Wednesday, June 3, 2009

The market has been very strong the last few days. The IWM pulled back on much lighter volume. The market needs to pullback on much higher volume before I can say that the market direction has turned bearish.

I'm expected that the IWM should fill the gap up from Monday. It was painful seeing the indices move higher in the past four days. MY RUT calendar and the Call spread is taking some heat. 

I'm expecting a pullback (potential to the S1 level 484). The jobless numbers are coming out tomorrow morning (premarket) and Friday the unemployment numbers are expected to be at 9.2%. 

If these two numbers are better than expected, then I'm going to be toast with the short positions in AAPL, RUT, and USO.

Oil reached $68/barrel, but pulled back to $66. 

Okay, enough of my positions and onto some general risk management discussions.

Time after time, I have a good trade plan, but fail to execute. Take the 520/530 Call vertical spread. I should've have exited when the RUT was above 500. All too often in a violent trending market my positions will take a ton of heat because the market keeps on rallying in one direction without any pullback. This happened with my RUT vertical trade last month. I was fortunate that the RUT pulled back. As soon as it pulled back I exited because I was afraid that the RUT reversing. Looking back at the trade, the RUT closed below 500 on the Friday expiration and I would have collected the entire credit on the trade.

Right now I'm sitting and hoping for a pullback. This is not the proper way to manage risk. I should really heed Dan Sheridan's adjustment strategies

2 comments:

Mark Wolfinger said...

Discipline is still the name of the game. I sympathize because I've been where you are enough times in the past.

I often write about adjustment strategies and firmly believe that risk management is the #1 key to success.

I'm sure you believe it also and I hope this trade can work out for you.

Webmaster said...

Thanks Mark,

Trending markets for long periods of time are tough to trade if you're somewhat delta neutral.

So far this market isn't pulling back.