advantage and waited for the strength in the last hour of trading to open a position with a much better credit.

Anyways, that's the only position open right now and this is how the portfolio looks Beta-Weighted versus the SPX index.

(Click on image to enlarge)

I think probabilities of opening new trades this week are low as February expiration is now just 18 days away, and time premiums are small. March expiration is still a little far for my personal taste. That's the boring part of trading this way. Only 1 - 3 trades a month would be just too boring for many traders, and that's why they really need to evaluate their personalities before using a system or style of trading that will just go against their psychics, resulting in poor decision making.
Good luck to you all this week!

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