This week was the easiest way to make money — that is, if you didn’t do anything!
Sometimes sitting on a long position and having the patience to wait out the dips is harder than it seems — but when the market set up is there – sometimes the best move is no move — to let the market do its thing and waiting for opportunities to take profits.
This week was one of those weeks.
My thoughts this week were straight out of Jesse Livermore’s Reminiscences of a Stock Operator:
“It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine–that is, they made no real money out of it. Men who can both be right and sit tight are uncommon.”
So going forward, charts will be based on the September S&P contract.
We had a monstrous run of around $2,000 from a $1,700 position size — an over 100% return. We cashed out 40% of this amount on the pop to what is now the 2775 ES level. So 40% of what was $1,700 in profits at the time resulted in realizing around $680 in profits.
We are still holding on to the remaining 3 of 5 SPY call contracts – which have an unrealized profit of $1,300.
So if we add this $1,300 unrealized with the $680 in realized, then we have a trade that increased account size around $2,000 — or from $25,000 to $27,000 — by risking only $1,700 — that’s risking less than 10% of the account value.
This just shows the power of options — when entered at the right time and selected properly to provide appropriate % return while still managing ongoing, and increasing built-in time decay.
This one trade is responsible for the May to June move up from $25k to $27k.
BUY Alert: Buy to open 5 SPY June 15 ’18 270.5 call at market – Wednesday, May 30, 2018
SELL Alert: Sell to close 40% SPY June 15’18 270.5 call at market – Wednesday, June 6, 2018
“position up $1,700 profit, roughly 100% return — exiting 2 of the 5 contracts to lock in”
Still holding 3 of the 5 SPY calls.
Entry Date: May 30, 2018
Expiration Date: June 15 Days Held: 7 (so far)
Nasdaq broke to new highs and was particularly strong earlier in the week, though it corrected quite a bit on Thursday and Friday. Money flowed out of the big tech names and into the Dow during that time.
Likewise, the Dow also formed the Classic Elliott Wave pattern and was a bit sluggish to start the 3rd wave up. When other indices were moving up, Dow wasn’t moving up.
When the pattern aligns – you’ve got to ride the wave. Exiting too early and overtrading will just kill you. Ride the wave.