Thursday, September 24, 2009

24/09: Markets continue march downward

Markets, after spending the first few minutes of the session in positive territory, continued the downward trajectory that began in the final hour of Wednesday's session. After yesterday's close of approximately 1061, today's vital numbers for the S&P500 were: 1063 (high), 1046 (low) and 1051 (close). A 10-day chart follows: (and note that I'll be using 10-day charts from here on out, as the bigger picture significantly aids interpretation)

My own trading centered on GS. I held Oct $185 puts that I purchased late into yesterday's session (and reader, recall how frustrated I was at my poor timing), and I was looking to unload them this morning, as I feared a reversal.

In poor form at the market open, I was acting rather impulsively and did not cultivate a necessary big-picture approach to the decision. Thankfully, I did not -- at least -- sell in the few minutes during which I'd have lost money on the trade, but I did little better, selling for a paltry 5% gain on each contract. In doing so, I went against my own analysis, which was predicting a re-test of Wednesday's low, at the very least. Instead, I acted with the impulse to book a gain, however slight, rather than waiting to watch it slip into the red, perhaps deeply.

I cannot fault myself entirely for having such an impulse, to take money off the table while in the green; nor can I even fault myself for acting upon it. Yet I must make a more concerted effort to cultivate methodological, big-picture, level-headed thinking, and with practice and time, my decision-making will naturally be driven more by these elements.

Here's a 10-day of GS, before I go any further:

Upset with my decision-making, I proceeded to spend the midday on the bike trails through Chicago's near-northern suburbs, putting in an invigorating 34 miles on the bike. Back at my desk for the final hour of trading, I entered a strangle of sorts on GS, buying Oct $185 calls and Oct $180 puts while GS was at about the same price. Of course, I was trying to enter the calls position while GS was low and, conversely, the puts position while GS was high. Yet with only a quarter hour to play with before market close, I did not manage to fulfill these criteria.

I will be looking to sell both types of options contract tomorrow, preferably early in the trading day when volatility is greatest, and naturally I will want to stagger the sales so as to make some money. If GS spikes up, I'll sell the calls and then, in the pullback down, I'll sell the puts. If GS spikes down, then vice-versa (I don't mean to be tedious here!, but I anticipate that, perhaps, someday some reader might not be fully informed about how financial products are traded).


Tomorrow morning, UA 600 awaits, my favourite flight in the universe of airline flights. ORD-DCA, at the crisp time of 6am, in a 757 no less. I'm looking forward to it, and to the rest of my ambitious travel weekend. Of course, I'll be trading tomorrow from Washington. Good luck!

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