I’m quite happy about trading the Brexit announcement — one of the craziest trading experiences ever–stressful and thrilling at the same time. There were people who said trading this market was more exciting than a Game 7 of an NBA finals. Really dramatic. Your account would’ve gone through wild swings.
Britain is leaving the Euro — the vote happened on Thursday night – and gave the markets the craziest swings I’ve seen in recent market history.
Going into the vote the market rallied a crazy amount from 2075 the previous day to 2118ES that night going into the vote. I felt like I missed out. The expectation was that the UK would stay in the UK – and so the fears that they would leave were essentially gone so the market rallied.
But then they started counting the votes — and it turns out the it was a really tight race — but the voters who chose to leave were winning 51% to 49% in the initial counting. So the market dumped and continued dumping as the voting numbers came in.
But good thing I didn’t buy and hold anything overnight — because after the market close –the market just tanked.
Most notably, Gold and Silver — which I’ve talked about before — had massive rallies up 5+%. Too bad they gave up gains just before the open today, but still very powerful moves.
Remember this chart prediction from Monday, 6/20/16 – Boom! ES up 35 points from 2058 to 2093 – then drops to 2071 ?
Well, that chart from above (repeated here) is not too different from what actually happened:
We entered this bear call spread the day before the Brexit and exited at $.09 — roughly 90% of max profit.
Since max profit was 15 * $60 = $900 — 90% of that $900 = around $810 in profits from this trade.
So the max profit on this trade = $945
margin requirement = $4,500
This is a roughly 5:1 ratio — which is a good ratio and generally only available when volatility is elevated.
This is a bet that the market would stay below SPY 213 by next week. Well, SPY closed today in the 202 — so this was a very high probability trade.
That said, if I knew there would be such a massive downside, I would’ve bought puts — would have made a killing on those. Oh well. Hindsight is 20/20.
Where we lost — and we lost a small amount of $120 — was on the bull put spread that took some money off the table before the Brexit vote and kept the remaining portion.
That bull spread was this one that we entered at $1.09 — and exited a portion at $.30 — but the remaining portions we exited at around $1.20 for a slight loss there. Still, when combined with the call spread from above – the net result was +$810 – $120 + $300 = ~$900 combined. Not bad for what could have been a disastrous day.
This was the setup going into the Brexit vote as detailed in the blog post: Wednesday, A-B Mountain Ahead of Brexit Vote Thursday night/Friday morning
We had a coiling of A-B mountains that ended near the baseline — below where most of the market action was – making people think bearish. But then, what happened next was a big rally into the Brexit vote.
Going into the vote – the previous day was June 22 – notice the chart dropping off. But then shortly after the market closes — it jumps right up over 2080ES and stays above there for the entire night and opens the next day close to 2100ES.
After coiling into the actual vote – it exploded after the close again from 2098 towards 2118ES.
We entered into a bear call spread on the SPY when ES was trading at 2098. Definitely wish I bought SPY puts instead of shorting a call spread. I certainly did not expect a 121 point drop within hours to the point that circuit breakers hit after midnight.
I basically stayed up all night and pulled an all-nighter trading this — was absolutely crazy, thrilling, ridiculous – whatever you want to call it.
My minimum target for wave II has already been reached — within a few hours. I certainly did not expect it to happen that fast.
From a long-term perspective — I had been eyeing 2000-2010 as the potential bottom of wave II — and so when circuit breakers hit at 1999 at 1am, it was a no-brainer to buy.
Obviously, I wasn’t able to alert subscribers at 1am – – plus it was really nervous to trade this massive volatility. But lesson for next time, next time a circuit breaker kicks in — the market can’t go below that. So any movement back towards 2000 should be bought. This is where I made the bulk of my profits for the day.
These circuit breakers offered a great trading opportunity – provided you were able to take advantage of it at 2am and 4am.
Video will be posted for members in a separate post detailing everything.
Here’s last week’s members video – one of the charts we share shows a prediction of what would eventually become the Brexit market crash. Take a look:
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