RUT Weekly Calendar Trade #1 (Part 3)
Posted by Mark on April 19, 2015 at 10:42 | Last modified: April 17, 2015 14:03Today 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.
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[…] question remains: how often does this happen? No doubt the market is shaky this week. Certainly the market does seem much calmer when it’s […]