RUT Weekly Calendar Trade #1 (Part 3)

Today I will continue and complete the postmortem on my first live weekly time spread.

In the last post I illustrated the differences in risk graphs.  That’s huge and something I need to eventually figure out.

The final point is retrospective:  should I have closed this trade at the first adjustment point?  My profit target is 10% with a 15% max loss.  In the backtesting I tried to do, if I was anywhere close to max loss at the adjustment point then I wanted to exit the trade.  After slippage, I’d likely be at or beyond max loss after adjustment and it can only get [much] worse from there should the market continue moving against me.

The problem here was that I had no idea I was so close to max loss.  It came fast (within one day) and the market did not seem to move a great deal to get there!  Between OptionVue and my TOS account, I just did not have it modeled acceptably.  I probably need to get this into my DDE spreadsheet and then maybe I can create an “after adjustment P/L” cell to project where I would be after 0.10 slippage is applied per leg (for example).

On this trade, I lost 21.2%!

However, in legendary terms, “I’LL BE BAHK” [phonetics mine].

This is why we trade small:  to learn the nuances and how the trades work. I think this was a case of whipsaw; the market ran up forcing an adjustment and then ran down even harder. I was going to check before I went out this morning and had I been at the helm, I probably could have saved some of the loss.  Market activity like this is just not going to work for this trade, however.

So was this a fluke occurrence or does it happen on a semi-regular basis?

Only time will tell.